GUIDELINES FOR STATE INITIATIVES FOR MICRO & SMALL ENTERPRISES CLUSTER DEVELOPMENT

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3 GUIDELINES FOR STATE INITIATIVES FOR MICRO & SMALL ENTERPRISES CLUSTER DEVELOPMENT * * * * * 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.

4 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) v) Core stakeholders of the Cluster vi) Other stakeholders of the Cluster : 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. : Core manufacturing / processing / service enterprises Raw material suppliers & sub-contractors, machine & spares suppliers, business development service providers, support institutions, buyers, exporters, etc. vii) Consortium / : Informal group of core cluster actors having Network 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.

5 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) 4. Procedure: : 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 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.

6 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 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

7 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 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/

8 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

9 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 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 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 15 th 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 1 st 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.

10 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) iii) iv) 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. Cost of documentation including video, report preparation, printing, etc can be met. 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. * * * * *

11 FORMAT FOR SELECTION OF CLUSTER Annexure I 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)

12 Template for Diagnostic Study Report Annexure II 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)

13 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 * * * * *

14 FORMAT FOR EXPOSURE NOTE Annexure III 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 * * * * *

15 Name of the Cluster : Annexure IV Name of the Designated CDE : A. Activity details i. Activities (each one to be mentioned) ii. iii. iv. Purpose of the activities No. of participant Outcome of the activities v. Details of beneficiaries B. Expenditure details (Broad head of expenditure) Sl. Head of expenditure Total Expenditure i. ii. iii. iv. State Share Industry Association / SPV Share C. Problems, if any Signature of the CDE D. Suggested future activities Signature of GM / PM, DIC

16 Name of the Cluster : Annexure V Name & address of the SPV : A. SPV details i. Contact No. & 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-àvis 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

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