Ministry of Textiles - Comprehensive Handicrafts Cluster Development Scheme (CHCDS)

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Ministry of Textiles

Comprehensive Handicrafts Cluster Development Scheme (CHCDS)

1. INTRODUCTION

1.1 Mega cluster approach is a Drive to scale up the infrastructural and production chain at Handicrafts clusters which have remained unorganized and have not kept pace with the modernization and development that have been taking place so far. Consequently, there has not been any addition of fresh impetus of development and optimum realization of output in the handicrafts sector, which is not only the backbone of long traditional heritage and cultural linkages. The prospects of this sector lie in infrastructural Upgradation, modernization of the machinery and product diversification. Innovative manufacturing as well as designing know-how, furthered by brand building of the native products hold the key to creating a niche market for the products manufactured by the clusters. The proposed programme is expected to
support the Upgradation of infrastructural facilities coupled with market linkages and product diversification.

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Comprehensive Handicrafts Cluster Development Scheme (CHCDS)

2. COMPREHENSIVE HANDICRAFTS CLUSTER DEVELOPMENT SCHEME – A CENTRAL SECTOR SCHEME

2.1 Keeping in view the fact that the export value realization of Handicrafts products is quite high, integrated infrastructure development has been the policy focus in recent times. The multiplicity in production in tiny units along with geographical wide spread base has resulted into higher level of levies marring the competitiveness in international market. Thus, addressing the problem of infrastructure bottlenecks by suggesting continuation of the sector specific infrastructure schemes has been the focus of attention. It is in this background it is proposed to launch a new Comprehensive Handicrafts Cluster Development scheme (CHCDS) - Growth foci for spatial development in rural mosaic towards spiral percolation through partnership. The objective is to maintain "social equilibrium" through raising the living standards of millions of poor artisans located in far flung areas of the country as well as employment generation. There has been a paradigm shift vis-à-vis this largely household industry and efforts are now being made to tap its potential
with an integrated approach while appreciating the very factors that differentiate the sector from large, medium or even the small scale industry.

2.2 The cluster-based approach is increasingly being recognized as one of the strategies for cost effective, inclusive, sustainable and integrated development of Micro, Small and Medium Enterprises (MSMEs), the world over. Recognizing this, several Ministries of Central Government and the State Governments have launched sector specific cluster based schemes.

2.3 Handicrafts clusters are located in clearly identifiable geographical locations (clusters) that specialize in specific products, with close linkages and inter dependence amongst the key players in the cluster.

2.4 The current need is to have an umbrella cluster development program that drives the development program in an integrated and holistic manner.

2.5 In fact these cluster shall inter alia, comprise –
2.5.1 Common facility centers;
2.5.2 CAD Centres;
2.5.3 Communication Network;
2.5.4 Design Banks;
2.5.5 Establishment of Resource Centers for major crafts;
2.5.6 Building Marketing Infrastructure;
2.5.7 Creation of Raw Material Banks.

2.6 These components shall help in sorting out the challenges faced by the Handicrafts sector which are complex and numerous. Therefore, the need of the hour is to broadband and scale up these segments of the handicrafts industry in an integrated manner with significantly higher levels of funding.

2.7 All existing schemes of the Development Commissioner (Handicrafts) as well as other complementary schemes available in other ministries can be integrated into the proposed comprehensive cluster development program with a strong and proactive capacity building and technical assistance.

2.8 It is proposed to scale up infrastructure and production facility of large clusters with artisans more than 20000 in a cluster with geographical area such as a district, by adopting two as mega clusters i.e Moradabad (Uttar Pradesh) and Narasapur (Andhra Pradesh), for which comprehensive development plans would be drawn up and implemented by way of dovetailing various schemes on a PPP basis.

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Comprehensive Handicrafts Cluster Development Scheme (CHCDS)

3. OBJECTIVES AND STRATEGY

3.1 The objective is to develop these two clusters with world-class infrastructure. The guiding principle behind the design of clusters would be to create world-class infrastructure that caters to the business needs of the local artisans & SMEs to boost production and export. In brief, the main objective of setting up these clusters is to assist the artisans & entrepreneurs to set up world-class units with modern infrastructure, latest technology, and adequate training and HRD inputs,

coupled with market linkages and production diversification. SPV is designed in such a way, which will have Standard Models of units of SSI and SME with infrastructure that is customized to give a competitive edge and these centres have greater potential to become globally competitive.

3.2 The broad objectives of the proposed program are as follows:

3.2.1 To enhance the competitiveness of selected two clusters in terms of increased market share and ensuring increased productivity by higher unit value realization of the products.

3.2.2 To ensure effective integration of scattered artisans, building their grass roots enterprises and linking them to SMEs in the sector to build critical mass for customized interventions and ensure economies of scale in operations. This will build a supply system that is geared to responding to large-scale orders, adhering to quality and product standardization, which are pre-requisites of global markets.

3.2.3 To generate additional livelihood opportunities to the people through specific intervention in segmental sub sector industry and increase the incomes to the artisans/craftsmen already engaged in this sector.

3.2.4 To provide requisite support/ linkages in terms of adequate infrastructure, technology, product diversification, design development, raw material banks, marketing & promotion, social security and other components that are vital for sustainability of artisans/craftsmen engaged in the Handicrafts sector.

3.3 The core elements of the strategy for the proposed program are given below:

3.3.1 Convergence of the resources available under various ongoing schemes of the Central Government.

3.3.2 Public Private Partnership (PPP) model in the form of collaboration between the Central/State Governments, beneficiary artisans & their groups, financially creditworthy & commercially linked marketing enterprises and the financial Institutions.

3.3.3 Proactive and strong technical and program management assistance for capacity building, designing of the interventions and their implementation, through a competent professional agency.

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Comprehensive Handicrafts Cluster Development Scheme (CHCDS)

4. Targeted Clusters

4.1 Two clusters i.e Moradabad (Uttar Pradesh) and Narasapur (Andhra Pradesh) with more than 20000 artisans have been identified for scaling up infrastructure and production base.

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Comprehensive Handicrafts Cluster Development Scheme (CHCDS)

5. Scope of the Cluster

5.1 To stand up to the global competition, the local industry has to rise to emerging realities. Small Handicrafts units and poor artisans are unable to undertake the requisite initiatives on their own due to inadequate funds, non-availability of proper infrastructure and common amenities, like Computer Aided Design centre, Communication network and Trade
& Marketing facilities, etc. Similarly, cost affecting factors like Electricity and maintenance charges of age old machines are expensive so far as individual units are concerned. Hence, to overcome the prevailing bottlenecks, it is necessary to form a Public Private Partnership (PPP) model to build clusters, self-sufficient with State-of- Art infrastructure facilities required to match the changing industry needs.

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Comprehensive Handicrafts Cluster Development Scheme (CHCDS)

6. Project Components

6.1 The coverage of the proposed project will be need based of the given cluster and would include the components that are necessary for meeting the objectives as stated above. Detailed list of the components that will be addressed through the proposed project are discussed below:

6.1.1 Technology Upgradation: Modernization/ Upgradation of tools and machineries, processing and other methods of manufacturing. To assist entrepreneurs/ exporters to modernize/set up world class facility/ units with latest technology, which helps to compete in the growing competitive world market, there shall be a support from Government by way of one time grant in the ratio of 30:70, wherein Government share shall be 30% with a maximum assistance of Rs. 60 lakhs per unit. This would facilitate flow of latest technology.

6.1.2 Product Diversification:Upgrading and diversifying the present product range to meet the needs of contemporary market requirements through design development, quality improvement, etc.

6.1.3 Raw Material Bank: Establishment of Raw Material Bank for continuous availability of Quality & Graded Raw material.

6.1.4 Common Facility centre (CFC) : CFC will comprise State of the art machines which normally an individual can not buy on his own. Such facility would be open to individual artisans and SME’s. This facility would provide access to High tech facility at reasonable price as user has to pay only operating expenses.

6.1.5 Resource centre: Establishment of Resource centre as one point information centre in a choosen craft. Such facility would act as an arsenal in the hands of artisans. They can approach the resource centre for any problem in a particular craft.

6.1.6 Market Development: Targeted efforts to enhance the share of the cluster products in domestic as well as export markets through brand promotion, exhibitions, buyer seller meets, retail space, warehouses, E-Commerce, etc.

6.1.7 Forward & Backward Linkages: Provision of need based infrastructure in the form of Handicrafts parks, common facility centres, testing labs, design studios, R&D, TQM, etc.

6.1.8 Human Resource & Skill Development: Provision of Training, Recruitment Center and consultancy. Upgrading and imparting need based technical skills so as to improve quality and productivity, apart from coverage under entrepreneurship development programs and other soft skills. An SPV of Artisans’ Federations shall be eligible for executing this component.

6.1.9 Social Security: Covering the artisans in the cluster under various social security schemes, such as group insurance, small savings, financial institutions, etc. Civic amenities with in the Handicrafts Park.

6.1.10 Physical Infrastructure: Land development, roads connectivity, water treatment & supply, power supply, housing-cum-work sheds and other common buildings, Tele-communication network, sewerage, Effluent Treatment Plant & Solid Waste Management, etc. (Civic amenities mentioned above will be restricted to Handicrafts park).

6.1.11 Export & Marketing: Provision of Clearing facility, Customs office and Trade Center, Exhibition hall, etc.

6.1.12 Margin Money for Working Capital: Margin money for working capital for the artisans is an essential input as it provides a sufficient leverage to the artisans to complete one cycle of production-cum-marketing in a period of about 3 months. Provision of margin money @ Rs.4000/- per artisan of the federation may be kept (in line with the ongoing AHVY Scheme).

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Comprehensive Handicrafts Cluster Development Scheme (CHCDS)

7. Features of the Proposed interventions in the clusters

7.1 Core Infrastructure:
7.1.1 Road connectivity
7.1.2 Power Supply
7.1.3 Water supply
7.1.4 Water Reservoir with water harvesting facility
7.1.5 Drainage & Sewage line
7.1.6 Streetlights
7.1.7 Secured compound wall & wire fence
7.1.8 Solid waste disposal plant/Effluent Treatment Plant
7.1.9 Transportation facility
7.1.10 Parking bay.
7.1.11 Civic Amenities as mentioned above would be restricted within the Handicrafts complex or where common facility under the project is created and cost to be included in the project cost.

7.2 Common Facilities:
7.2.1 Common facility centre;
7.2.2 Warehouse;
7.2.3 Trade/Display Center;
7.2.4 Exhibition Hall;
7.2.5 Convention Center;
7.2.6 Information Centre.

7.3 H R Development Facilities & Training Centre:
7.3.1 Recruitment Centre;
7.3.2 Workflow Training Centre;
7.3.3 Class room with LLD Project (For Classroom Training);
7.3.4 Library;
7.3.5 Recreation Centre;
7.3.6 Faculty Room;
7.3.7 Crèche & Canteen;
7.3.8 Labour Restroom;
7.3.9 Management Consultancy Centre.

7.4 Common Facilities for Industrial Section:
7.4.1 Communication Network (including broadband service);
7.4.2 Administrative Building;

7.5 R & D Infrastructure:
7.5.1 Product Design & Development Support Centre;
7.5.2 Testing Laboratory;
7.5.3 Quality Benchmark Centre [following TQM Technique];
7.5.4 Material Research;
7.5.5 Basic Product Technology Research;
7.5.6 Pre-competitive Collaborative Research;
7.5.7 Market Research.

7.6 Other Eligible Area - The eligible areas of assistance in each cluster will also include:
7.6.1 CAD Centres;
7.6.2 Communication Network
7.6.3 Design Banks
7.6.4 Training Centres
6.6.5 Building Marketing Infrastructure.

7.7. Any other facility to enhance production related activity as required by the cluster and approved by the committee.

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Comprehensive Handicrafts Cluster Development Scheme (CHCDS)

8. Funding and Timeframe

8.1. The budget of each cluster would be 70 crores in terms of Ministry of Textiles share, however, it is estimated that at least Rs. 90 crores will be required for comprehensive development of each mega cluster. Thus overall funds needed for each of the proposed project will be mobilized by dovetailing of grant funds available under various schemes of the Central and State Governments. Some of these schemes that can be leveraged are illustrated as below:

8.1.1. Scheme for Integrated Textile Parks (SITP) & Technology Upgradation Fund Scheme (TUFS) of the Ministry of Textiles;

8.1.2. Schemes available under Development Commissioner (Handlooms)/ Development Commissioner (Handicrafts)/Powerloom Sector;

8.1.3. Schemes available under Ministry of Rural Development, such as, Swarnjayanti Gram Swarozgar Yojana (SGSY);

8.1.4. Schemes available under Ministry of Urban Development and Poverty Alleviation;

8.1.5. Schemes of Ministry of Commerce, such as, MDA, MAI, etc.;

8.1.6. Schemes under Ministry of MSME.

8.1.7 Schemes of Ministry of Tourism, such as scheme for rural tourism.

8.1.8. Schemes of Ministry of Panchayati Raj.

8.1.9 Industrial Infrastructure Upgradation scheme of Department of Industrial Policy & Promotion.

8.1.10 Schemes of the State Governments for development of handloom, handicraft and power loom industry.

8.2 While this sharing is largely valid at the overall project level, the respective shares of the stakeholders may vary from component to component depending upon the nature of interventions.

8.3 The project would be implemented over a period of 4 years. The DPR would clearly provide year wise phasing with respect to interventions and requirements of funds

8.4 It is to state that there will be broadly three categories of funding for various project components. First could be a project in which specific scheme of Govt. of India exists, for Example: in case the SPV wants to develop integrated Handicrafts cluster, which is covered under the scheme of SITP of Ministry of Textiles, then SPV can take funding from SITP scheme. Similarly, for physical infrastructure covered under Industrial Infrastructure Upgradation Scheme [IIUS], funding can be taken by SPV from the scheme of IIUS of Department of Industrial Policy & Promotion as per the scheme parameters.

8.5 Second type of intervention could be those specific interventions, which are required for growth of the Handicrafts cluster and are covered as a part of scheme of the Office of the Development Commissioner [Handicrafts].
Such projects could be setting up of marketing hubs in metros/sourcing hubs in clusters, warehousing facility in the clusters, design bank, resource centre, raw material bank for the craft, common facility centre, etc. For these interventions, the SPV shall be made eligible under relevant scheme of the Office of the Development Commissioner [HC] to obtain grants under relevant scheme components.

8.6 Third type of intervention relate to missing gaps, not covered under the scheme of Central or State Government, for instance, the SPV may want to undertake certain activities which are critical for the development of clusters and are commercial projects. Such requirements would be met from the main grant of Rs.70 crore per cluster after necessary approval from PAMC under Comprehensive Handicrafts Craft Development Scheme.

8.7 Thus, SPV will get funding from various Govt. agencies as per the scheme parameters in addition to the Grant of Rs.70 crores from this scheme, which shall be utilized for meeting the critical gaps. For example: A Common facility needs to be established in a cluster with an expenditure of Rs.100 lakhs. AHVY scheme of O/o DC(H) has a provision to fund up to Rs.60 lakhs as grant. The SPV can utilize this provision and avail grant up to Rs 60 Lakhs from AHVY scheme and rest from this Comprehensive Handicrafts Craft Development Scheme.

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Comprehensive Handicrafts Cluster Development Scheme (CHCDS)

9. Funding pattern

9.1 Establishment of Baseline data:

9.1.1. Funds to the tune of 3% (max.) of project cost shall be earmarked for establishing baseline data / DPR against which performance can be compared at the end of the project.

9.2. Funds in the pattern as in table below would be released in 3 installments.

i) 1st installment of 40% as advance on SPV acquiring land.
ii) 2nd installment of another 40% on utilization of 2/3 of first installment.
iii) Balance as 3rd and final installment as reimbursement.

Sl. No	Activity	GOI share	Financial limit of GOI in Rs.	SPV share
1	Soft skills such as skill development Training, Product Development workshop, etc.	I year – 100% II year - 90% III year – 75% IV year – 75%	Rs 10 crores/project	Nil 10% 25% 25%
2	Common production related Infrastructure which are artisan centric such as CFC, Work shed, etc	100%	Rs 20 crores/project	Land and recurring expenditu re
3	Other commercial infrastructure – such Gas pipe line, etc	75%	Rs 20 crores/project	25% and recurring expenditu re
4	Facility Centers for Exporters/entrepreneu rs	30%	Rs. 2 crores/ Facility centre/Entre preneur	70%

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Comprehensive Handicrafts Cluster Development Scheme (CHCDS)

10. Project Management Cost

10.1 The Project Management Fee will be paid to the Cluster Management & Technical Agency (CMTA) for managing the activities of the cluster. CMTA will be selected for both the clusters through competitive bidding process.