The Small Industry Cluster Development Program Scheme is developed by the Ministry of Micro, Small, and Medium Enterprise ( MSME), under the Government of India (GOI). They have adopted the cluster scheme as a capacity-building booster, enhancing productivity and also the competitiveness of Micro and Small Enterprises ( MSEs). As defined under the said guidelines, a cluster can be a group of enterprises located within an identifiable as far as a practicable, contagious area that is not classified together by geographical location but by common infrastructural facilities that help solve various common challenges. These cluster characteristics can be similar in methods of production, testing, technology, marketing strategies, common market, and challenges faced.
Objectives of the Scheme
- Support the sustainability of MSEs by improvement in technology, market access, and skills- quality.
- Set up of Common Facility Centres for testing, training, a depot for raw materials, etc.
- To build a community for supportive action for MSEs through self-help groups, associate up-gradation, etc.
- To boost green manufacturing ideas amongst clusters to promote units to switch and continue under the same process for the future.
The set-up ( Approach and statistical plan)
The way forward is to identify the needs of the enterprise in various identified clusters and geographical areas. This helps in categorizing similar enterprises while ie=dentifying common needs and gradually towards resource allocation. They also aim at ensuring better access to public resources and linkage to the market to enhance competitiveness. A Detailed Project Report (DPR) needs to be formed which identifies the technical feasibility and economic viability for which the Government does not provide any financial grant. However, a sum equivalent to 4% of project Cost no =t more than Rs. 50 lakh will be contributed by the Special Purpose Vehicle (SPV) / State Government towards the same purpose.
Evaluation and Monitoring Process
The National Level Steering Committee under the Chairmanship of Secretary, MSME will be the Apex body that monitors the progress of the Scheme. The Development Commissioner will coordinate and oversee the Project’s process.
Some Important Ratios for the Project
- Debt Service Coverage Ratio ( Projections for 10 years)
DSCR= Net profit added with interest and depreciation divided by the sum of
installment and interest
- BreakEven Point = Fixed Cost divided by the difference between Variable Cost
To check the Commercial Viability
A focus on the following aspects is needed
- The net present value of the project needs to be positive.
- The internal Rate of Return should be more than 10 percent
- The break-even should be below 60 percent of the installed capacity.
- During the repayment period, the accepted cumulative debt service coverage ratio is 3:1.
After observing the records provided by the Government, it’s clear that the Expenditure on the scheme has increased from Rs. 63.18 crore in 2014-2015 to Rs. 76.12 crore in 2021-2022 which signifies the growth in the volume of operations of the Scheme. Various Common Facility Centres and Infrastructure Development Projects have been set up in all Indian states in the totality of 89 and 499 respectively ( various others are approved and are pending completion).