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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 MSMEsØGive 45% of Manufacturing OutputØ Account for 40%+ of ExportsØ Contribute 8% to GDPØ 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 SchemeØ Micro Finance Scheme Ø Skill Development Programmes Ø Credit Linked Capital Subsidy SchemeØ Cluster Development Programme Ø National Manufacturing Competitiveness

Programme

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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 identifiablecontiguous area & producing same/similarproducts/services. Essential characteristics:

• Similarity or complementarity in the methods ofproduction, quality control and testing, energyconsumption, pollution control, etc

• Similar level of technology and marketingstrategies/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 theindustries, through well defined clusters andgeographical areas. This enables in

• Achieving the economies of scale in terms ofdeployment 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 StudyF Soft Interventions

FSetting up of Common Facility Centres (CFCs)

FCreation and upgradation of Infrastructure in industrial estates/ clusterso Development of land, Provision of water supply, drainage,o Power distribution, non- conventional sources of Energy for

common captive useo Construction of roads, Common facilities such as First Aid

Centre, Canteen, etc

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Project Cost and GoI SupportIntervention Cost (Rs. in

lakh)GoI in %Normal cluster #

DSR P 2.50*1.00

100 100

DPR for i) CFC Pii) 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

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 inMSME 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 IdeasØ Promote Emerging Technological & Knowledge-based Innovative

VenturesØ Encourage Ideas to Become MSMEs

• 100 BIs to be Located in engineering colleges, managementinstitutions 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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SRIVARI INDUSTRIES

Before After

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SA INDUSTRIES

Before After

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AFTERBEFORE

AASHISH AUTO COMPONENTS

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SHIVAKRISHNA INDUSTRIES

BEFOREAFTER

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Ø Bring the industrial design fraternity closure to the MSME sector

Ø Increase the competitiveness of local products and services throughdesign

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 EfficientTechnology

2) Credit Linked subsidy for EET Projects

3) Cluster level CDM initiatives

4) Encourage MSMEs through subsidy to acquire National as wellas 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