Scheme Objectives and Components
The Micro and Small Enterprises – Cluster Development Programme (MSE-CDP) is a central sector scheme launched in 2003 with the aim of enhancing the productivity and competitiveness of micro and small enterprises through the cluster approach. Under this scheme, enterprises in a geographic cluster are supported with common facilities and improved infrastructure to address shared challenges like technology obsolescence, quality improvement, skills, and market access.
Objectives of MSE-CDP:
- Supporting the sustainability and growth of MSEs by addressing common issues such as technology improvement, skills and quality upgrades, access to markets, etc.
- Capacity building of MSEs through formation of consortia, self-help groups, and industry associations for collective benefit.
- Creating tangible assets and infrastructure in clusters – e.g., shared production facilities, testing centers, training hubs, or developed industrial estates – to foster a better business ecosystem.
Key Components:
- Common Facility Centers (CFCs): Establishment of shared facilities for a cluster, such as production/process centers, testing laboratories, design centers, raw material depots, training centers, effluent treatment plants, etc. The Government of India provides a grant portion of the project cost (generally 70% for projects up to ₹10 crore, 60% for larger projects, with higher grant ratios of 80%–90% for special categories like North-East/Hill states or clusters with a majority of women/SC/ST micro units).
- Infrastructure Development (ID): Creation or upgradation of industrial infrastructure for clusters, including development of new industrial estates or enhancement of existing industrial areas/flatted factory complexes. The GoI grant is usually 60% of the project cost for new estate development (up to ₹15 crore project) or 50% for upgrading an existing estate (up to ₹10 crore project).
Additional interventions: Though funding for soft interventions like training and marketing was provided earlier, the current focus is on hard infrastructure. For approved projects, a notional amount up to ₹10 lakh is treated as the SPV’s contribution for preparatory activities. Support is also extended for marketing/display centers for women entrepreneurs.
Eligibility Criteria and Beneficiaries
The scheme targets clusters of MSEs located in proximity and engaged in related business activities. Both existing and emerging clusters are eligible.
Key Conditions:
- Special Purpose Vehicle (SPV): A legally registered entity (e.g., cooperative society, trust, or company) formed by at least 20 micro/small enterprises. The SPV ensures inclusivity and collective benefit.
- Funding Share: SPV members must contribute a minimum of 10% of the project cost. The state government typically adds 10% to 20%. The Government of India provides the remaining portion.
- Cluster Readiness: A Diagnostic Study Report (DSR) and a Detailed Project Report (DPR) must be prepared to identify needs and demonstrate project feasibility.
- Implementing Agencies: Proposals can be submitted by state governments or central MSME field offices. The SPV implements the project with oversight from the Ministry and state agencies.
Coverage and Achievements
By the end of 2024, a total of 609 cluster projects had been approved under the scheme, with 353 completed and operational. These include both Common Facility Centers and Infrastructure Development projects. The clusters span diverse sectors and are geographically distributed across all Indian states.
Summary Table:
| As of Date | Total Projects Approved | Projects Completed |
|---|---|---|
| December 2023 | 580 | 307 |
| December 2024 | 609 | 353 |
Impact and Performance
Government reports confirm that all completed clusters are operational. Independent evaluations by the National Productivity Council found:
- Improved efficiency and productivity due to shared facilities
- Enhanced market access and competitiveness for participating firms
- Positive effects on employment and income levels
- Increased capacity for value addition and exports
The scheme has been effective in achieving its goals and is widely acknowledged for its contribution to MSME development.
Process to Create a New Cluster
- Formation of SPV: Entrepreneurs in a cluster form a registered SPV with at least 20 member units.
- Diagnostic Study & DPR: An expert agency conducts a diagnostic study. Based on this, a DPR outlining project viability, technical specs, and benefits is prepared.
- Proposal Submission: The DPR is submitted through the state government to the Ministry of MSME via the official cluster portal.
- Appraisal and Approval: A Steering Committee at the Ministry evaluates the proposal. If conditions are met, final approval is granted.
- Fund Release & Implementation: Funds are released in phases. The project is implemented jointly by the SPV and the state.
- Commissioning & Operations: The completed facility is run by the SPV. Performance monitoring continues post-commissioning.
Conclusion
MSE-CDP is a well-structured, impactful scheme aimed at fostering collective growth for micro and small enterprises. By providing support for shared facilities and industrial infrastructure, it enables MSEs to scale up, compete, and contribute meaningfully to India’s economy.
