Being a small sized company comes with its own benefits and hurdles. A common MSME challenge is the inability to invest in infrastructure development and build facilities. This may restrict their growth. In such cases, the government encourages MSMEs cluster development initiatives, take a collaborative approach and take advantage of the government scheme.
Ministry of Micro, Small and Medium Enterprises has launched a cluster development scheme. The MSME cluster development programme helps the small businesses located in clusters in various ways. Apart from encouraging cluster development, there are several other MSME schemes and initiatives (e.g., MSME registration on Udyam portal, MSME Samadhaan scheme etc.) to help MSMEs in their growth journeys.
However, before understanding what the what is the cluster development scheme, lets us first understand the meaning of MSME cluster.
What is a cluster?
According to Ministry of MSMEs, “A cluster is a group of enterprises located within an identifiable and as far as practicable, contiguous area or a value chain that goes beyond a geographical area and producing same/similar products/complementary products/services, which can be linked together by common physical infrastructure facilities that help address their common challenges.”
The ministry has further defined the characteristics of a cluster too. Here are the characteristics of a cluster.
- Units in the cluster must use similar of complimentary production methods, quality checks and testing. They should have similar energy consumption and pollution control methods.
- Units in the cluster should have similar kinds of technology in use and similar marketing practices for their products.
- Units should have common markets and skill requirements.
- Units should have similar market challenges and opportunities.
What is the MSME cluster development programme and its objectives?
The MSME cluster development programme is rolled out with the clear objective of addressing common challenges that MSMEs in the cluster are facing. The scheme helps the clusters in following ways:
- In capacity building for micro and small enterprises through formation of self-help groups/clusters/associations, etc. for common supportive action
- In creating infrastructure facilities within the new or upgrading existing industrial infrastructure such as industrial complex, flatted factory complex, etc.
- In setting up various common facility centres such as training centre, raw material depot, wastewater treatment plant, etc.
Helping micro and small industries units to switch to the green and sustainable manufacturing practices.
What are the benefits of cluster development programmes for MSMEs?
- Common facility centres (CFCs): The government of India offers grant of up to 70% of the cost of the project that costs between ₹5 to ₹10 crore. Projects costing ₹10 to ₹30 crore will attract grants of up to 60%.
- Setting up infrastructure projects: The government of India will provide grant up to 60% of the project costing between ₹5 to ₹15 crore for setting up a new industrial complex for flatted factory complex. The grant will be up to 50% for upgrading existing infrastructure. The cost of the project can be between ₹5 to ₹10 crore.
Note: it is recommended to verify grant restrictions with the Ministry of MSMEs as it changes from region to region. Also, the percentage of grants differs for geographies having special status.
How to apply for the MSME Cluster Development Scheme?
Online applications can be made through Cluster Development Programmer portal. For offline application, you can visit the nearby government authority or autonomous bodies. Some of the important documents to be submitted include:
- Detailed project report
- Project appraisal report
- Registered land documents
- Other documents certifying necessary compliances
As a MSME owner, if you haven’t already it is recommended to get your business registered on the Udyam portal for the MSME certification, with details on the updated MSME classification for your business.
The MSMEs Cluster Development Scheme was launched with the view of having a collaborative approach. Many a times, it is not viable for a single company to establish a facility like R&D centre, training centre, effluent treatment plant, etc. In such cases it is viable to take a collaborative approach and build such facilities as a cluster.