Report 3 PDF

Final
Study on Financing Models and SPV Structures in Respect of Common Industrial Infrastructure/Facilities for
MSMEs Under PPP and Private Ownerships
Acknowledgement
This study was made possible by the funding and support from Small Industries Development
Bank of India (SIDBI) and IL&FS Clusters would like to thank SIDBI and all the officials’ thereof
who were involved in this study. We appreciate the valuable feedback received from SIDBI during
the reviews which has been duly incorporated and has helped shape this report
IL&FS Clusters also extends its gratitude to all the stakeholders such as banks, SPVs members,
and promoters with whom IL&FS Clusters have been working for several years thereby gaining
valuable experience and knowledge which have been used in preparing this report. We are also
thankful to the policy makers at the various Ministries with whom IL&FS Clusters has had the
opportunity to work in the past and continues to work.
Finally, the study team is thankful to all the colleagues at IL&FS Clusters who have over the years
worked on such common infrastructure projects for different sectors and hence were able to
contribute with their understanding. The sagacity of such experiences has proven to be invaluable
in shaping this study and incorporating the recommendations.
Abbreviations
Abbreviations
AC Approval Committee
AMC Ahmedabad Municipal Corporation
AYUSH Ayurveda, Yoga and Naturopathy, Unani, Siddha & Homeopathy
BDS Business Development Service
BOT Build-Operate-Transfer
CA Controlled Atmosphere
CAGR Compound Annual Growth Rate
CC Collection Center
CDP Cluster Development Programme
CDSF Common Debt Service Fund
CFC Common Facility Center
CGS Credit Guarantee Scheme
CGTMSE Credit Guarantee Fund Trust for Micro and Small Enterprises
CHCDS Comprehensive Handicrafts Cluster Development Scheme
CIPS Critical Infrastructure Upgradation Scheme
CLU Change in Land Use
CPC Central Processing Centre
DC Department Commissioner
DIPP Department of Industrial Policy & Promotion
DPR Detailed Project Report
DSRA Debt Service Reserve Account
EDM Electronics Systems Design & Manufacturing
EMC Electronic Manufacturing Cluster
EoI Expression of Interest
ETP Effluent Treatment Plant
FDI Foreign Direct Investment
FI Financial Institution
FPO Farmer Producer Organization
FY Financial Year
FYP Five Year Plan
GFR General Financial Rules
GIDC Gujarat Industrial Development Corporation
GMP Good Manufacturing Practices
GoI Government of India
IA Implementing Agency
IDC Interest During Construction
IICD Indian Institute of Crafts & Design
IID Integrated Infrastructural Development
IIFCL India Infrastructure Finance Company Ltd
IIUS Industrial Infrastructure Upgradation Scheme
IPR Intellectual Property Rights
IQF Individual Quick Freezing

ITCL IL&FS Trust Company Limited
ITDP Integrated Tribal Development Programme
ITP Integrated Textile Park
LIC Life Insurance Corporation
LNG Liquefied Natural Gas
MA Modified Atmosphere
MFPS Mega Food Parks Scheme
MIIUS Modified Industrial Infrastructure Upgradation Scheme
MLC Mega Leather Cluster
MMSME Ministry of Micro, Small & Medium Enterprises
MMWC Margin Money for Working Capital
MoA Memorandum of Agreement
MoFPI Ministry of Food Processing Industry
MoT Ministry of Textiles
MoU Memorandum of Understanding
MSME Ministry of Micro, Small & Medium Enterprises
MSMED Act Micro, Small & Medium Enterprises Development Act
NID National Institute of Design
NIFT National Institute of Fashion Technology
NMFP National Mission of Food Processing
NPA Non Performing Assets
O&M Operations & Maintenance
PAC Project Approval Committee
PCB Pollution Control Board
PM Programme Manager
PMA Program Management Agency
PMC Program Management Consultant
PMU Project Monitoring Unit
PPC Primary Processing Center
PPP Public Private Partnership
PSP Private Sector Participant
PSU Public Sector Undertaking
QCBS Quality and Cost Based Selection
R&D Research & Development
RFP Request for Proposal
RFQ Request for Qualification
SCC Scheme for Cold Chain, Value Addition and Preservation
Infrastructure
SEZ Special Economic Zone
SHG Self Help Group
SIA State Implementing Agency
SICDP Small Industries Cluster Development Programme
SITP Scheme for Integrated Textile Parks
SLBC State Level Bankers’ Committee

SMC Scheme Monitoring Committee
SME Small and Micro Enterprises
SPV Special Purpose Vehicle
STP Solid Treatment Plant
TC Technical Committee
TRA Trust & Retention Account
TUFS Technology Upgradation Fund Scheme
UC Utilization Certificate
VGF Viability Gap Funding
VIA Vatva Industries Association
ZLD Zero Liter Discharge
Contents
Abbreviations .......................................................................................................................................... 3
Executive Summary................................................................................................................................ 7
Chapter-1: Introduction .................................................................................................................... 7
Chapter-2: Methodology adopted for the study................................................................ 12
Chapter-3: Significance of MSMEs in Indian Economy ..................................................... 14
Chapter-4: Major Focus Schemes Analyzed in the Study ............................................... 24
Chapter-5: Implementation Status of the Major Schemes Covered Under the
Study .......................................................................................................................................................... 51
Chapter-6: Demand Assessment for Common Industrial
Infrastructure/facilities for MSMEs..................................................................................... 84
Chapter-7: Public Private Partnerships in India ................................................................ 107
Chapter-8: Existing Legal and Regulatory Framework for PPP Projects......... 114
Chapter-9: Legal and Regulatory Framework for Common Industrial
Infrastructure Projects.............................................................................................................. 122
Chapter-10: Special Purpose Vehicles for Common Industrial Infrastructure/
Facilities for MSMEs....................................................................................................................... 135
Chapter-11: Challenges Faced by Lending Institutions in Financing of Common
Industrial Infrastructure Projects for MSMEs ............................................................. 147
Chapter-12: Recommendations .................................................................................................. 172
Annexure-1 ............................................................................................................................................ 185
Annexure-2 ............................................................................................................................................ 186
Executive Summary
Background and Approach
There is enough evidence to suggest that various schemes/programmes being implemented for
promotion of common industrial infrastructure projects for MSMEs in our country have not met
expectations of the policymakers. Insufficient progress of these projects has had an adverse impact
on industrial development of the country, as common infrastructure facilities are considered to be
critical in making MSMEs more efficient and competitive. The present SIDBI Report is an
attempt to develop a deeper understanding of such schemes and to gain insights into envisaged
financing models and institutional structures, especially from the perspective of lending
institutions, so as to come out with solutions to identified challenges.
Most of these schemes promoting common infrastructure projects are being implemented in the
spirit of Public-Private Partnership (PPP) and provide for grant-in-aid, for part financing of
infrastructure cost, even as ownership/management of these infrastructure facilities are vested with
groups of MSME entrepreneurs who are required to meet remaining cost of such infrastructure
projects through debt and equity. Typically, the beneficiary enterprises are required to from a
separate legal entity, as a Special Purpose Vehicle (SPV), with specific objective of
implementation/management of projects being assisted by the government agencies, either in PPP
format or even under private ownership. These projects are eligible to receive capital grant
assistance from sponsoring government agency, based on defined eligibility parameters and release
milestones.
Shift in Approach
The 10th and 11th Five Year Plans marked a significant shift in the approach to development of
these common industrial infrastructure/facilities. Both the nature and scale of these schemes got a
huge boost, with the launch of the Scheme for Integrated Textile Parks (SITP) during 10th Plan
and Mega Food Parks Scheme (MFPS) during 11th Plan. Although programmes such as
Industrial Infrastructure Upgradation Scheme (IIUS) and Micro and Small Enterprises–Cluster
Development Programme (MSE-CDP) were being implemented even before that, but arguably,
SITP and later MFPS marked an approach which gave much more ownership, management and
operational flexibility to the private sector.
Earlier initiatives such as IIUS and MSE-CDP adhered largely to the accepted PPP structure, with
ownership and control of assets remaining with the government agencies, even as operation and
management of these projects were entrusted with the beneficiary enterprises. SITP, aimed at
setting up green-field industrial parks for textile sector, made a significant departure from this
approach, and provided complete ownership and control over assets to SPV, constituting of private
sector entrepreneurs setting up units in the Park.
A similar approach was taken under MFPS, which went one step further, and allowed equity
holding, in SPV, to even those who might not set up a unit in the Mega Food Park. Moreover,
schemes such as SITP and MFPS provided for a more comprehensive funding of project
components. Under SITP, project components such as factory sheds, inter-alia, owned by SPV but
leased to individual entrepreneurs, became eligible for grant assistance and in case of MFPS,
entire civil work and plant and machinery for core processing facilities and basic enabling
infrastructure are eligible for grant funding. It is to be noted that under SITP and MFPS, the
beneficiaries need not be confined to MSMEs and even large units can be part of assisted projects.
However, there has been a rethink recently by the policymakers over implementation model for
these schemes, recognising the challenges of the SPV model. Under IIUS, revised in 2013, there is
a complete turn about in implementation approach, and projects are now to be implemented by a
state government agency instead of earlier envisaged SPV, promoted by private sector
entrepreneurs. The revised IIUS guidelines cite “serious practical difficulties” of PPP model, as the
reason for this change in implementation model.
The revised MFPS, for setting up industrial parks for food processing sector in “Hub and Spoke”
model, has also provided for state government agencies to set up these projects without going
through the SPV route, though the latter model is still expected to be the primary implementation
mechanism for these projects.
Financing Models
The financing norms and models of common industrial infrastructure and facilities have gone
under significant changes over the years even as such norms also depend largely on the industrial
sector concerned. While the amount of financial assistance available for creation of common
industrial infrastructure/facilities varies across various schemes, most of the programmes assisting
these projects envisage lending by banks and financial institutions to achieve financial closure. In
fact, many of such schemes and programmes make bank lending mandatory to ensure that projects
are not only appraised carefully but also project implementation and utilisation of funds are
monitored by concerned banks/financial institutions. On the other hand, the banks/financial
institutions find it challenging to provide loan to such projects, in absence of a defined promoter
and often diffused management and operational responsibilities. It has also been found that lack of
cohesion amongst equity holders of these SPVs often leads to delays in project implementation and
even may bring projects to a standstill. The low capacity utilisation and difficulties in recovery of
envisaged user charges are also challenges of common industrial infrastructure/facilities, which
deter many banks and financial institutions.
In view of these associated challenges, the schemes and programmes funding these projects often
provide requisite safeguards for lending institutions, in form of TRA framework, escrow account
and also confer rights on them to secure their credit against assets being financed. Such provisions
have enabled lending institutions to come forward and actively assist these common infrastructure
projects, in spite of above mentioned challenges.
During the course of the study, the schemes and programmes funding such common industrial
infrastructure projects were studied in details in terms of the various institutional structures &
implementation models and constraints in accessing finance for these projects were identified. The
study also documented the challenges faced and lesson learnt during implementation of such
projects. A risk assessment framework for appraisal of common industrial infrastructure projects
has also been developed based on the financing challenges faced by the banks/ FIs.
Key Recommendations
Based on the challenges faced recommendations have been made in the report in two categories:
I. Recommendations for Restructuring of Schemes and Programmes

II. Recommendations for Banks/ Financial Institutions
The recommendations for restructuring of schemes and programmes have been put forward with
an objective to make these schemes and projects more investment friendly and successful in the
long run. Some of the key recommendations made in this category include (a) Appropriate
restructuring of the financial assistance to ensure proper long term utilization of the created assets
and to ensure that the grant assistance may also be passed on to the entrepreneurs/units in the park
(b) Dividing grant assistance into ‘capital subsidy’ (for creation of infrastructure) and ‘interest
subvention’ facility which will be provided during an initial fixed period. The interest subvention
facility would only be provided to the SPV on yearly basis on successful operations of the
facilities/infrastructure (c) Keeping the interests of units as well as of SPV and to ensure setting up
of proper number of units, modification of the schemes by linking release of grant amount to the
leasing out of the plots to independent units (d) To ensure proper operationalization of the facilities
created, a part of the allocated grant may be carved out for specific purposes (e) Ensuring
predictability in the selection process in terms of number of the projects to be supported and the
timeline of the selection process (f) Simplification of terms and conditions for the selection and
implementation of the projects (g) Encouraging the SPVs to adopt a transparent and an
unambiguous pricing mechanism that would make the project viable and also ensure that the
assistance received from the Ministries are also passed on to the units coming up in the parks (h)
Revision of PPP model and reconsideration of the roles and responsibilities of key stakeholders by
increasing the involvement of state agencies by giving them the ownership and implementation
responsibility of the projects (i) Ensuring active involvement of banks in designing, revising and
launching of schemes and programs to support industrial infrastructure projects (j) Considering the
Industrial Parks as ‘Infrastructure Lending’ projects as RBI provides a differential treatment to a
credit facility categorized as “Infrastructure Lending”
Recommendations for Banks/ Financial Institutions have been made to increase bankability and
financing of common industrial infrastructure projects. Some of the key recommendations made in
this category include (a) Increasing the knowledge and understanding of different schemes for
common industrial infrastructure (b) Improving the quality of appraisal of projects by the banks by
developing certain standards for appraisal of such infrastructure development projects and creating
PPP cells which would deal with large common infrastructure development projects (c) Serious
appraisal and strict due diligence of SPV structure and ownership especially related to the clarity
of roles & responsibilities and management structure of the SPV (d) Clear understanding and
assessment of different types of statutory approvals and clearances during appraisal of projects by
the banks/ FIs (e) Developing innovative options in creation of security to increase the bankability
of the projects (f) Developing different project structuring options and innovative loan products for
improving bankability and risk mitigation
Chapter-
Chapter-1: Introduction
The National Manufacturing Policy (NMP), launched with a vision to increase the share of
manufacturing in GDP from 16 percent to 25 percent, has acknowledged the advantages of
clustering though also noted that full benefits of agglomeration/ clustering are yet to be realized.
Government agencies have been implementing schemes/programmes for promoting common
industrial infrastructure/facilities with a twin approach. On the one hand, there are schemes
promoting both creation of such facilities in the existing industrial clusters and also on the other
there are also schemes encouraging setting up of new industrial parks and zones, often dedicated to
one industrial sector. The primary objectives of such schemes are to enhance international
competitiveness of the domestic industry by providing quality infrastructure through public-private
partnership in select functional industrial clusters or locations which have great potential to
become globally competitive. The strategy is to provide critical physical infrastructure in clusters
or industrial locations in terms of physical infrastructure (i.e., transport, roads, water, common
captive power generating units etc), information and communication technology infrastructure,
Research & Development infrastructure, common facilities centre, international marketing
infrastructure and any other physical infrastructure required and identified by the clusters to
become globally competitive. It has also been accepted by government agencies that creation of
any common infrastructure/facilities for MSMEs needs active involvement of beneficiary
enterprises, to be truly effective. A major highlight of such schemes is that they are public-private
partnership initiatives, which recognises the role of private sector participation in infrastructure
development based on local need, so that the entire effort is user-driven with the support of the
government. However in spite of Government grants being made available for common
infrastructure, MSMEs face serious challenges in mobilizing the industry contribution because of
their inherent limitations at individual unit level, and the fact that individual units have to raise
resources from their individual balance sheets, which puts additional burden on them. Hence there
is a critical need for adequate support from banks and financial institutions for such cluster
infrastructure projects. The role of SIDBI becomes significant here not only as a financial
institution but also as the apex agency for promotion and development of MSMEs in the country. It
is with this understanding that this report has been prepared to understand the financing challenges
of such common infrastructure projects and to recommend possible ways of overcoming such
challenges.
Chapter-
Chapter-2: Methodology adopted for the study
The objective of the study is to identify financing challenges for common industrial infrastructure
for MSMEs in India. There is a thrust by the Government of India on carrying out the
implementation of such industrial infrastructure in a public –private- partnership mode. Thus to
achieve the said objective, a detailed study of the schemes currently being implemented by the
different Ministries and analysis of its effectiveness were carried out. On this basis, a set of
recommendations have been proposed for improving the schemes in terms of easing financing
hurdles. The above two activities were carried out in the following phases:
Phase I: In this phase, the ten major schemes to be analysed for this study were shortlisted. After
having shortlisted these schemes, their implementation status along with their demand were
analysed. The shortlisted schemes are as follows:
Scheme for Integrated Textile Parks
Mega Food Parks Scheme
Industrial Infrastructure Upgradation Scheme
Micro and Small Enterprises–Cluster Development Programme
Scheme for Development of AYUSH Clusters
Comprehensive Handicrafts Cluster Development Scheme
Scheme for Cold Chain, Value Addition and Preservation Infrastructure
Mega Leather Cluster Scheme
Electronic Manufacturing Clusters Scheme
Scheme for Setting up Plastic Parks
As the major focus of this report is to understand the adaptability of PPP models with such
schemes, the design of these schemes were compared against the standard PPP models.
Phase II: In this phase, the legal and regulatory framework of general PPP projects was analysed.
The analysis was limited to the factors directly related with the implementation of the identified
schemes
Phase III: In the final phase, the study concentrated in understanding the Special Purpose Vehicle
(SPV) model. The associated risks and challenges with this model were analysed and understood.
The risks and challenges were categorised in terms of design, financial and operational aspects. In
this phase, the study examined in detail the envisaged financial structuring under the said
schemes/projects including identification of revenue streams and utilization thereof, loan
covenants, debt service comforts like reserve accounts, escrow & TRA framework etc. Based on
this, finally the recommendations were made to increase the bankability and financing of the
common industrial infrastructure projects for MSMEs.
Over the years, IL&FS Clusters have conducted numerous evaluation and feasibility studies for
common infrastructure related projects, vision documents and working group reports. IL&FS
Clusters has been a pioneer in this field who had promoted the idea of public private partnership
based common industrial infrastructures since 2005 and has been the Program Management
Agency for several major schemes since then. This study has delved into the repository of all such
experiences of IL&FS Clusters and extracted information that has been incorporated at various
stages of the report. Overall, the analysis was largely based on IL&FS Clusters’ experiential
learning over the years which were documented in various public and private sources. To analyse
the current status of these projects, inter team discussions and brain storming session were carried
out within the IL&FS Clusters division. In-depth secondary research was undertaken from various
sources like Ministry websites, Working Group Reports for relevant Ministries and Policy Papers
thereof. The insight gained from the continuous process of interaction with different Ministries,
various promoters/ members of the SPVs and banking officials have also been utilized in the
preparation of the report.
Chapter-
Chapter-3: Significance of MSMEs in Indian
Economy
With a total number of 448 lakh units and employing more than 100 million people,1 the MSME
sector is an important segment of Indian economy. The sector has a share of about 40% in
manufacturing output and 45% in total exports of the country, and therefore contributes
significantly to economic development as well as social development. MSME is the biggest
employment provider in the country after agricultural sector. It also comprises the largest share
(90%) of the total industrial units of the country. According to Ministry of Micro, Small &
Medium Enterprises, Government of India (MMSME) the number of MSME units (both registered
and unregistered) grew at a CAGR of 4.5% during FY 2007-11. Investments by MSMEs have
increased by 11.5 % during the same period. Employment generation capacity of this sector has
increased recording a CAGR of 5.3% since FY 2007 signifying the increasing labour intensive
nature of the sector. Further, nearly 50% of MSMEs2 are owned by disadvantaged groups of
society which indicates the inclusiveness of this sector. Despite facing intense competition since
year 1991 due to liberalization policies of India, this sector has survived and thrived well,
reflecting the capability to compete in International markets. The potential of this sector to grow
further and play more vibrant role in the country has also been well established and recognized by
policy makers
1200 Total 2000000

1000 Working 1500000
Enterprises 1000000
800
(in lakhs)
600 500000
Employmen
400 t (in lakhs) 0
200
0
Market Value of Fixed Assets (in Crore)

Gross Output (in Crore)
Annual report 2012-13, Ministry of Micro Small, Medium Enterprises
As per Micro, Small & Medium Enterprises Development (MSMED) Act, 2006, micro, small &
medium enterprises are defined as per the investment in plant & machinery (in case of
manufacturing industries) or on equipments (in case of service enterprises). The scope & coverage
1
Annual report 2012-13, Ministry of Micro Small, Medium Enterprises, GoI
2
Report of The Working Group on MSMEs Growth for 12th FYP-Ministry of Micro, Small & Medium Enterprises,
GoI
was broadened significantly under MSMED Act, 2006, which recognised the concept of
‘enterprise’ & to include both manufacturing & services sector, besides defining the medium
sector. The present classification of these sectors, in terms of investment in plant & machinery, has
been presented in table given below:
Classification Manufacturing Sector Services Enterprises

Micro Up to Rs. 25.00 lakhs Up to Rs. 10.00 lakhs
Small Rs. 25 lakhs to Rs. 500 lakhs Rs. 10 lakhs to Rs. 200 lakhs
Medium Rs. 500 lakhs to Rs. 1000 lakhs Rs. 200 lakhs to Rs. 500 lakhs
MSMEs are considered as drivers of economic growth and equitable development globally. Its
inherent nature of being less capital intensive and more labour intensive at the same time gives an
edge to the industry. MSMEs are becoming more agile and dynamic which, in turn, promoting
innovations and adaptability to the industry to survive and thrive in recent economic downturn and
recession
The importance of MSMEs is well established in developing countries like India having large rural
and semi-rural populations with major dependence on agriculture and high unemployment. In such
an environment, further promotion of MSMEs can lead to significant employment generation,
economic development and equitable prosperity
In India, this sector is highly diverse in terms of size of businesses, sectors, goods and services
offered and other parameters. The graphs given below show their break up on various parameters3:
Percentage Distribution of Area wise share (in %)

Enterprises by Type of Organization
(in %)
Proprietory
Partnership Urban
44.66
Pvt. Company 55.34 Rural
Cooperative
Others
94.41 Not recorded
3
Annual report 2012-13, Ministry of Micro Small, Medium Enterprises, GoI
As per the data of MMSME, a large majority (about 94%) of enterprises in the MSME sector in
India are proprietary concerns. About 1.18% of the enterprises are partnership firms and only
0.14% of them are private companies. Also, rural area accounts for about 55% of the total working
enterprises in MSME sector with 200.19 lakh of working enterprises whereas urban area has about
161.57 lakh working enterprises (i.e. about 45% of the working enterprises)
Percentage Distribution by
Social Category (in %)
0.9
7.83 SC
5.76
ST
43.56
OBC
Others
41.94
Not recorded
In term of ownership of enterprises by different social categories, about 50% of MSME enterprises
are owned by disadvantaged groups (7.83% by Scheduled Caste entrepreneurs, 5.76% by
Scheduled Tribe entrepreneurs and 41.94% by entrepreneurs of Other Backward Classes). This
shows a certain amount of inclusiveness in the MSME sector and also indicates further potential of
the sector in social development
Output generated across key
sectors In the organized sectors, food & beverages is the
Leather 11
largest MSME sector in terms of both output (USD
Apparel 27 180 bn) and employment generation (USD 3.1 mn)
USD Billion
Textiles 79 followed by textiles. The other major sectors which
Food & Beverages 180 have significant contributions are apparel and leather
In most sectors, MSMEs are an integral part of large

Employment generation in
organized MSME sectors across industries as they complement them as ancillary units.
select industries
As per the National Manufacturing Policy, MSMEs
3.1
2.5
1.8
are expected to contribute majorly to the target of
Population (in raising the share of manufacturing sector from 16% at
0.05 Million)
Food & Textiles Apparel Leather
present to 25% by the end of year 2022
Beverages
The number of registered MSMEs in India has shown

a growth rate of more than 10% every year till 2010-11, whereas in year 2011-12 growth rate was
19% which is approximately twice of the growth rate recorded for previous years. Following graph
depicts the growth pattern of the MSMEs (registered) in India over the last five years:
Annual Growth Rate (in %)
2010-1 to
2011-2 19.06
2009-10 to
2010-1 10.93
2008-9 to
2009-10 10.78
2007-8 to
2008-9 10.76
Annual report 2012-13, Ministry of Micro Small, Medium Enterprise
In spite of the healthy growth rate, the MSME sector has the potential of even higher growth which
is limited by various challenges and barriers. Stringent competition from global counterparts,
change in manufacturing strategies, technological shifts and highly volatile market scenario are
some of the challenges currently faced by this industry. Moreover, the MSMEs also face several
common issues such as lack of modern technology and support infrastructure, skills and quality,
access to market and capital, etc., which they, due to their small scale and lack of capital, many
times are unable to address leading to reduced competitiveness
(I) Rationale for Common Industrial Infrastructure/ Facilities for MSMEs

Common facilities for MSMEs are conceptualized and implemented to enable sharing of costly
infrastructure and facilities, which is otherwise very essential for the operations of MSMEs in the
increasingly competitive environment
(1) Common Industrial Infrastructure/ Facilities
Usually the common facilities comprise of costly, state-of-the-art hi-tech equipment, which is very
essential to meet modern processes, quality requirements and also achieving scale of operations.
Individually, MSMEs cannot afford such facilities and moreover their individual utilization would
not meet the optimum scale required for economical operations of these facilities. Such common
facilities include testing centres/ laboratories, training centres, raw material and finish products
warehouses/ cold storages, effluent and sewage treatment, complementing production processes,
packaging facilities, etc
Several industry associations in existing clusters and industrial estates promote common
infrastructure/ facility projects to provide infrastructure specifically for MSMEs. Such projects
may be either up-gradation of infrastructure in existing clusters and industrial estates, or setting up
of Greenfield clusters, i.e. industrial parks. The greenfield clusters provide opportunity for MSMEs
to move into better working environments with access to quality infrastructure and facilities. Due
to constraints of space and high costs of real estate, expansion by MSMEs is not feasible, and
therefore greenfield industrial parks provide an
opportunity to realize twin objectives of growth
Some of the major challenges
and better infrastructure. It is for this reason that faced by MSMEs in India are:
several Government departments and ministries
• Absence of adequate and timely
have schemes for promotion of infrastructure for banking finance
their specific sectors • Limited capital and knowledge,
non-availability of suitable
Such common infrastructure and common facilities technology
• Low production capacity
are normally owned by industry promoted Special
• High cost of credit
Purpose Vehicles (SPVs) which receive grants • Ineffective marketing strategy
from Government to part finance the projects • Lack of skilled man power for
manufacturing, services,
From Governments’ point of view, such projects marketing etc
• Lack of access to global markets
serve as means to encourage and promote
• Constraints on modernization of
industrial development and create more expansion
employment opportunities. These projects also • Problems of storage, designing,
packing and product display
help MSMEs and industry in general to achieve • In adequate infrastructure
efficiencies and growth, including export sales, facilities, including power, water,
roads
which helps in foreign exchange earnings for the
country. The sectoral Ministries like Ministry of Textiles, Ministry of Food Processing Industries
have schemes with this objective. Similarly the Ministry of Commerce & Industry has schemes
like IIUS, Mega Leather Clusters for promotion of industry in general and specific sectors.
Similarly for Electronics Manufacturing Clusters, Ministry of Communication & Information
Technology has come out with an Electronic Manufacturing Clusters Scheme. Ministry of MSME
has Micro and Small Enterprises–Cluster Development Programme (MSE-CDP) and other
Ministries like Ministry of Heavy Industries and Public Enterprises have been exploring schemes
for promotion of Capital Goods Sector through cluster approach
From the industry’s point of view, the investment in such clusters provides them access to better
facilities and infrastructure at lesser cost, and sharing of the same through joint equity investments
in such projects. Usually, the beneficiary enterprises pool in their resources and meet the share of
industry stipulated by Government in their individual schemes. Industry is keen on investing in
such projects as it would give them competitive advantage of other similar units and also help in
meeting global compliance norms
A key motivator for industry investments in such projects is environmental compliances. With
stricter enforcement of norms and also introduction of stringent compliances necessitated by
judicial intervention, industry is left with little choice but to promote such projects. Specific
incentives are laid down for common effluent treatment plants in the Mega Leather Clusters
Scheme. Such projects also help the individual units in externalizing their obligations for
environmental compliances. Several textile parks have included effluent treatment plants in their
plans
(2) Ownership and Management Structure
The MSMEs predominantly operate in clusters as these provide them with opportunity of sharing
key resources like raw materials, specialized/skilled manpower, supporting industries, technology
and market and thus make them more efficient and competitive. There are a large number of
industrial clusters present in the country, often developed around one industry or sector and the
promotion of common industrial infrastructure/facilities for MSMEs in these clusters has been
integral to industrial development policy of the country. The nature of these clusters has
encouraged the policymakers to promote creation of common industrial infrastructure/facilities as
the most effective instruments to reach the largest number of MSMEs (beneficiaries). However,
there are different models of ownership and management (O&M) of the common infrastructure
facilities thus created in the MSME clusters. Such O&M models range from entirely government
owned and managed common infrastructures to beneficiary enterprises driven models
It has been accepted by government agencies that creation of any common infrastructure/facilities
for MSMEs needs active involvement of beneficiary enterprises, to be truly effective. The
emergence of Public-Private Partnership (PPP) is considered to be a sustainable financing and
institutional \mechanism with the potential of bridging the common industrial infrastructure gap in
the MSME sector. Typically, a Public Private Partnership entails an arrangement between a
government/statutory entity on one side and a private sector entity (typically beneficiary
enterprises although in some schemes it may be an independent third party) on the other side, to
provide public assets/services, through investments being made and/or management being
undertaken by the private sector entity, for a specified period of time, where there is a well defined
allocation of responsibilities and risk between the private sector and public entity. Many of
common infrastructure/facilities projects for MSMEs are being implemented in the spirit of Public-
Private Partnership (PPP) and provide for grant-in-aid, for part financing of infrastructure cost,
even as ownership and/or management of these infrastructure facilities are vested with groups of
MSME entrepreneurs, who are required to meet remaining cost of such infrastructure projects. In
some cases the government also recognizes that some common infrastructure/facilities projects
may not always be viable on PPP and it uses other mechanism of compensation such as provision
of Viability Gap Funding (VGF) or annuity payments, etc. Alternatively, the government
sometimes directly implements such facilities upfront and then transfer O&M of facilities and
services to a Private Sector Participant (PSP) where feasible
Typically, the beneficiary enterprises are required to from a separate legal entity, as a Special
Purpose Vehicle (SPV), with specific objective of implementation and/or management of projects
being assisted by the government agencies, either in PPP or even under private ownership.
However, the mode and amount of assistance granted by the government agencies and envisaged
financial models for these projects range widely. The various SPV structures and O&M models
have been discussed in details in the subsequent chapters of the report
CODISSIA INDUSTRIAL PARK – Enabling Local

Economic Development – A Case Study
Project Background
Coimbatore is the second largest industrialized region in Tamil Nadu after Chennai and is an
important industrial hub housing more than 50,000 small and medium enterprises
constituting about 22% of the factories in the state. The existing industrial estates promoted
by SIDCO/private co-operatives are completely taken
Objectives
up with no vacant land available. More importantly,
these industrial estates are poor when it comes to • To develop a green field state-
of-art Industrial Park for the
industrial infrastructure, with limited industrial SME Industry of Coimbatore
Region.
amenities. In view of this, the SME units felt the need
to have larger plots of industrial land area to cater to
the growth in demand. The Coimbatore District Small • To provide enabling support in
the manufacturing of
Industries Association (CODISSIA), which is the
engineering products and
single largest District Association of Small Industries services and accelerate the
in India, have decided to come together to develop

world-class integrated industrial Park at two locations near Coimbatore. The proposed Park
would be developed on a land parcel admeasuring 520 acres comprising of both the
locations. The proposed project is in line with the National Strategy of accelerating growth in
engineering exports on a medium term perspective with aggressively promoting products to
move up the value chain which has a strong domestic manufacturing base
Project Cost
On the basis of cost estimates worked out for all facilities planned, the project cost is
estimated at Rs 225 Cr. The project is being developed with no grant support from
Government but purely through a mix of debt and equity from the members of CODISSIA.
Banks are showing keen interest in funding such infrastructure projects as they assist in
catalyzing industrial development and empowering the sector. Furthermore, this also
provides opportunity to banks in funding future needs of industrial units towards
construction of buildings, acquisition of machinery, etc. The Means of Finance for the
proposed project is given below:
Study on Financing Models and SPV Structures in Respect of Common Industrial Infrastructure/Facilities
Infrastructure/Facil for
Means of Finance Rs Crore Rs Crore

Equity 70.00
Debt 155.00
SIDBI – Lead Bank 55.00
Canara Bank 40.00
Central Bank of India 30.00
Syndicate Bank 30.00
Total Means of Finance 225.00
Implementation Framework
The prime responsibility of development of the proposed project would be that of the
SPV,M/s CODISSIA Industrial park. An appropriate contractual framework has been
proposed that would facilitate project development and operations thereafter. The contractual
framework
rk is described in the schematic diagram below:
IL&FS Clusters has been retained by the SPV as the Project Management Consultant (PMC),
for the purposes of carrying out Project Development, Design and Detailed Engineering of
the proposed Project and for
or overseeing construction and implementation supervision. The
SPV has entered into financing documentation for securing the Loans and would repay the
same as per the schedule laid down in the Base Case Business Plan. SIDBI is the Lead
Banker for the Project
ct and it has undertaken detailed appraisal of the project, loan
documentation/ security creation and assistance in disbursement of the term loan.
Envisaged Impact of the Project
It is estimated that about 550-600 SME Role of SPV, CODISSIA Industrial Park
units will be set up in the park with an • Development of the Project
average per acre investment of about • Operate, manage and maintain the Park along
Rs 3 Crore and an estimated total with the infrastructure facilities
turnover of Rs. 1750 crore. The Park is • Facilitate intending industrialists in establishing
their units
envisaged to generate direct and
Role of SIDBI
indirect employment of about 17,500
• SIDBI is the Lead Banker
and 2500 people respectively. The
• Undertaken detailed appraisal of the project, loan
project will provide long and short term documentation/ security creation and assistance
in disbursement of the term loan
local job opportunities and increasing
connectivity of the region through • Monitoring the project implementation shall be
jointly undertaken by all the bankers in
construction and upgradation of roads consortium
for movement of construction material Role of IL&FS Clusters
and subsequently raw material and • IL&FS Clusters is the ‘Project Development and
Executing Advisor’
finished products. The project will go
• Assisting SPV in Project Development (site
long way in increasing the economic analysis, project related studies, preparation of
master plan and estimation of block costs)
growth of the region
• Project engineering & supervision
for MSMEs Under PPP and Private Ownerships
Chapter-
Chapter-4: Major Focus Schemes Analyzed in
the Study
(I) Scheme for Integrated Textile Parks (SITP), Ministry of Textiles

The ‘Scheme for Integrated Textile Parks’ (SITP) was approved in the 10th Five Year Plan
(July 2005) in order to provide the textile industry with State of the art, world-class
infrastructure facilities for setting up their textile units. The important feature of the scheme
is to target locations where there are high future growth prospects and necessitate critical
interventions to extend state-of-the-art facilities so as to develop common infrastructure and
buildings for production/support activities (including textiles engineering, accessories.
packaging), depending on the needs of the ITP. The scheme would also facilitate textile units
to meet international environmental and social standards
The Scheme seeks green field investments in the textiles sector which will be operational
through mode of Public Private Partnership for setting up textile units. All the sub-sectors of
textile industry are eligible under the scheme such as cotton ginning, spinning, weaving,
processing, garmenting and the related ancillaries. Each Integrated Textile Park (ITP) would
normally entail about 50 units. The number of entrepreneurs and investments to be made in
each ITP is project specific. The entire range of common infrastructure within the park are
eligible under the scheme which includes roads, water supply, sewage/effluent treatment,
power including CPP, training facilities, workers hostels, testing labs and SPV owned factory
buildings, etc
(1) Implementation
Each ITP is considered as a separate Special Purpose Vehicle (SPV) which involves various
stakeholders’ i.e. local industrial entities, banks and/or financial institutions, State
Governments and Central Government into a single fold. SPV shall invariably be a Corporate
Body registered under the Companies Act. ITPs may also be set up as SEZs
The state governments have a special role to play for setting up ITPs. All kinds of necessary
approvals and required assistance for power, water and other utilities etc., wherever
necessary, are to be obtained from state governments. Further, they also assist in
identification and procurement of land at locations suitable for development of a textile hub
in the state. Various state government agencies may also participate in the projects by
subscribing to the equity of SPV or by providing grants-in-aid for the project
(2) Funding Pattern
The project cost covers common infrastructure and buildings for production/support activities
as per the specifications of the ITP. However, aggregate investment in land, factory buildings
and Plant & Machinery by the entrepreneurs in a Park shall be at least twice the cost of
common infrastructure proposed for the Park. Total project cost is funded through mix of
equity and grant-in-aid from various agencies i.e. Ministry of textiles State Government,
State Industrial Development Corporation, Industry, Project Management Consultant and
Loan – from Banks/ Financial Institutions etc. extend financial support to the ITP.
Government of India extends financial support to the project through the Scheme up to 40%
of the project cost subject to a ceiling of Rs. 40 crore. Financial assistance from Govt. of
India is generally a grant-in-aid to the project unless specified by Project Approval
Committee (PAC) to be equity. The combined equity stake of government agencies i.e.
Central Government/State Government/ State Industrial Development Corporation would not
exceed 49% of the project cost. GOI support will be provided at 90% of the project cost
subject to a ceiling of Rs. 40 crore for first two projects in the North East States and Jammu
& Kashmir
(II) Micro and Small Enterprises–Cluster Development Programme

(MSE-CDP), Ministry of Micro, Small & Medium Enterprises
(MSME)
To strengthen and enhance the competitiveness of micro and small enterprises in the country,
the Ministry of Micro, Small & Medium Enterprises (MSME) has adopted a cluster
development approach to realize higher productivity, competitiveness and capacity building
of a group of enterprises which are located in geographical proximity and are complementary
to each other
In October 2007, the erstwhile cluster development scheme ‘Small Industries Cluster
Development Programme (SICDP)’ was renamed as ‘Micro and Small Enterprises – Cluster
Development Programme (MSE-CDP)’. It was also decided that the ‘Integrated
Infrastructural Development (IID)’ Scheme shall be subsumed in MSE-CDP for providing
developed sites for new enterprises and upgradation of existing industrial infrastructure. A
comprehensive MSE-CDP is being administered by the office of Development Commissioner
(MSME), the Ministry of MSME
(1) Objectives
As per the scheme guidelines, the objectives of the scheme are given below:
• To support the sustainability and growth of MSEs by addressing common issues such
as improvement of technology, skills and quality, market access, access to capital, etc.
• To build capacity of MSEs for common supportive action through formation of self
help groups, consortia, upgradation of associations, etc.
• To create/upgrade infrastructural facilities in the new/existing industrial areas/
clusters of MSEs.
• To set up common facility centres (for testing, training centre, raw material depot,
effluent treatment, complementing production processes etc).
(2) Activities
The admissible activities under this scheme are as follows:
• Diagnostic Study Reports: These reports are prepared to identify a cluster and to
prepare an action plan for the same.
• Soft Interventions: To provide technical assistance, capacity building, exposure
visits, market development, trust building, etc for the cluster units.
• Detailed Project Report: To prepare a technically feasible and financially viable
project report for setting up of a common facility center for cluster of MSE units
and/or infrastructure development project for new industrial estate/ area or for
upgradation of infrastructure in existing industrial estate/ area/ cluster.
• Hard Intervention/Common Facility Centers (CFCs): Creation of tangible “assets”
like Testing Facility, Design Centre, Production Centre, Effluent Treatment Plant,
Training Centre, R&D Centre, Raw Material, Bank/Sales Depot, Product Display
Centre, Information Centre, any other need based facility.
• Infrastructure Development: Development of land, provision of water supply,
drainage, power distribution, non- conventional sources of energy for common
captive use, construction of roads, common facilities such as first aid centre, canteen,
other need based infrastructural facilities in new industrial (multi- product)

areas/estates or existing industrial areas/estates/clusters
(3) Implementation
It is necessary to form an SPV prior to setting up of and running the proposed CFC. An SPV
should be a clear legal entity (Cooperative Society, Registered Society, Trust or a Company)
with evidence of prior experience of positive collaboration among its members. The SPV
should have a character of inclusiveness wherein provision for enrolling new members to
enable prospective entrepreneurs in the cluster to utilise the facility should be provided. There
should be a minimum of 20 MSE cluster units serving as members of the Special Purpose
Vehicle (SPV). There is no ceiling on the maximum number of members. In special cases,
where considerations of investments, technology or small size of the cluster warrant lesser
number of units, a minimum of 10 MSE units may be considered for the SPV
(4) Implementing Agencies
Following are the agencies made responsible for the above mentioned activities:
Activity Implementation Agency
Diagnostic study • Officers of Ministry of MSME.
Soft interventions • Offices of State Governments.
Setting up of CFC • National & international
institutions engaged in
development of MSE sector.
• Any other institution/agency
approved by Ministry of MSE.
Infrastructure development projects State/UT Governments through an
appropriate state government agency with
a good track record in implementing such
projects.
(5) Funding Pattern
Under this scheme, broadly five activities have been proposed for funding pattern:
• Diagnostic Study Reports: Total grant of maximum Rs. 2.5 lakhs for each cluster
will have to be aided by Ministry. The grant amount is Rs. 1.00 lakhs for field
organizations of Ministry of MSME
• Soft Interventions: Maximum limit of Rs. 25.00 lakhs per cluster has been marked.
GoI grant for the soft interventions will be 75% of the sanctioned amount of the
project cost. For NE & Hill States, Clusters with more than 50% (a) micro/village (b)
women owned (c) SC/ST units, the GoI grant will be 90%. The cost of project will be
moderated as per size/ turnover of the cluster
• Detailed Project Report: A maximum grant of Rs. 5.00 lakhs will be provided for
this task
• Hard interventions: Financial assistance from Govt. of India as grant-in-aid will be
restricted to 70% of the project cost subject to maximum of Rs. 15.00 crore. GoI
grant will be 90% for CFCs in NE & Hill States, Clusters with more than 50% (a)
micro/ village (b) women owned (c) SC/ST units
• Infrastructure Development: Govt. provides grant up to 60% of the project cost
maximum up to Rs 10.00 crore. GoI grant will be 80% for projects in NE & Hill
States, industrial areas/ estates with more than 50% (a) micro (b) women owned (c)
SC/ST units
(III) Modified Industrial Infrastructure Upgradation Scheme (MIIUS),

Ministry of Commerce and Industry
MIIUS, a flagship scheme under Department of Industrial Policy & Promotion (DIPP),
Ministry of Commerce & Industry, is a revised and modified version of Industrial
Infrastructure Upgradation Scheme (IIUS) launched in 10th Five Year Plan (in FY 2003-04).
With a special focus of upgrading and building industrial infrastructure to enhance
competitiveness and to overcome operational lapses, the scheme aims to promote public
private partnership (PPP) in selected clusters. This scheme promotes demand driven approach
and intends to cover the components such as Common Facility Centres (CFCs), Research &
Development, Environment Protection Infrastructure, Training Set up, Quality Certification
& Benchmarking etc. which otherwise are not covered under other available schemes. The
Scheme prioritizes upgaradation of infrastructure in existing clusters over Greenfield
investments. Further, the Scheme also aims to upgrade infrastructure in Industrial

Estates/Parks/Areas and Greenfield projects in backward areas including NER
The Scheme was implemented through SPV model in PPP mode in 10th & 11th FYP.
However, various practical shortfalls had to be faced while implementing the Scheme
through this mode. As per the modified scheme guidelines, there were enormous delay in
implementation, cost escalation in case of majority of the projects, lack of project
accountability and shortfalls in achievement of outcome. It was challenging for stakeholder
industries to unite to form a SPV for creating a common infrastructure due to internal conflict
among industries. The SPVs faced difficulties in raising equity from its members as
envisaged in the project; and some SPVs defaulted in raising funds and in some cases, state
government and local bodies contributed funds to the extent of failed contributions from the
Industries. Further, optional involvement of the State Governments in the scheme led to weak
ownership of the project with reduced financial, monitoring and mentoring support to the
project
Considering the shortfalls of previous modes and taking the lessons from the past, the
modified Scheme now will be implemented through State Implementing Agency (SIA) in
12th FYP. SIA will formulate the project interventions as well as implement and monitor the
progress of the project. The SIA for each IIUS project could be the State Industrial
Development Corporation (SIDC) or any equivalent state entity as identified and
recommended by the respective State Government
It is also proposed that the proposals can be taken up under either of the following two
options:
• For funding of new or existing Industrial Estates/Parks/Areas, SIA would choose the
site in consultation with the industry to assure that funds are not sought for Industrial
Estates/Parks/Areas in place where industry does not find it viable.
• For funding through SPV-led Clusters, the proposal is routed through the SIA-led
implementation route
The role of states in the scheme has been redefined for nominating the State Implementation
Agency (SIA) such as State Industrial Development Corporations for execution of the project
and sharing the project cost. It is expected that with this change, bottlenecks which delayed
the projects in earlier versions of scheme would be overcome. In this way, state governments
have to play a central role in this Scheme considering the industry is a State subject
(1) Funding Pattern
The central government will contribute up to 50% each of the project cost subject to a ceiling
of Rs. 50 Crore. The remaining contribution will be from the SIA, beneficiary industries and
loan from financial institutions. The minimum contribution of the SIA will be 25% of the
project cost. In case of North Eastern States, the central grant and the minimum contribution
of the SIA will be 80% and 10% respectively. Central grant for physical infrastructure will be
up to 25% of the central grant subject to a ceiling to Rs.12.5 crore. ‘CETP’ component of the
project would be considered subject to ceiling of assistance upto Rs. 15 crore/CETP
(maximum Rs. 1.50 crore/MLD) and for ZLD treatment (Zero Discharge) maximum
assistance up to Rs. 20 crore/CETP (Rs. 4.50 crore/MLD)
Central government funding will be confined only to creation of durable assets and activities
relating to productivity enhancement and no recurring expenditure will be funded by Central
Government under the scheme
The central assistance will be a onetime grant-in-aid (not equity) and the contributions of
other stakeholders must be in the form of cash and not in kind like the cost of land/existing
building. The SIAs will meet all expenses beyond the prescribed limit from their own
resources. In case of downward revision of project cost, the central government grant would
be reduced proportionately
Interest earned on central grant by the SIA to be treated as a part of the central grant. Land
and Land development cost, working capital and contingencies shall be excluded from the
project cost. Higher expenditure in the project cost due to time and cost-overruns have to be
borne by the SIA or other stakeholders
(IV) Mega Food Parks Scheme (MFPS), Ministry of Food Processing

Industries (MoFPI)
Mega Food Parks Scheme is being implemented by Ministry of Food Processing Industries
(MoFPI). This scheme was launched by Ministry of Food Processing Industries as Scheme of
Food Parks during 10th FYP and was reformulated as Mega Food Parks Scheme during 11th
FYP
The primary objective of the MFPS is to provide modern infrastructure facilities for the food
processing along the value chain from the farm to the market. It will include creation of
processing infrastructure near the farm, transportation, logistics and centralized processing
centers. The main feature of the Scheme is a cluster based approach. The scheme will be
demand-driven, and will facilitate food processing units to meet environmental and safety
standards
The expected outcome is increased realization for farmers, creation of high quality processing
infrastructure, reduction in wastage, capacity building of producers and processors and
creation of an efficient supply chain along with significant direct and indirect employment
generation
(1) Salient Features of Mega Food Parks
• The Scheme aims to facilitate the establishment of a strong food processing industry
backed by an efficient supply chain, which would include collection centers, primary
processing centers and cold chain infrastructure. The food processing units, under the
Scheme, would be located at a Central Processing Centre (CPC) with need based
common infrastructure required for processing, packaging, environmental protection
systems, quality control labs, trade facilitation centers, etc
• The extent of land required for establishing the CPC is estimated to be between 50-
100 acres, though the actual requirement of land would depend upon the business plan
of investor(s), which may vary from region to region. CPC would be supported by
Primary Processing Centers (PPC) and Collection Centers (CCs) in identified
locations based on a techno-feasibility study, adequate to meet the raw material
requirements of the CPC. The land required for setting up of PPCs and CCs at various
locations would be in addition to land required for setting up the CPC
• It is expected that on an average, each project may have around 30-35 food processing
units with a collective investment of around Rs 250 crores that would eventually lead
to an annual turnover of about Rs 450-500 crores and creation of direct and indirect
employment of about 30,000 persons. However, the actual configuration of the project
may vary depending upon the business plan for each Mega Food Park. The aggregate
investment in CPC, PPCs and CCs should be proportionate and commensurate to the
size of the total project keeping in view the economies of scale
• The spirit of the guidelines of the Mega Food Parks Scheme is to facilitate setting up
of only food processing industries. Accordingly, only food processing industries that
make food products fit for human/animal consumption may be permitted to be set up
in the Mega Food Parks. Packaging facilities of food products as ancillary to the food
processing industries may also be allotted land in the Mega Food Parks
(2) Implementation
The project under this scheme will be implemented through a Special Purpose Vehicle (SPV)
registered under Companies Act. However, State Government/ State Government
entities/Cooperatives applying for the project under the scheme will not be required to form a
separate SPV
The Anchor Investor in the SPV holding majority stake, with or without other promoters of
the SPV, will be required to set up at least one food processing unit in the park with an
investment of not less than Rs. 10 crore. The Anchor Investor will have at least 51% stake in
such processing unit(s). However, State Government/ State Govt. entities/ Cooperatives will
not be required to set up processing unit(s) in the park
As per the guidelines, lead promoter is the one who has maximum equity share in the SPV.
The lead promoter has to coordinate with the key stake holders including Ministry of Food
Processing Industries. The combined net worth of the promoters should be not less than Rs.
50.00 crore and each member in SPV must have a net worth at least 1.5 times of his/her
proposed equity contribution in order to ensure requisite contribution for the project from
each shareholder. The SPV has to bring in at least 20% of total project cost as equity in
general areas and at least 10% of total project cost in difficult & hilly areas & ITDP notified
areas. Also, only up to 26% equity share can be taken up by Central Government. However,
there are no such restrictions on State Government entities/Cooperatives. SPV is not
permitted to sell or lease the common facilities under Mega Food Park and can only be
offered on rental basis
(3) Program Management Agency (PMA)
The Ministry appoints a Program Management Agency (PMA) to assist it in implementation

of the Scheme. The PMA is required to be a reputed institution with extensive experience in
project development, management, financing and implementation of infrastructure projects
(4) Project Management Consultant (PMC)
In addition to the PMA, for ensuring smooth implementation of projects at ground level,
Ministry has drawn up a panel of Project Management Consultants (PMC) with experience in
preparation of DPRs for large projects and in project implementation. Any of these Ministry’s
empanelled agencies may be engaged by the SPVs for preparation of DPRs and for assistance
in implementation and the cost of which would be considered as one of the eligible
components of the project. However, such cost should not exceed 2% (inclusive of taxes) of
the eligible grant amount of the project
(5) Funding Pattern
The Scheme shall provide a capital grant at the rate of 50 percent of the eligible project cost
in general areas and at the rate of 75 percent of eligible project cost in difficult and hilly areas
i.e. North East Region including Sikkim, J&K, Himachal Pradesh, Uttrakhand and ITDP
notified areas of the States subject to a maximum of Rs.50 crores per project. The eligible
project cost is defined as total project cost but excluding cost of land, pre-operative expenses
and margin money for working capital. However, Interest During Construction (IDC) as part
of preoperative expenses and fee to Project Management Consultant (PMC) up to 2% of the
approved grant would be considered under eligible project cost
(V) Scheme for Cold Chain, Value Addition and Preservation

Infrastructure, Ministry of Food Processing Industry (MoFPI)
The Ministry of Food Processing Industries (MoFPI) launched the Scheme for Cold Chain,
Value Addition and Preservation Infrastructure during the 11th Plan, which emerged out of
the realization that any effort to promote food processing sector has to necessarily address the
challenges of existing logistics constraints, specially for perishables, in the country. The
Scheme, therefore, aims at enabling food processing units to create integrated and appropriate
cold chain facilities along the value chain with an objective to streamline the supply chain
leading to significant reduction in wastages of perishables
(1) Objectives
The objective of the Scheme is to provide integrated and complete cold chain, value addition
and preservation infrastructure facilities without any break, for perishables from the farm gate
to the consumer and to link producers to food processors and market through well equipped
and efficient supply chain. To achieve this objective pre-cooling facilities at production sites,
reefer vans and mobile cooling units are also assisted under the Scheme. The Scheme also
aims to establish value addition with infrastructural facilities like sorting, grading, packaging
and processing for a variety of products such as fruit and vegetable, marine, dairy, poultry,
etc
(2) Components of the Scheme
The eligible components under the Scheme are as follows:
a. Minimal Processing Centre at the farm level. This centre may have facilities
for weighing, sorting, grading, waxing, packing, pre-cooling, Controlled
Atmosphere (CA)/ Modified Atmosphere (MA) cold storage, normal storage,
Ripening Chamber and Individual Quick Freezing (IQF) etc
b. Mobile pre-cooling vans and reefer trucks
c. Distribution hubs with multi product and multi CA /MA chambers cold
storage /Variable Humidity Chambers, Packing facility, grading and sorting
facility, CIP Fog treatment, Ripening Chambers, IQF and Blast Freezing etc
d. Irradiation facility
To avail financial assistance, any two of the components, from (a), (b) or (c) above are
required to be set-up by the units. Considering the functional nature of the facility, Irradiation
facility is considered on standalone basis for the purpose of eligibility
(3) Funding Pattern
Financial assistance is provided @ 50% of the total cost of plant & machinery and technical
civil works in general areas and 75% for NE region and difficult areas (North Eastern states,
Sikkim, J&K, Himachal Pradesh and Uttrakhand) subject to a maximum grant-in-aid of Rs 10
Crore
Any business entity including individuals (proprietorship concerns), groups of entrepreneurs,

cooperative societies, Self Help Groups (SHGs), Farmer Producer Organizations (FPOs),
NGOs, Central/State PSUs, Partnership Firm, Private/ Public Ltd. company, LLP etc. can
apply under the scheme
(5) Selection Process
Applications under the scheme are invited through EOI by the Ministry. The proposals have
to meet the following basic eligibility criteria:
a) The net worth of the applicant should be at least 1.5 times of the grant applied for.
b) Availing term loan from the Bank/Financial Institution for an amount not less than
10% of the project cost
c) Appraisal of the project by Bank/Financial Institution
d) Minimum two components [from (a), (b) and (c) of Components of Scheme as
mentioned above]
e) Irradiation facility can be treated as a standalone project for the purpose of availing
grant
f) No second proposal from the same applicant / company
g) Date of commercial production should not be prior to the date of submission of
application
The proposals found prima facie eligible based on the above mentioned criteria are evaluated
as per the approved assessment criteria
An Ideal Cold Chain project at Rai Food Park in Sonepat,

Haryana – A Case Study
The cold chain project, promoted by Suri Agro Fresh Pvt. Ltd at Rai Food Park in Sonepat,
Haryana, is envisaged to be an integrated facility consisting of multi-product/ multi-chamber
cold storage (controlled atmospheric/ modified atmospheric chambers, ripening chambers)
packing line for fruits and vegetables, and dry storage for other agricultural crops.
The major cold chain components being set up by them are as follows:
Sl No Major Cold Chain Components Capacity

1 Multi-Product/Multi -chamber CA/MA cold Storage 11000 MT
Reefer Trucks 3 Trucks of 8MT
2
capacity
3 Packing lines for fruits& Vegetables 1 line
The project is located inside the Rai Food Park, which is strategically located at a distance of
about 35 KM from Azadpur Mandi, New Delhi. It is on NH-1, connecting New Delhi to
Ambala and Chandigarh via Sonepat, Panipat. Road, drainage, power, water supply, etc are
well developed inside the park. The project facilities are equipped to handle both domestic
and imported fruits and vegetables. The promoters are one of the oldest fruits traders of
Aazadpur Mandi in Delhi and deal in domestic marketing as well as exports. They are
authorized distributors of companies such as Zespri of New Zealand, Dole, Unifruitti, FHEL
and Adani Agri Fresh. The promoters also sell their fresh and processed products under the
brand ‘Enjoy’. The promoters have three offices located in Delhi, Mumbai and Ahmedabad
for distribution of fresh and processed products. The promoters are planning to link the
project with three collection centers located in Shopian- Phulwama road in Jammu and
Kashmir, Kotkhai (Kokunala) and Jubbal (Saraswati Nagar) in Himachal Pradesh. These
centers will mainly procure apple and pear from farmers of this area. The collection center is
J&K is already operational and the promoters have tied up with one of the largest apple
traders of that region. Setting up of collection centers are under progress at two other
locations in Himachal Pradesh; the promoters have acquired land and begun the construction
work. The setting up of an integrated cold chain facility in Haryana is likely to add value to
the existing supply chain of fruits and other perishables. It shall benefit both the farmers and
the traders by reducing product wastages by providing cold storage facilities. Setting up of
CA storage at the project site will increase the shelf life of the products, their marketability
and hedge farmers risk against price fluctuation. It is envisaged that farmers will have greater
access to bigger markets and hence obtain better price for their produce. This, in turn, will
significantly increase farmers income and they will have better incentives to produce good
quality products. Moreover, the project will also generate employment for both skilled and
un-skilled manpower, directly and indirectly. Overall, the project will have an impact on
more than 2000 farmers. The project has made significant progress with near completion of
technical civil work and equipments for major project components are in installation stage.
Photographs of the Cold Chain Project by Suri Agro Fresh Pvt. Ltd
(VI) Comprehensive Handicrafts Cluster Development Scheme (CHCDS),

Department Commissioner (DC) for Handicrafts, Ministry of
Textiles
The Comprehensive Handicrafts Cluster Development Scheme (CHCDS) was launched in
2009 by the DC Handicrafts, Ministry of Textiles
The Scheme targets development of Handicraft Mega Clusters across the country through an
umbrella cluster development program that drives the development program in an integrated
and holistic manner. It is proposed to scale up infrastructure and production facility of
identified mega clusters with artisans more than 20,000 in a cluster with geographical area
such as a district, for which comprehensive development plans would be drawn up and
implemented by way of dovetailing various schemes on a PPP basis
Till date five Mega clusters have been identified under the CHCDS:
• Moradabad Brass Mega cluster

• Narsapur Lace Mega cluster
• Bhadoi-Mirzapur Carpet Mega cluster
• Srinagar Carpert Mega cluster
• Jodhpur Handicraft Mega cluster
(1) Objectives
The broad objectives of the scheme are as follows:
• To enhance the competitiveness of selected cluster in terms of increased market share

and ensuring increased productivity by higher unit value realization of the products.
• Ensure effective integration of scattered artisans by building their grassroots
enterprises and linking them to SMEs 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
1. To generate additional livelihood opportunities to the people through
specific interventions in segmental sub sector industry and increase the
incomes to the artisans/craftsmen already engaged in this sector
2. 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. The core elements of the strategy for the proposed program are given
below:
a. Convergence of the resources available under various ongoing
schemes of the Central Government
b. 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
c. Proactive and strong technical and program management assistance
for capacity building, designing of the interventions and their
implementation, through a competent professional agency
(2) Project Components
The project components broadly covered in the scheme are: Skill Development, Design,
Innovation and Product Development, Market Promotion, Trade Facilitation Centre,
Technology Upgradation for Individual Exporters, Community Production & Facilitation
Centre, Toolkits & Safety Kits & Raw Material Bank
(3) Eligible Agencies
The implementing agency for the various interventions is selected preferably through a
competitive process. The following agencies on their own or through their SPVs are eligible
for implementing this scheme:
• Established NGOs, Artisan federations and SHG groups

• Industry Associations in the cluster engaged in the development of handicrafts
sector
• Export promotion councils including EPCH, Registered exporters’
associations/Chambers of Commerce, etc
• National Level institutions (both Private and Government owned) such as

NIFT, NID, IICD, NCDPD, COHANDS, etc engaged in the promotion of
handicrafts sector
• Government supported / sponsored Institutions including State Government
Missions, Corporations etc
• A Special Purpose Vehicle (SPV) Company which shall be a legal entity,
registered under Companies Act 1956 with the participation of related
Stakeholders, particularly the leading manufacturers, suppliers, buyers, and
artisan federations/SHGs/financial institutions
(4) Implementing Agencies (IA) / Special Purpose Vehicle (SPV)
• The interventions under the project are implemented by IAs. It is the recipient
of grant support from the Ministry of Textiles and other agencies
• Such IA is responsible for ownership, execution and management of the
interventions/facilities created under the project. In the case of the
implementing agency being a SPV Company registered under the Companies
Act 1956, the majority of the equity of such SPV should be with the
artisans/craftsmen/ entrepreneur of the cluster and/or their
associations/cooperatives/ federations/ SHGs. The remaining stake may be
held by strategic investors such as buyers, large scale production units, banks,
financial institutions, State Government agencies, etc
• It is mandatory to induct two Government nominees in the Board of
Directors/Governors of IA/SPV for all projects including soft and hard
interventions
• For any SPV, each member is not allowed to hold more than 5% equity
(including his relatives)
• One or more SPV/IA can implement the same intervention. Also one SPV / IA
can be entrusted to implement more than one intervention
• SPV is responsible for maintaining the utilities and infrastructure created by
collecting service and user charges to recover cost and future expansion
(5) Funding Pattern
• The funding is in the ratio of 75:25, wherein Government grant per cluster
may constitute 75% (with a ceiling of Rs. 70 crores) and the balance 25% is
raised by Implementing Agencies (IAs)/Special Purpose Vehicles (SPV)
comprising of various stakeholders. The contribution of 25% by SPV also
includes the cost of land. 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
• 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.
(VII) Scheme for Development of AYUSH Clusters, Department of

AYUSH, Ministry of Health & Family Welfare
With increase in awareness among Indians and at global forum on traditional medicine, its
market share has been increasing steadily. Due to constrains viz. fragmentation of industries,
lack of standardization of raw material and finished products, inadequate R&D, slow pace of
modernization of production processes and technology, absence of focused marketing and
branding, inadequate emphasis on human resource development, the Ayurveda, Yoga and
Naturopathy, Unani, Siddha and Homeopathy (AYUSH) industry has not been able to exploit
the emerging market opportunities. The ‘Scheme for Development of AYUSH Clusters’, is a
Central Sector Scheme and is implemented by Department of AYUSH, Ministry of Health &
Family Welfare. In the present context of challenges, the ‘Scheme for Development of
AYUSH Clusters’ was launched by Department of AYUSH, Ministry of Health & Family
Welfare in the 11th FYP.
(1) Objectives
• To bridge the critical gaps especially regarding standardization, quality assurance and
control, productivity, marketing, infrastructure and capacity building through a cluster
based approach
• To encourage the level of organization in the sector thereby creating social capital for
sustainability of collective initiatives
The scheme is implemented on Public Private Partnership (PPP) and Department of AYUSH
supports by the way of grant to the SPV (formed by group of entrepreneurs from AYUSH
sector). This implies that willing industry representatives desirous of framing cluster can
apply and obtain grant under the Scheme. Also, the project entails availability of
infrastructure and willingness on the part of SPV
(2) Implementation
The scheme is implanted on a PPP basis through SPV formation, owned and managed by the
user industry. An SPV is ordinarily a company registered under Companies Act, 1956. Any
other structure of SPV would require prior approval of Scheme Monitoring Committee
(SMC)
An SPV should represent a cluster as a whole and should have a minimum of 15

manufacturing enterprises of AYUSH products as its shareholders; of them at least 75%
should have GMP certificate & license valid for 3 years for manufacturing AYUSH products
under Drugs & Cosmetics Act, 1940 proceeding to incorporation of SPV. AYUSH
enterprises should hold at least 51 % equity of the SPV and remaining may be held by any
Government agency, Financial Institution/Bank, strategic partners like buyers, ASU colleges
etc as the case may be. There should be one nominee of the Department of AYUSH and one
nominee of PMC on the Board of Directors of the SPV till completion of the project. The
state government plays an important role to provide land for the project, necessary clearances
and other assistance to make project effective and viable
(3) Pattern of Assistance
The assistance under scheme would be available for a project, prepared for development of a
cluster in general; covering the following two sets of interventions:
• Core Interventions such as those related to setting up of common facilities for testing,
certification, standardization, quality control and other capacity building measures.
• Add-on Interventions such as those related to marketing/ branding, provision of
general infrastructure to support production units etc.
The assistance would be available to the units related to Ayurveda, Sidha, Unani,
Homeopathy, Yoga & Naturopathy. Each of the cluster development projects proposed to be
implemented by a Special Purpose Vehicle (SPV) representing at least 15 AYUSH
manufacturing enterprises in a cluster is eligible for grant funding under the scheme up to
60% of cost of the core interventions, 25 % of the cost of add on interventions, within overall
ambit of 60% of the project cost subject to maximum of Rs.10.00 crore per cluster. The
assistance is further subject to the following:
• Assistance for engagement of CDEs and other management support of SPV should
not exceed 5% of the overall project cost
• Assistance for engaging engineers/ architects/ construction management/ other experts
for execution of civil works should not exceed 5% of the overall project cost
(4) Project Management Consultant (PMC)
Recognizing the fact that the projects of the proposed nature requires very extensive project
development efforts, Department of AYUSH engages the services of an agency that has
experience in developing, financing and executing the cluster development projects and as
Advisor in implementation of similar PPP based Schemes, from the stage of
conceptualization to commissioning. PMC acts as a link between the Department and the
industry and would help in speedy implementation of the projects in a transparent manner
(VIII) Mega Leather Cluster, a Sub-Scheme of Indian Leather Development

Programme, (DIPP), Ministry of Commerce and Industry
(1) Objective
The major objective of developing Mega Leather Clusters is to create world-class

infrastructure and to integrate the production chain in a manner that caters to the business
needs of the leather industry so as to cater to the domestic market and exports. In brief, these
mega clusters will assist the entrepreneurs to set up world-class units with modern
infrastructure, latest technology, and adequate training and Human Resource Development
(HRD) inputs. The development of Mega Leather Clusters would help in creating additional
employment opportunities, particularly for the weaker sections of society
The Mega Leather Clusters may host production units of all segments namely footwear,
footwear components, leather goods (including gloves), leather garments & saddlery &
harness items
It is proposed to develop Mega Leather Clusters in the States having large concentration of
leather units as also in States having potential for growth of the leather sector in view of the
labour advantage and raw material availability. The scheme is demand driven and the exact
locations are identified on receipt of DPRs from the Industry with diagnostic study along with
availability of backward and forward linkages on those locations. Such clusters should have
world-class infrastructure and good connectivity with the Ports. The maximum time frame for
complete establishment of each Mega Leather Cluster is 5 years. The selection of the Mega
Leather Cluster is done based on outcomes proposed and the proposal with the best outcomes
is approved
(2) Implementation
Each Mega Leather Cluster project is implemented by a Special Purpose Vehicle (SPV). The
assistance is provided to a SPV which should be a legal entity duly registered for this
purpose. The SPV is promoted by private companies registered under the Companies Act,
1956 engaged in leather industry value chain, industry organizations registered under
Societies Act, financial institutions, R&D institutions, State or Local governments or their
agencies and units within the Leather Industry. The structure of SPV is approved by the
Empowered Committee at the time of in-principle approval for the project
(3) Funding Pattern
The total project cost for the purpose of the Mega Leather Cluster sub-scheme comprises of
the cost of Land development, Infrastructure, Capacity Building and engagement of
Consultant by SPV. GoI assistance is up to 50% of the project cost, subject to the limitations
as follows, depending on the total land area of the MLC:
• MLC of 25-60 acres land (to be set up without tanneries) and 40-60 acres land (to be
set up with tanneries)- GoI assistance limited to Rs 50 crore
• MLC of 61-100 acres land- GoI assistance limited to Rs 70 crore
• MLC of 101-150 acres land- GoI assistance limited to Rs.105 crore
• MLC of more than 151 acres land- GoI assistance limited to Rs 125 crore
The SPV/industry has to bring in the land for the project at its own cost. Component wise
amount of assistance is decided from project to project by the Empowered Committee based
on due appraisal of the project proposal received from concerned SPV
(IX) Plastic Parks, Department of Chemicals and Petrochemicals

The Indian Plastics industry is large but highly fragmented with dominance of tiny, small and
medium units and thus lacks the capacity to tap this opportunity. Department of Chemicals &
Petrochemicals has formulated this scheme with a view to synergize and consolidate the
capacities through cluster development. The scheme supports setting up of a need based
“Plastic Parks’ an ecosystem with requisite state of the art infrastructure and enabling
common facilities to assist the sector move up the value chain and contribute to the economy
more effectively
(1) Objectives
• To increase the competitiveness, polymer absorption capacity and value addition in

the domestic downstream plastic processing industry through adaptation of modern
research and development led measures
• To increase investments in the sector through additions in capacity and production,
creating quality infrastructure and other facilitation to ensure value addition and
increase in exports
• To achieve environmentally sustainable growth through innovative methods of waste-
management, recycling, etc
• To adopt a cluster development approach to achieve the above objectives owing to its
benefits arising due to optimization of resources and economies of scale
The grant is a onetime grant –in – aid to the special purpose vehicle (SPV) formed by the
State Government or any of its agencies such as State Industrial Development Corporation
(SIDC) in association with user enterprises representing the plastic sector / sub sector
(2) Activities

(a) Infrastructure to support production units like roads, water supply, drainage, electricity
supply including captive power plant, effluent treatment plant, telecommunication lines, solid
/ hazardous waste management, incinerator, etc
(b) Buildings for support services like administrative buildings, crèche / canteen / hostel / rest
and recreation facilities, facilities for labour, marketing support system, etc
(c) Buildings and equipment / machinery for common facilities for characterization,
prototyping & virtualization, non-destructive material testing, incubation, training,
warehousing, plastic recycling, tooling, designing, Research & Development, etc
(d) Administrative and other management support including the salary of CEO for the project
implementation period
(e) Assistance for engaging engineers/ architects / construction management / other experts
(f) Besides the above mentioned components aimed at creation of infrastructural facilities, the
scheme shall also support initiatives which are soft in nature to ensure that the capacity of the
beneficiary SPV and member enterprises is suitably strengthened in order to absorb,
implement and sustain the proposed initiatives. These illustratively could include surveys /
studies, sensitization / awareness generation, skill development / training at various levels,
exposure visits, etc
The above list of common facilities is illustrative and each park may have its own specific
requirements based on the nature of units being set up and the products proposed to be
manufactured in the parks. The Scheme Steering Committee (SSC) approves the project
components and funding thereof depending upon the merits of the proposal
(3) Implementation
The implementing SPV should be a distinct legal entity formed by the State Government or
its agency such as State Industrial Development Corporation or any equivalent state entity as
identified and recommended by the respective State Government in association with user
enterprises representing the plastic sector / sub sector. The SPV is ordinarily a Company
registered under Companies Act 1956. Any other structure will be subject to the approval by
SSC. Programme managers are to be appointed to assist department and state government
will make environment conducive for setting up of parks
Following are the agencies made responsible for the above mentioned activities:
Implementing Agency Activity
Special Purpose Vehicle (SPV) • Preparation of DPR with complete technical and
financial details and procurement of land.
• Allocate sites to industry, maintain assets.
• Appoint Business Development Service
provider/consultant/contractor.
• Achieve financial closure for the project
• Statutory approval and clearances including
environmental from Government and other bodies
& furnish requisite information
Programme Manager (PM) • Devise operational guideline and sensitize

industries, formulate evaluation criteria.
• Appraisal of the DPR, Monitoring the scheme
progress and furnish regular reports.
• Release of grant to SPV based on achievement of
milestone in timeline.
Scheme Steering Committee (SSC) • Induct representatives of the industry

associations, R & D institutions and other expert/
technical agencies as members or special invitees
.
State Government • Nominate and recommend state agency for

execution of project, participation in SPV and
providing necessary assistance & providing
conducive labor environment
(5) Funding Pattern
• Funding is provided up to 50 % of the project cost subject to a ceiling of Rs. 40 crore

per project. The remaining contribution in SPV is from State Government or State
Industrial Development Corporation or similar agencies of State Government,

beneficiary industries and loan from financial Institutions
• Equity contribution of the State Government agencies is at least 26% of the cash
equity of the SP (excluding value of any land given as equity)
• Cost escalation due to any reason has to be borne by the State Government agencies.
• The grant-in-aid is released in 4 phases subject to identification of milestones and

time limit which is decided by SSC
The funding is subject to the following:
• A minimum of 25 per cent of the Grant-in-aid should be earmarked for common

enabling facilities dedicated to plastic processing industry like characterization,
prototyping & virtualization, non-destructive material testing, incubation, training,
warehousing, plastic recycling, tooling design, Research & development, etc
• Assistance for Administrative and other management support of SPV including the
salary of CEO for the project implementation period shall not exceed 5 % of Grant-in-
aid of the overall project cost
• Assistance for engaging engineers / architects / construction management / other

experts for execution of civil works shall not exceed 5 % of Grant-in-aid of the
overall project cost
Also, assistance for soft initiatives is over and above the grant provision for infrastructure
components and is to an extent of 75 % of the cost of soft interventions not exceeding Rs 50
lakhs per project. This amount may be met from within the total grant to be given for each
project
SPVs may dovetail funds from other sources as well for the project, provided there is no
duplication of funding for the same component / intervention
(X) Electronic Manufacturing Clusters Scheme, Department of

Electronics & Information Technology, Ministry of Communication
& Information Technology, GoI
Department of Electronics and Information Technology has adopted Electronic
Manufacturing Clusters Scheme to provide world class infrastructure for attracting
investments in Electronics Systems Design & Manufacturing (EDM) Sector
(1) Objectives
• To provide assistance for setting up of ‘Greenfield EMCs’ and upgradation of

‘Brownfield EMCs’ with world class logistics and infrastructure and easy to do
business
• To support development of appropriate infrastructure to support the development of
logistics hub, port to factory linkage, roads and highway etc
(2) Activities
• Basic Development – Boundary wall, Internal Roads, Street Lightening etc.

• Essential Services – Government support office, Water Treatment Plant, waste
disposal/recycling, Electricity Sub-Station, Backup Power Plant, Warehousing etc.
• Welfare Services – Employee Hostel & Mess, Hospital and ESIC, Educational
Facilities etc.
• Support Services – Centre of Excellence, R & D services, Training Facility, IT
Infrastructure/ Telecom etc.
• Manufacturing Support – Packaging, Testing and Certification Facility etc,
Component Testing including Safety, Electrical & Mechanical Properties, RoHS
Testing etc.
• Government Regulatory Support/ Services – Development Commissioner, Tax
Support, Pollution Control etc
(3) Implementation
It is necessary to form an SPV prior to setting up of and running the proposed EMCs. An
SPV should be a clear legal entity (Company or Society) constituted as per the structure
specified by the Department of Electronics and Information Technology with the objective of
establishing an EMC by way of development of the requisite common infrastructure and
facilities within the scope of the EMC Scheme. Each EMC shall have a separate SPV for
management & implementation of the project.
A Steering Committee for Clusters (SCC) is constituted for proper implementation of project.
The SCC may include any activity which in its opinion would serve towards achieving the
objective of the Scheme.
A Project Monitoring Unit (PMU) is established by Department to oversee the

implementation of the project. It helps the department to assist in processing and appraising
the preliminary applications and final applications received under the Scheme.
(4) Funding Pattern

• Only those applications involving project with financial assistance of Rs. 10 crore or
more from the Government are considered.
• Government grant in processing area is maximum 50% of the project and in non
processing area it is maximum of 20 % of the project.
• For Greenfield EMCs:- Minimum 80% of land has to be allotted to processing area
and 20% of the land is allocated to non-processing area. The assistance is restricted to
50 % of Project cost, subject to maximum up to Rs. 50 crore per 100 acres of land.
For larger areas, pro–rata ceiling is applied. For lower extent, the support is decided
by the SCC subject to the ceiling up to Rs. 50 Crore. The remaining project cost is
financed by other EMC stakeholders with at least 25% from units within the EMC.
• Brownfield EMCs: - The financial assistance is limited to 75% of the project cost with
ceiling of Rs. 50 crore. The remaining project cost is financed by other EMC
stakeholder with at least 15% from unit within EMC
• The applicant specifies the minimum committed investment by the constituent units
as a part of preliminary application. The minimum committed investment by the
constituent units of the EMC is not less than 4 times the assistance sought under the
scheme.
• 75% investment in the cluster should be related to units which are manufacturing
electronics products as mentioned in M-SIPS guidelines.
• Administrative expenses are restricted to 3% of central assistance. Administrative

expenses shall only be provided to an SPV and not to chief promoter and cost of
preparation of DPR is considered as a part of administrative expenses.
• Government assistance should not exceed 25% of approved administrative
expenditure on pay and allowances of SPV.
Infrastructure/Facil
Chapter-
Chapter-5: Implementation Statu
Status
atus of the
Major Schemes Covered Under
Under the Study

Presently, the total number of Integrated Textile Parks approved under the Scheme is 61
across the country with a total approved project cost
cos of Rs. 6200 crore (see
see map for the
locations)
The total amount of grant sanctioned to the Parks is Rs. 2218 crore out of which about Rs.
1107 crore has already been disbursed to the Parks. Out of the 61 approved Parks, 13 Parks
have already been completed,
eted, although in 27 Parks, units are already operational. The Parks
have generated more than 50,000 direct employments and so far, attracted FDI of more than
Rs. 1000 crore
The impact of Scheme for Integrated Textile Parks (SITP) on overall economy, env
environment
of the region, employment generation and other social aspects has been observed to be quite
encouraging. Evaluation of the scheme has revealed that it has created high-class
high class assets for
the Textile Industry in the country to enhance competitiveness and upgrade technologies. The
scheme has been instrumental in addressing the problem of fragmentation of industry by way
of creating vertically integrated value chain within the Parks. It has also increased the ability
of the industry in meeting the regulatory and trade compliances in the areas of environment,
quality and social standards and thereby providing greater market access. The scheme, by
establishing large Parks with multiple units in the value chain available at one location, also
helped to attain economies of scale by attracting the attention of large scale global and
domestic buyers. The unit cost of production for the units located outside the Parks have also
been reduced due to sharing of common infrastructure and reduced lead times in procurement
of inputs
The SITP have had its share of implementation challenges which delayed some of the
projects. Some of the major challenges faced by the projects are given below in brief:
• Delays in obtaining the approvals for conversion of land and PCB related
• Delays on the part of SPV in arriving at consensus and decision on the project
configuration
• Inability to raise the bank loans by SPV as well as member enterprises
• Absence of cohesive structure amongst members with regard to management issues
• Inability of small entrepreneurs to adhere to corporate governance guidelines
In view of the challenges, the Ministry of Textiles has proposed some steps to assist in
efficient implementations of the projects. MoT has proposed to execute MoA with the State
Governments to ensure early clearances to the Textile Parks proposed in the State. To check
the delays on the part of SPV in arriving at consensus and decision on the project
configuration, MoA is being executed with the SPV which has penalty clauses in case of
delay in implementation of the Project. The Project Management Consultant has also been
advised to assume greater responsibility of ensuring that likeminded people are inducted into
the SPV, in event of a Project getting cancelled due to inability of the PMC to implement,
penalty would levied on the PMC. The MoT has also decided that the proposals to be
submitted for consideration under the Scheme should be appraised by the Banks and weight
age has been assigned for proposals vetted by the Bank being submitted for approval
Based on IL&FS Clusters’ experience as PMA with the Ministry of Textiles for the scheme
implementation, it has been found that there are certain common attributes of successful
textile parks which are as follows:
• Strong SPV promoted by a group of anchor textile entrepreneurs with proven

credentials and with ability to raise the bank loans
• Enhanced State Government role in setting up the Park and its pro-active support in
facilitating the external infrastructure and clearances
• Availability of land with clear title and land use conversion, if required
• Supply chain within the Park leading to economies of scale and emergence as
sourcing hubs for international buyers
• Shared infrastructure like ETP, skill development centres, testing labs, and others with
a robust O&M framework reducing the cost of operations for individual units
• Appointment of reputed contractors with requisite resources who can execute the
works at faster pace
(II) Micro and Small Enterprises–Cluster Development Programme

(MSE-CDP), Ministry of Micro, Small & Medium Enterprises
(MSME)
The programme strives to achieve the following four objectives of a) Supporting the
sustainability and growth of Micro and Small Enterprises b) Building capacity of Micro and
Small Enterprises c) Creating/upgrading infrastructural facilities in the new/existing
industrial areas/ clusters of MSEs and d) Setting up common facility centres
The scope of the scheme is limited to the following four components:
i. Diagnostic Study
ii. Soft Intervention
iii. Setting up of Common Facility Centres and
iv. Infrastructure Development
The component wise distribution of completed activities under this scheme is as follows:
Total
%
Sl No Component Number of
distribution
Clusters
1 Diagnostic Study 361 49%
2 Soft Intervention 218 30%
3 Setting up of Common Facility Centres 27 4%
4 Infrastructure Development - New 85 12%
Infrastructure Development – Up-gradation 43 6%
Total 734 100%

Out of 39 projects sanctioned in the 10th and 11th Five Year Plan periods under Industrial
Infrastructure Upgradation Scheme (IIUS), 21 projects have been completed and the
remaining are at various stages of implementation. Sanction has been withdrawn in respect
of two projects as these projects could not start implementation activities in more than two
years despite efforts made by this department. There has been a delay in most of the projects
on account of land related issues and environment clearance. Some projects have also been
delayed on account of shortfall in contributions from Industrial stakeholders and State
Governments. The findings of the Evaluation Study of NPC(National Productivity Council)
done in 2011 indicates that the scheme has provided a robust platform for development of
common facilities like Research & Development labs, Skill Up-gradation Centres, Common
Tool Rooms, Prototyping Centres, Effluent Treatment Plants and basic infrastructure (road,
water, supply, power, etc.) which are essential for the clusters as majority of these clusters
belong to Small and Medium Enterprises who have taken up green initiatives and
components to curb pollution. During the 12th Five Year Plan, the IIUS has been revised as
‘Modified Industrial Infrastructure Up-gradation Scheme (MIIUS)’ and under this scheme
only State Implementing Agency (SIA) such as State Industrial Development Corporation is
authorised to implement the project. Due to modification in the scheme, projects in the 12th
Plan Period cannot be undertaken by SPV or Special Purpose Entity (SPE), however new
projects have been undertaken through SIA. The overall performance and achievement of the
Special Purpose Vehicles (SPVs) for implementation of 39 projects sanctioned during the
Tenth and Eleventh Five Year Plan Periods are deemed to be satisfactory4
The following table provides the detailed project wise progress status of the scheme in the
identified clusters during the 10th and 11th Five Plan:
4
http://pib.nic.in/newsite/PrintRelease.aspx?relid=106285, accessed on 4-august-2014
Study on Financing Models and SPV Structures in Respect of Common Industrial Infrastructure/Facilities for MSMEs Under PPP and Private Ownerships
Total Funds generated from
Approved Released
Project all Physical
Sl No Name of the Industrial Cluster State GOI grant GOI grant
Cost (Rs. stakeholders (Financial Progress
(Rs. Cr.) (Rs. Cr.)
Cr.) Progress in Rs. Cr.)
Andhra
1 Pharma Cluster, Hyderabad 66.16 49.62 48.13 62.08 Complete
Pradesh
2 Chemical Cluster, Ahmedabad Gujarat 71.35 41.39 40.14 69.41 Complete
3 Chemical Cluster, Ankleshwar Gujarat 152.83 50 49.47 161.4 Complete
4 Chemical Cluster, Vapi Gujarat 54.31 40.49 39.27 71.25 Complete
5 Foundry Cluster, Belgam Karnataka 24.78 18.58 18.02 24.38 Complete
6 Machine Tools Cluster, Bangalore Karnataka 135.5 49.12 47.64 149.09 Complete
7 Textile Cluster, Ichalkaranji Maharashtra 65.07 32.7 31.72 67 Complete
8 Auto Components Cluster, Pune Maharashtra 59.99 44.99 44.54 63.05 Complete
Auto Components Cluster,
9 MP 62.97 47.23 45.81 67.64 Complete
Pithampur
10 Textiles Cluster, Ludhiana, Punjab Punjab 17.19 12.69 12.3 17.24 Complete
11 Marble Cluster, Kishangarh Rajasthan 27.84 26.04 26.77 50.17 Complete
12 Auto Components Cluster, Chennai Tamil Nadu 47.49 27.74 26.9 54.67 Complete
Cereals Pulses & Staples Cluster,
13 Tamil Nadu 39.96 29.97 29.07 40.03 Complete
Madurai
Foundry/Pump/Motor Cluster,
14 Tamil Nadu 55.3 39.39 38.99 55.57 Complete
Coimbatore
15 Leather Cluster, Ambur Tamil Nadu 67.33 43.93 43.49 96.34 Complete
56
16 Textiles Cluster, Tirupur Tamil Nadu 143 50 49.5 157.6 Complete
17 Multi Industry Cluster, Haldia West Bengal 58.85 35.97 34.89 52.76 Complete
18 Iron & Steel Cluster, Raipur Chhatisgarh 55.06 31.76 30.79 58.33 Complete
19 Metallurgical Cluster, Jajpur Odisha 80.6 47 45.59 88.16 Complete
20 Coir Cluster, Alappuzha Kerala 56.8 42.6 41.31 54.75 96%

Auto Components Cluster, Andhra
21 30.67 23.01 22.31 30.66 98%
Vijaywada Pradesh
22 Leather Cluster, Kanpur Uttar Pradesh 14.34 9.32 8.83 13.56 Complete
23 Gem & Jewellery Cluster, Surat Gujarat 61 45.61 44.15 45.64 75.75%
24 Rubber Cluster, Howrah West Bengal 29.74 15.71 14.835 27.99 94%
25 Foundry Cluster, Howrah, West Bengal 95.03 38.68 32.57 54.02 57%
26 Engineering Cluster, Nashik Maharashtra 67.26 42.87 41.59 56.48 Complete

Pandhurna Industrial Cluster, Madhya
27 66.78 43.07 41.77 61.41 92%
Chhindwara Pradesh
Madhya
28 Handloom Cluster, Chanderi 27.8 20.3 13.09 9.57 34%
Pradesh
29 Auto Cluster, Adityapur Jharkhand 65.63 47.79 28.42 21.4 33%
Readymade Garments Cluster, Madhya
30 55.58 30.67 16.95 19.76 36%
Jabalpur Pradesh
Plastic, Polymer and Allied Cluster,
31 Odisha 81.9 58.2 33.14 36.89 45%
Balasore
Tiruchirapalli Engineering and
32 Tamil Nadu 102.81 58.28 34 52.08 51%
Technology Cluster, Tirruchirapalli
57
Marathwara Automobile Cluster,

33 Maharashtra 81.35 58.2 50.81 47.78 59%
Aurangabad
Himachal
34 Baddi Infrastructure, Baddi 80.5 58.28 49.51 62.4 78%
Pradesh
Bamboo Technology Park,
35 Assam 62.28 52.63 45.91 32.76 53%
Guwahati
Narol Textiles Infrastructure and
36 Gujarat 145.3 58.28 17.48 39.3 27%
Environment Management, Narol
37 Kolhapur Foundry Cluster Maharashtra 42.63 30.92 9.27 14.71 35%
Sanction was withdrawn vide order
38 Handloom Cluster, Bhagalpur Bihar 20.82 15.69 1.56 dated 28.06.2013; the SPV has
refunded the central grant.
Sanction was withdrawn vide order
dated 24.07.2013; the SPV has
Hand Tools Technology Centre,
39 Punjab 79.49 58.28 17.48 refunded Rs. 15.22 crore of central
Jalandhar
gant and Rs. 4.40 crore of interest
earned.
58
Under the 12th Five Year Plan, the following list of projects has been sanctioned for
implementation by the different State Implementing Agencies:
Sl.
Name of Project State Central grant (Rs. Cr.)
No.
1 Industrial Area Zuangtui, Aizawl Mizoram 15.22
2 Bodhjungnagar Industrial Area Tripura 41.9
3 Industrial Growth Centre, Urla. Raipur Chhattisgarh 12.15
4 Sirgitti Engineering Cluster Chhattisgarh 8.32

Industrial Infra Upgradation of IMT
5 Haryana 29.27
Manesar
6 Industrial Infra Upgradation at IMT, Bawal Haryana 29.27
7 Industrial Area, Kandrauri HP 26.97
8 Industrial Area, Pandoga HP 33.46
9 SIDCO, Industrial Growth Centre, Samba J &K 7.45
10 Industrial Estate, Kathua J &K 12.91
11 Devipur Industrial Area Jharkhand 27.36
12 Tupundana Industrial Area, Ranchi Jharkhand 8.11
13 Existing Cluster at Ernakulam Kerala 45.44
14 Kolhar Industrial Area, Bidar Karnataka 48.36
15 Bangalore Aerospace Park, Devenhalli Karnataka 47.43
16 Industrial Area, Sitapur MP 12.75
17 Angul Aluminium Park Odisha 43.01

Punjab Small Industries and Export
18 Punjab 16.58
Corporation Ltd. (PSIEC) Estate
Total value of 'in-principle' already issued 465.96
The following listed projects are still under evaluation by the National Productivity Council
which is the Program Management Agency (PMA) for this phase5:
5
http://pib.nic.in/newsite/PrintRelease.aspx?relid=108334, accessed on 5-august-2014
Proposed
Central
Sl. No. Name of the project State Reasons for Pendency
Grant(Rs.
Crore)
The State Implementing
Agency (SIA) revised their
project proposal and the
Pashamylaran Industrial
1 Telengana 30.51 same has been evaluated by
Area, Medak
PMA; the proposal is under
consideration in the
Department.
Textile park at Addl.
2 Amravati Industrial Area Maharashtra 33.55
These proposals were
3 Tarapur Industrial Area Maharashtra 12.5 received after the cut-off
Rajiv Gandhi Info Tech date prescribed by this
4 Maharashtra 12.5 Department and therefore,
Park
could not be considered
Tamilnadu Chamber
along with the proposals
Linkage Infra Ltd.,
5 Tamil Nadu 44.05 received on or before the
Madurai (Convention
due date. These are being
and Centre at Madurai)
evaluated by PMA for
Engineering Industry further consideration by the
6 Tamil Nadu 60
Cluster ( SIPCOT) Department.
Chemical park under West Not
7
MIIUS at Howrah Bengal mentioned

Industries (MoFPI)
As mentioned earlier, the MFPS envisages a cluster-based demand driven approach for
developing decentralized infrastructure including farm proximate facilities such as primary
processing centres (PPC) and collection centres (CCs) and a Central Processing Centre
(CPC). The CPC (spread in at least 50 acres of contiguous land) would have need-based
common infrastructure which may include warehouses, cold storage including CA & MA,
IQF, Tetra Pack, ripening chamber, Quality Control Labs and R&D Facility including
incubation center etc. It would also have basic enabling infrastructure like road, water, power,
ETP & STP etc. The grant assistance shall be utilized exclusively towards creation of
common infrastructure in CPC and PPCs in the park. Such facilities are expected to
complement the processing activities of the units proposed to be set up at the CPC in the park
The supply chain will establish on-farm Primary Processing Centre cum cold chain facilities
for aggregation of the produce at village level, which will be linked to the retail as well as to
CPC through appropriate produce aggregation facility and collection centre-cum-cold chain
and reefer transportation net works
The food processing units would be located at CPC. The developed plots at the CPC shall be
leased out to them on a long term lease basis. The processing units that can be set up in the
Parks are expected to be in line with the availability of various processable raw materials.
Such units can avail the benefits of common facilities on a user fee basis
(1) Implementation Status
The summary table of the number of projects approved by the Ministry (starting 2008-09 till
date) is given below:
Status of Projects
Mega Food Parks Scheme In-Principle Final Cancelled/

approval Approval withdrawn
1st Phase of Implementation 1 8 1
2nd Phase of Implementation - 4 1
3rd Phase of Implementation 17 4 6
Total 18 16 8
As can be seen, the Ministry has approved projects in a phase-wise manner. Thus, a total of
42 projects have been taken up by the Ministry during the 11th and 12th plans. Of this, 16
projects have been accorded final approval and 18 projects have been given in-principle
approval. EOI for remaining projects has been invited with last date of submission being June
30, 2014. The state-wise distribution of Parks which have been granted approval by the
Ministry is given in the exhibit below:
State IPA FA Total State IPA FA Total

Andhra Pradesh 2 1 3 Maharashtra 4 1 5
Assam 0 1 1 Mizoram 1 0 1
Bihar 2 1 3 Puducherry 1 0 1
Chhattisgarh 2 0 2 Punjab 0 1 1
Gujarat 2 0 2 Rajasthan 0 1 1
Haryana 1 0 1 Tripura 0 1 1
HP 2 0 2 UP 2 0 2
J&K 0 1 1 UK 0 2 2
Jharkhand 0 1 1 WB 0 1 1
Karnataka 0 1 1 Total 18 16 34
MP 0 1 1
21 states to which Parks have been allotted
IPA: In-Principle Approval and FA: Final Approval
A summary chart for investment and grant numbers is given below: (Figures in Rs. Cr)
Financial Layout of Mega Food Park

TOTAL (in 1799 800 999 314 665
Rs. Cr.)
934
534 561
449
416 400
249 269
200 200 216
104
55
Project Cost Amount of Grant Pvt. Sector Amount of Grant Total Expenditure
Approved Investment (SPV) Released* Till Date*
1st Phase 2nd Phase 3rd Phase
*: Data for third phase is not available

(2) Impact Assessment/Success Stories
Assuming an average project cost of Rs. 115.00 crore, these 42 Parks will have a cumulative
investment of approx. Rs. 4800 crore. Total government grant outlay in these projects would
be approximately Rs. 2100.00 crore
It is expected that on an average, each project, upon completion, will have around 30 food
processing units with a collective investment of around Rs 250 crores that would eventually
lead to an annual turnover of about Rs 450-500 crores and creation of direct and indirect
employment to the extent of about 30,000 persons
Mega Food Parks – A snapshot
• 16 Parks under implementation – each Park shall provide developed infrastructure

for setting up about 30 processing units leading to a total of about 450-500 units
• 18 more projects in pipeline - Shall provide for setting up about 500-550 units
• EoI for 5 more Parks out - opportunity for ~150 processing cum ancillary units
• Approx. Rs. 250 crore expected to be invested in these units in each. Hence,
approximately 40 parks would imply cumulative investment of approx. Rs. 10000
crore (in addition to the project cost numbers mentioned above)
• Overall, the 42 Mega Food Parks shall provide state-of-the-art facilities for setting
up of about 750-800 food processing including ancillary units
At present, six projects are at an advanced stage of implementation. These are:
i. Srini Food Park, Andhra Pradesh
ii. Patanjali Food and Herbal Park, Uttarakhand
iii. Integrated Food Park, Karnataka
iv. International Food Park, Punjab
v. Jangipur Bengal Food Park, West Bengal
vi. Indus Food Park, Madhya Pradesh

Of these, the ones in Andhra Pradesh and Uttarakhand are in the most advanced stages.
Having started commercial operations, these projects have started to embody the objectives
of the Scheme – investment mobilization, employment creation, wastage reduction,
streamlined supply chain operations to name a few. A snapshot of key numbers is given in
the following table:
Patanjali Food and Herbal

# Srini Food Park, AP
Park, UK
Total Number of 35 acres of land is available

1 Approx. 25 plots in 35-37 acres
Plots for approx. 15-20 plots
17 units operational (in addition 20.39 acres has been allotted

to this, 1 more plot has been to 7 units. 1 Unit in
2 Units in Operation
allotted recently). Total area operation in an area of
Allotted is approx. 30 acres approx. 3 acres
Employment 5000 (direct and indirect 25 permanent and 40-50

3
Generation combined) seasonal
4 Turnover of Units Over Rs. 250.00 crore Over Rs. 200.00 crore
Some of the products being manufactured in Patanjali Food and Herbal Park include juice,
candy, murabba, flour, spices, besan etc. Products for which units are being/have been set up
in Srini Food Park include noodles, sauces, pickles and juices
It is expected that as other parks commence commercial operations in due course, they will
have similar impact on aspects like employment, wastage reduction and supply chain
operations in the cluster to which they shall cater
(3) Learning and Modifications in Guidelines
The Scheme was launched in 2008-09 when 10 projects were accorded approval by the
Ministry. Subsequently, as has been mentioned above, 34 projects have been approved by the
Ministry till date. Five years down the line, only two projects have commenced commercial
operations. No project has yet been able to avail the entire grant of Rs 50.00 crore allocated
to it. This half decade has been a learning experience both for MoFPI and for entrepreneurs
implementing the projects. In order to make the Scheme more investor friendly and smoother
to implement, MoFPI has time and again revised the Scheme Guidelines. Some of the
learnings and resulting revisions in Guidelines are highlighted below –
1. Arranging for project land has been observed as a key reason for delay: Arranging for
minimum 50 acres contiguous land with CLU for industrial use has been one of the
biggest challenges for promoters, especially in hilly regions. Issues such as land ceiling
laws, no sub-lease permissions in state government laws in many states, time taken to
obtain environmental clearances etc have not helped the cause. Over time, Ministry has
now started giving more weight to projects which have land upfront at EoI stage (initial
screening stage). Also, final approval is accorded only when promoters have land in
possession with CLU permission so that no delays are caused post final approval. State
Governments have now been made an integral part of selection and approval process.
With this, state governments are being sensitized about the requirements of the Scheme,
and in turn, they are making suitable modifications in the land related laws
2. Lack of adequate response from large and recognized players in food processing sector:
The first set of Guidelines required the SPV to have at least five independent entities. The
number was later reduced to three. This condition was found to be restricting as many
large entities were keen on setting up such projects on their own. Based on feedback from
the industry and consultations with other stakeholders, the Guidelines have now been
further modified and a single entity can also implement the project. Also, while in the
earlier set of Guidelines, having a food processor member was a must, new Guidelines
have done away with this condition so as to encourage participation by large players in
the infrastructure space
3. The Scheme earlier required only in-principle approval for term loan component before
final approval. This led to significant delays as in most cases formal sanction of term loan
took more than 6 months even as SPVs awaited this sanction before going ahead with
project construction and award of contracts. After Financial closure too, it was observed
that pre-disbursement conditions imposed by the banks were too strict to be met in some
cases. Banks are now being sensitized about the Scheme by PMAs and PMCs. Revised
Guidelines have made sanction of term loan along with submission of bank appraisal
report a pre-requisite for Final Approval. This is expected to improve the quality of DPRs
being submitted by SPVs and make them more realistic. It is also likely to assist
Ministry/PMA in appraisal and approval exercise and in significantly reducing the project
implementation period
4. Scheme Guidelines earlier provided for release of 10% of approved grant as advance after
Final Approval and SPVs providing proof of equity contribution of 10 %. They did not
require SPVs to incur any expenditure except for land acquisition cost. Revised
Guidelines require expenditure certificate from SPVs for at least 10 % of equity
contribution (term loan plus equity) out of eligible project cost. SPVs are now required to
incur expenditure on project components, in addition to land and pre-operative
expenditure, before receiving any grant. Grant installments are now also linked to clear
and proportionate physical progress not only on core processing infrastructure at CPC but
also on other project components like PPCs, SDF sheds and leasing units. These
modifications are likely to assist in more holistic development of projects
5. Guidelines now envisage a greater involvement of State Govt. for effective project
implementation. State Govt. representative is now member of both the Technical
Committee (TC) and the Approval Committee (AC). Ministry is also encouraging State
Govt. Representatives to be part of SPV’s board
6. Another modification in the Guideline has been the redefining of the eligible Project Cost
for grant eligibility. Eligible project cost was earlier defined as total project cost minus
cost of land. Eligible project is cost now defined as total project cost minus (-) cost of
land, pre-operative expenses and margin money for working capital (MMWC). However,
PMC Fee (up to 2 percent of eligible grant) and interest during construction (IDC), both a
part of pre-operative expenses, shall be part of the eligible project cost
7. Based on experience during project implementation, project implementation timelines

have been made more realistic - 24 months from 1st installment to begin with, 30 months
from Final Approval in first set of modification and 30 months from 1st installment in the
latest revision of the Guidelines. the rationalization of timelines
(4) Concluding Remarks
As concluding remarks on the performance of the Scheme, it can be said that while it was
slow to take off due to reasons highlighted above, a more conducive implementation
environment and more investor-friendly Scheme Guidelines may go a long way in ensuring
timely execution of such projects. While two projects are already operational, another 3-4
projects (in West Bengal, Punjab and Karnataka) are expected to be complete within in this
financial year. Hence, close to half a dozen operational projects by end of FY 2014-15 will
serve as a boost not only to MoFPI’s initiatives but also to other private players executing
these projects in other parts of the country. Overall, the Scheme has the potential to augment
food processing related operations in India. The growth of the sector, as is well documented,
is critical for achieving growth in the agricultural sector which in turn is a pre-requisite for
holistic growth of Indian economy. Growth of sector is also essential to meet twin national
objectives of “inclusive growth” and “food security”. Importantly, the growth of this sector
will reduce food wastage across value chain (value terms) and is also seen as a means of
curbing inflationary tendencies. The successful implementation of the Mega Food Parks will
help, in its own unique way, in providing fillip to the above mentioned positive ripple effect
(V) Scheme for Cold Chain, Value Addition and Preservation

The SCC is one of the successful schemes of the Ministry of Food Processing Industries, GoI
which is being implemented since 2008. Presently, 122 approved integrated cold chain
projects in 4 phases (the latest being in 2013 and the 5th phase in underway in which selection
of projects is in process and are yet to be approved) are under different stages of
implementation across the country. The summary table of the number of projects approved by
the Ministry (starting FY 2008-09 till date) is given below:
Cold Chain Scheme Projects Approved
1st Phase of Implementation 10
2nd Phase of Implementation 28
3rd Phase of Implementation 18
4th Phase of Implementation 66
Total 122
The total project cost of the all the approved cold chain projects is more than Rs. 2800 crore
with a approved grant amount of about Rs. 950 crore, out of which about Rs. 328 crore has
been disbursed to the projects. Out of the 122 approved cold chain projects, 24 projects are
completed and operational. Another 13 projects have also reported to be completed and the
final verification/ release of the final installment of grant by the Ministry are pending in these
cases. Recently, the Ministry has come out with another invitation for EOI for about 15 more
cold chain projects under the scheme. The appraisal process for the same is underway. The
state-wise distribution of Cold Chain Projects which have been granted approval by the
Ministry is given in the exhibit below :
Sl. No. Name of State No. of Projects Sl. No. Name of State No. of Projects
1 Andhra Pradesh 7 13 Maharashtra 31
2 Arunachal Pradesh 1 14 Manipur 1
3 Assam 4 15 Mizoram 2
4 Bihar 1 16 Odisha 1
5 Chhatisgarh 2 17 Punjab 7
6 Gujarat 8 18 Rajasthan 3
7 Haryana 5 19 Sikkim 1
8 Himachal Pradesh 9 20 Tamil Nadu 1
9 Jammu & Kashmir 4 21 Uttar Pradesh 6
10 Karnataka 4 22 Uttarakhand 11
11 Kerala 3 23 West Bengal 7
12 Madhya Pradesh 3 Total 122
(1) Revisions under National Mission of Food Processing (NMFP)
Based on the stakeholders’ feedback and deliberation during the Working Group for 12th Five
Year Plan, the scheme has been revised for non-horticulture produces which are now being
implemented under National Mission of Food Processing by the state governments (although
the for horticulture produces, the MoFPI still implements the scheme directly). Under NMFP,
the financial incentives are given now in two parts: Capital Subsidy and Interest Subsidy
The above has been designed to ensure that project assets, after completion, are efficiently
utilized. This was based on the suggestion that many of the projects after completion, and
receiving entire grant amount, are not operated in optimal manner. Under the revised
framework, the applicants have to ensure operation of the facilities to avail entire grant. This
was also to address the concerns that assistance to cold chain projects would be more critical
during operation phase than implementation phase
The capital subsidy has been reduced to 35% of the bank appraised project cost including
Interest during Construction (IDC), subject to a maximum of Rs. 5 crore per project. There is
also interest subvention available for a period of 5 years from the date of completion of the
project. Every year the interest subsidy @ 6% will be paid to the Bank/FI directly against the
term loan sanctioned by it, subject to a maximum of Rs. 2 crores per project or actual interest
accrued on term loan, whichever is less
In Difficult areas and NER, the capital subsidy is now up to 50% of the bank appraised
project cost including Interest during Construction (IDC), subject to a maximum of Rs. 5
crores per project. The interest subvention is available for a period of 7 years from the date of
completion of the project. Every year the interest subsidy @ 7% will be paid to the Bank/FI
directly against the term loan sanctioned by it, subject a maximum of Rs. 3 crores per project
or actual interest accrued on term loan, whichever is less
Another significant revision under the scheme for NMFP has been that for all the projects,
there needs to be term loan of at least 25 % of the project cost. This was considered advisable
as many applicants did not propose term loan for their projects or provided for small term
loans (even less than 10 % of project cost), which made the entire appraisal exercise
unreliable. It may be noted that under the Scheme, the Ministry relies mostly on bank
appraisal notes, to establish technical and financial viability of the projects, as also
commitment and resourcefulness of the promoters. Thus, in case of no loan or insignificant
loan amount, the appraisal notes from banks/financial institutions were not found adequately
detailed and trustworthy
The scheme so far has achieved considerable progress and witnessed very encouraging
response from stakeholders. The approved projects would be creating more than 2 lakh MT
of cold storage, 1.3 lakh MT of MA/CA storage, 55,000 MT of Deep Freezers, about 100
MT/Hr capacity of Individual Quick Freeze (IQF), 100 Lakh Litres/Day of milk processing
facilities and more than 600 refrigerated vehicles. Presently, it has been observed that the
projects, which are being funded under the Scheme, generally do not face any major issues
regarding sanctioning of term loans from banks and other financial institutions. This is due to
relatively large amount of grant from the Ministry and reduced risk exposure of the banks
through security cover. Although such favourable views of the banks/ FIs towards the cold
chain projects lead to financial closure without many hindrances, however, it may lead to less
rigour and detailing in the appraisal process of the banks/ FIs for the projects and may also
result in less due diligence of the projects by the banks/ FIs during the project execution and
operational phases. In the past, some projects may have been cancelled due to such issues
Apart from modifications made under the NMFP, the Scheme was also modified for
horticultural produces (which is directly implemented by the Ministry) in 2013. The major
modifications made are the mandatory requirement of term loan from banks/ FIs of at least
10% of the project cost and revision of project implementation timeline from 18 months to 24
months in case of projects in general areas. In case of projects located in Northeast and hilly
areas the implementation timeline was increased to 30 months instead of 18 months

Textiles
To make decentralized activities in handicraft sectors a viable business proposition, mega

clusters have been promoted in Bhilwara (Rajasthan), Mirzapur-Bhadohi (Uttar Pradesh),
Srinagar (Jammu & Kashmir), Virudhunagar (Tamil Nadu) and Murshidabad (West Bengal).
Subsequently more work has commenced on mega clusters in Varanasi (Uttar Pradesh),
Sibsagar (Assam), Bhiwandi, (Maharashtra), Erode (Tamil Nadu), Narsapur (Andhra
Pradesh) and Moradabad (Uttar Pradesh). In the budget presented by the Union Ministry in
for 2014-15 the following three new Mega Clusters have been proposed: (i) Bareilly, (ii)
Lucknow and (iii) Kutch. To strengthen the implementation of this scheme a multilingual
website including seven foreign languages hosting 45,000 handcrafted products has been
launched. During the year 2012 against an allocation of Rs. 37 crores an amount of Rs. 31.96
Crores has been released for incurring expenditure for ongoing sanctioned clusters located all
over India other than NER. Under the ambit of the Comprehensive Handicraft Cluster
Development Scheme, the following cluster specific infrastructure related interventions are
up taken:
Establishment of resource centre for major crafts
Establishment of E-kiosks
Creation of Raw Material Banks
Setting up of Common Facility Centre.
Technological assistance by setting up of Facility Centres by Exporters/
Entrepreneurs, etc.
This section will briefly describe the progress of the proposed mega clusters.
Moradabad Mega Cluster: In this mega cluster six new projects with the project
cost of Rs.57.55 crore have been sanctioned to six Special Purpose Vehicles
(SPVs) with the Government of India investing Rs.50.21 crore. Raw material
Bank for Metal Craft, Common Facility Centre for Wood procession, Common
Facility Centre for Metal Handicrafts Processing, Design & Product Development
Centre and Marketing Support Centre have been inaugurated during 2012-13.
Mirzapur-Bhadohi and Srinagar Carpet Mega Clusters: In these two mega
clusters, Cluster Management and Technology Agencies (CMTAs) have been
appointed. For the Mirzapur-Bhadohi cluster, Skill Development Programme for
20,000 carpet weavers at total project cost of Rs. 21.67 crore and Government of
India share of Rs. 15.55 crore have been sanctioned. For the Srinagar cluster, Skill
Development Programme for 10000 Carpet weavers at total project cost of
Rs.12.75 crore and the Government of India share of Rs.10.00 crore have been
sanctioned. In addition to this distribution of 2000 improved carpet looms at
Project cost of Rs. 10.00 crore with Government of India share of Rs. 8.00 crore
has been sanctioned.
Narsapur Mega Cluster: In this mega cluster four new projects with project cost
of Rs.41.87 crore have been sanctioned to four SPVs with the Government’s
investment of Rs.35.05 crore.
The Detailed Project Report (DPR) for comprehensive handicrafts Cluster Scheme
for Jodhpur Mega Cluster, has been approved
The cluster development scheme for handicrafts is further divided into sub-components for
the disbursement of grant-in-aid money from the Government of India. The sub-components
are as follows:
1. Ambedkar Hastshilp Vikas Yojana(AHSVY)
2. Marketing and Support Services(MSS)
3. Human Resource Development Scheme(HRDS)
4. Design Scheme(DS)
5. Research and Development Scheme(RDS)
6. Infrastructure and Technology Development Scheme(ITDS)
The following table provides us with the figures on the Government grant-in-aid under the various sub-components of the handicraft clusters for
the financial year 2014-15:
CL-
STATES AHSVY MSS CL-DS CL-HRD HRDS DS RDS ITDS Total
MSS
Uttar Pradesh 0.04 1.13 0.74 0.40 0.13 0.42 0.12 0.21 0.24 3.43
Rajasthan 0.02 0.00 0.12 0.12 0.01 0.00 0.00 0.00 0.00 0.27
Jammu & Kashmir 0.01 0.32 0.00 0.02 0.00 0.00 0.00 0.00 0.00 0.34
Bihar 0.01 0.02 0.85 0.08 0.00 0.00 0.00 0.02 0.00 0.97
Haryana 0.05 0.33 0.77 0.67 0.08 0.00 0.00 0.06 0.00 1.96
Punjab 0.04 0.10 0.11 0.04 0.11 0.00 0.00 0.00 0.00 0.40
Uttrakhand 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.01
Delhi 0.01 4.02 0.35 0.15 0.04 0.38 0.69 0.05 8.63 14.32
Andhra Pradesh 0.01 0.00 0.06 0.02 0.01 0.01 0.00 0.00 0.00 0.10
Jharkhand 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.01
Odisha 0.01 0.30 0.17 0.04 0.13 0.02 0.01 0.05 0.00 0.73
Manipur 0.02 0.00 0.00 0.00 0.00 0.00 0.02 0.00 0.00 0.03
Assam 0.00 0.42 0.00 0.00 0.00 0.01 0.06 0.02 0.00 0.50
Gujarat 0.00 0.27 0.22 0.11 0.04 0.00 0.05 0.00 0.00 0.68
Himachal Pradesh 0.00 0.09 0.08 0.13 0.00 0.00 0.00 0.00 0.00 0.30
Karnataka 0.00 0.04 0.07 0.04 0.00 0.00 0.01 0.00 0.02 0.17
Madhya Pradesh 0.00 0.29 0.85 0.33 0.02 0.38 0.05 0.02 0.00 1.95
Nagaland 0.00 0.01 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.01
Tamil Nadu 0.00 0.69 0.00 0.00 0.01 0.00 0.00 0.00 0.13 0.83
West Bengal 0.00 0.06 0.00 0.00 0.00 0.00 0.07 0.03 0.00 0.16
Uttarakhand 0.00 0.04 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.04
Chhattisgarh 0.00 0.00 0.05 0.00 0.00 0.00 0.00 0.00 0.00 0.05
Kerala 0.00 0.00 0.02 0.05 0.00 0.00 0.00 0.00 0.00 0.06
Maharashtra 0.00 0.00 0.32 0.18 0.00 0.00 0.04 0.00 0.00 0.54
Manipur 0.00 0.00 0.05 0.05 0.00 0.00 0.00 0.00 0.14 0.25
Figures are in Rs Crores
72

The Department of AYUSH, Ministry of Health and Family Welfare, had approved nine
AYUSH clusters in eight States one each in Kerala, Karnataka, Tamil Nadu, Odisha, Andhra
Pradesh, Punjab, Rajasthan and two in Maharashtra for setting up of AYUSH industry cluster
as common facilities centre for manufacturing and testing facilities for Ayurvedic, Siddha,
Homeopathy and Unani medicines. The scheme was launched in 2008 and was to co-exist
with the 11th five year plan with a scheme outlay of Rs. 100 crore. Since then scheme has
been slightly modified and was approved for continuation into the 12th Five Year Plan by the
Expenditure & Finance Committee (EFC) in 2013 after a mid term appraisal commissioned
by the Department. The Department through the continued scheme intends to cover the
hitherto uncovered states so as to have geographical parity. Till date 10 projects have been
sanctioned with a total project cost of Rs. 160 crore and a cumulative sanctioned grant of Rs.
94 crore. One out of the 10 projects, Andhra Pradesh has been cancelled in 2013 because of
internal mismanagement in the SPV. One project has started commercial operations and has
drawn the last instalment of grant on reimbursement basis. There are three projects which
have drawn three instalments of grant and the last instalment of grant on reimbursement basis
is pending. Rests of the projects are at different stages of implementation and are likely to get
commissioned in FY 2014- 15
The following table presents the fund details of the nine AYUSH approved clusters6:
Funds Allocated
Sl No State/UT AYUSH Special Purpose Vehicle
(Rs. in crores)
1 Andhra Pradesh Lepakshi Ayush Park Private Limited 10.00
2 Karnataka Ayurpark Health Care Limited, 10.00
3 Kerala CARE Keralam 10.00
Maharashtra Ayurved Center Pvt. Ltd. 9.49
4 Maharashtra
Konkan Ayur Pharma Pvt. Ltd. 8.87
5 Odisha Rushikulya Ayurvedic Cluster pvt Ltd 5.99
6
http://pib.nic.in/newsite/PrintRelease.aspx?relid=82718
6 Punjab Herbal Health Research Consortium Pvt. Ltd. 10.00

7 Rajasthan M/s Ayushraj Enterprises Pvt. Ltd. 9.70
8 Tamil Nadu Traditional Ayurveda Cluster of Tamilnadu 9.65
Total 83.70
The following table presents the details of grant-in-aid released under the Central Sector
Scheme for the Development of Common Facilities for AYUSH Industry Clusters:
2008-09
Grant- in-
S. No Name of the SPVs aid(Rs in
crores)
1 M/s Confederation for Ayurvedic Renaissance Keralam Limited 2.00
2 M/s Konkan Ayur Pharma Pvt Ltd., Sangemeshwar, Maharashtra 1.50
3 M/s Herbal Health Research Consortium Pvt. Ltd., Amritsar, Punjab 2.00
2009-10
1 M/s Mahrastra Ayurvded Center Pvt. Ltd; Pune,Maharshtra 2.50
2 M/s Ayurpark Heatlh Care Limited, Bangalore, Karnataka 2.00
3 M/s Traditional AYUSH Cluster, Pvt. Ltd;Tamil Nadu, Chennai 2.00
4 M/s Herbal Health Research Consortium Pvt Ltd.,Amritsar, Punjab 4.00
5 M/s Konkan Ayur Pharma Pvt Ltd., Sangemeshwar, Maharastrha 1.04
6 M/s Confederation for Ayurvedic Renaissance Keralam Limited 4.00
2010-11
1 M/s Mahrashtra Ayurved Center Pvt. Ltd; Pune, Maharashtra 3.50
2 M/s Konkan Ayur Pharma Pvt Ltd., Sangemeshwar, Maharashtra 1.96
3 M/s Ayurpark Heatlh Care Limited, Bangalore, Karnataka 4.00
4 M/s Lepakshi Ayur Park Pvt. Ltd; Hyderabad, Andhra Pradesh 2.00
5 M/s Rushikulya Ayurvedic Cluster Pvt. Ltd; Ganjam, Odisha 1.20
In addition to the above mentioned SPVs, M/s Assam Ayurvedic Consortium Pvt. Ltd in
Assam, M/s CG Ayursh Health Pvt. Ltd in Chattisgarh and M/s Sanskar Ayush Medicare
Pvt. Ltd in Uttrakhand have received “Conditional In-principle Approval”. The cancelled
Special Purpose Vehicles under the ambit of this scheme are M/s Spark Herbotech Ltd;
Hyderabad, Andhra Pradesh and M/s Maha AYUSH Park Ltd; Nasik, Pune

The Government of India has targeted to implement this scheme in the 12th Five Year Plan
period i.e. 2012-17. To this effect, the Ministry of Commerce and Industry, Department of
Industrial Policy and Promotion (Leather Section) convened a meeting on 20th January 2014,
at Udyog Bhawan where in they have constituted an Empowered Committee and a Steering
Committee for the implementation of the scheme
The roles and responsibilities of the Empowered committee have been defined as the
following:
1. Monitor the implementation of Integrated Leather Development

Programme(ILDP)
2. To suggest modifications in the guidelines of the various sub-schemes under
Indian Leather Development Programme and also suggest specific measures
required/essential to achieve the desired output for the development of the leather
sector.
3. To co-ordinate and collate information about schemes being implemented by
various Ministries/Department having connection or linkage to leather industry
and synergize/disseminate the same to all concerned for overall development of
the leather sector.
4. Approve proposals under the Sub-scheme of Indian Leather Development
Programme costing above Rs. 15 crore.
5. Approve specific issues concerning all sub-schemes of ILDP as mentioned in the
concerned guidelines.
The composition of the Empowered Committee is as follows:
Sl No Personnel Position
1 Secretary(IPP) Chairman
2 Financial Advisor, Department of Industrial Policy and Promotion Member
3 Representative of Planning Commission not below the rank of Advisor Member
Representative of Ministry of Environment and Member
4 Member
Forests not below the rank of Joint secretary
Representative of Department of Animal Member
5 Husbandry and Dairying not below the rank of Member
Joint Secretary
Representative of Ministry of MSME not below the Member
6 Member
rank of Joint Secretary
7 Chairman, Council for Leather Exports Member
Chairperson, Footwear Design and Development Member
8 Member
Institute
Managing Director, Footwear Design and Member
9 Member
Development Institute
10 Director, Central Leather Research Institute Member
Representative of State Government pertaining to the State for which the
Special
11 proposal under Indian Leather Development Programme is being
Invitee
considered
Representative of the organization (s) for which the proposal under Special
12
Indian Leather Development Programme is beinq considered Invitee
Experts from organization having expertise on the proposal under Indian Special
13
Leather Development Pronrarnme is being considered Invitee
Joint Secretary (Leather), Department of Industrial Convener Policy and
14 Convener
Promotion
The roles and responsibilities of the Steering committee have been defined as the following:
1. Ensure effective implementation, lay down procedures. decide normative prices for
standard plant and machineries required for the modernization programme, accord
sanction of financial assistance from Government, and monitor and follow up
disbursal of financial assistance from Government to the industrial units under the
sub-scheme Integrated Development of Leather Sector (IDLS);
2. Approval of proposals under the sub-schemes of Indian Leather Development
Programme costing upto Rs. 15 crore; and
3. Monitor the implementation of the projects sanctioned by the Department under
Indian Leather Development Programme.
4. Approve specific issues concerning all sub-themes of ILDP as mentioned in the
concerned guidelines.
5. Any other work assigned by the Empowered committee.
The composition of the Steering committee is as follows:
Sl. No Personnel Position

1 Joint Secretary (DIPP) Chairman
Director/Deputy Secretary (Finance wing),
2 Member
Department of Industries Policy and Promotion
3 Nominee of Ministry of Commerce Member
4 Nominee of Ministry of MSME Member
Managing Director, Footwear Design &
5 Member
Development Institute or nominee
Chief General Manager of Disbursing Bank (s)
6 Member
or nominee
7 Chairman, Council for Leather Exports Member
Director (Leather), Department of Industries
8 Convener
Policy and Promotion
9 Other Invitees as co-opted by the Chairman
The notice for inviting applicants for setting up the Mega Leather Cluster and empanelment
of Project Management Consultants are displayed below:
Notice for Empanelment of Project Management Consultants
Notice for Invitation of Applicants for setting up the Mega Leather Cluster
In the wake of the Central Government approving the National Plastic Park policy which was
further modified in 2013, four plastic parks were approved in the following states of Madhya
Pradesh, Tamil Nadu, Odisha and Assam. These four shortlisted plastic parks were in
allocated in the following regions: Paradip in Odisha, Manali Industrial Estate near Ennore
port in Tamil Nadu, Tinsukia in Assam and Bhopal in Madhya Pradesh. They are expected to
be operational in the next one to two years. In the 12th Five-Year Plan, it is envisaged that six
more plastic parks will come up in Punjab, Haryana, Rajasthan, Uttar Pradesh, Odisha and
Andhra Pradesh
The following section will briefly describe the four plastic parks that are under various stages
of implementation.
i. Assam Plastic Park
The Techno-Economic Feasibility Report was prepared by IL&FS and

submitted to Assam Industrial Development Corporation Limited which is the
designated nodal agency for this project. Possession of around 500 acres of
land at Gelapukhuri, Tinsukia was completed by 2011. In a bid to attract
investments, AIDC undertook major awareness campaigning program in
propagating among the major plastic / polymer houses in India for joining the
SPV. The total project cost is estimated at Rs 300 crore. For this purpose, two
awareness meetings on the Plastic Park were organized at Mumbai and
Ahmedabad on in 2010. In December 2013, AIDC had put out advertisement
inviting applications for allotment of park plots and currently they are
screening the applicants based on the set criteria. The short listings of the
firms are still awaited
Figure: Advertisement for inviting entrepreneurs to put up units in the

Plastic Park
ii. Paradip Plastic Park
Post the Department of Chemical and Petrochemical under the Union ministry
of Chemicals and Fertilizers had given its in-principle approval, the central
government has given its final nod for the Plastic Park project near
Paradip. This plastic park is being developed through the Special Purpose
Vehicle known as Paradip Plastic Park Limited with Indian Oil Corporation
Limited and Odisha Industrial Infrastructure Development Corporation
(IDCO) having 74 per cent and 26 per cent stakes in it respectively. The site
has been finalized at Siju village near the Paradip port. The acquisition of the
required land of 120 acres required for the project by Odisha Industrial
Infrastructure Development Corporation (IDCO) has been completed and the
construction of the park is expected to get completed by 2014.The
Odisha government expects to attract investment of Rs 2.78 lakh million in the
Paradip Petroleum, Chemicals and Petrochemicals Investment Region and
other related projects
iii. Ennore Plastic Park
The State Industries Promotion Corporation of Tamil Nadu (SIPCOT) and the
Tamil Nadu Industrial Development Corporation (TIDCO) had floated a joint
venture to implement the plastic park project which will be set in the
government owned land near the Ennore port and the Larsen & Turbo port
near Kattupalli. The plastic park is earmarked to be set up in 300 acres of land
and the total project cost is Rs 243 crore with Government of India pitching in
with Rs 40 crore in grant. The detailed project report was submitted in April
2013 and it is expected to be completed by 2016. Indian Oil Corporation has
expressed its interest in setting up a plastic container manufacturing unit. The
park will have the capacity to have over 70 such units which can generate over
25,000 jobs
iv. Bhopal Plastic Park
The proposed plastic park is being set up at Tamot village in Raisen district.
The state government has already transferred 138 acres of land belonging to
Madhya Pradesh Audyogik Vikas Nigam, Bhopal to the Special Purpose
Vehicle for setting up the park. Besides this it also exempted the land from
registration fee and stamp duty. The Madhya Pradesh Audyogik Kendra Vikas
Nigam has been appointed as the nodal agency for its implementation and the
name of the Special Purpose Vehicle is Madhya Pradesh Plastic Park
Development Corporation Ltd. The proposed plastic park will house around
150 industrial units and would create jobs for 25,000 persons directly or
indirectly. At present, 30 industrialists/ investors have deposited money for
acquiring shares in the park. The All-India Plastic Manufacturers Association,
Mumbai and its members have also signed MoU with Trade and Investment
Facilitation Corporation Limited, Government of Madhya Pradesh for
bringing major investment proposals in the plastic sector

The Electronic Manufacturing Clusters scheme was launched in April 2013. The scheme has
a two step approval process- in-principle approval and final approval. The scheme supports
setting of common facilities in Brownfield clusters and setting up of Greenfield cluster parks.
Under this scheme, 7 Greenfield parks and 1 common facility centre has been accorded in-
principle approval under the scheme till December 2013. While 6 out of the 7 Greenfield
projects are promoted by State Governments/ their agencies the remaining Greenfield and 1
common facility projects is being promoted by industry associations. The common facility
centre is proposed in Karnataka. None of the projects have been accorded final approval as of
now
The following table shows the status of the proposed Greenfield projects under this scheme:
Financial outlay
Proposed
Sl. Location of (Figure in Rs. crores)
State Area Status
No Cluster Estimated GIA
(Acres)
Cost sought
Andhra e-city In Principle
1 602.37 580 264
Pradesh Hyderabad approval accorded
Andhra
2 Maheshwaram 310.15 360 155 Non Responsive
Pradesh
EMPI
Andhra Under preliminary
3 Innovation Park 100.00 1201.1 22.57
Pradesh Appraisal
Ltd.
Andhra Applications
4 Chilamathur 47.00 53.48 62.5
Pradesh withdrawn
Andhra Applications
5 Puttandoddi 125.00 125 0
Pradesh withdrawn
Andhra Pydi Applications
6 0.00 0 0
Pradesh Bhimavaram withdrawn
Andhra Applications
7 Parwada 0.00 0 63.6
Pradesh withdrawn
Andhra Under preliminary
8 Shankarpur 175.00 130.64 276
Pradesh Appraisal
Tamil In Principle
9 Hosur 527.08 549.5 78.5
Nadu approval accorded
Tamil Under preliminary
10 Coimbatore 157.00 171.11
Nadu Appraisal
In Principle
11 Rajasthan Bhiwadi 100.66 198.64 50.35
approval accorded
12 Madhya Bhopal 50.00 45.11 21.61 In Principle
Pradesh approval accorded

Madhya In Principle
13 Jabalpur 40.00 42.7 24.63
Madhya In Principle
14 Gwalior 90.00 80.44 42.77
Madhya In Principle
15 Indore 37.07 44.77 25.77
West
16 Naihati 70.00 74 31 NA
Bengal
17 Haryana IMT Rohtak 108.00 292 54 Non Responsive
In Principle app
18 Karnataka Bangalore 1.17 85.15 50
accorded
Under preliminary
19 Karnataka Mysore 849.22 181.7 88.32
Appraisal
CFC Kasaba Under preliminary
20 Karnataka 1.70 30.97 22.83
Industrial Area Appraisal
In Principle app
21 Kerala Kakkanad 75.00 250 50
accorded
Under preliminary
22 Kerala Kochi 43.70 244.08 50
Appraisal
Under preliminary
23 Odisha Bhubaneswar 215.80 209.64 96.96
Appraisal
Source: Department of Electronics and Information Technology, Ministry of Communications and IT, Government of India
The following table shows the status of the Brownfield project for the Common Facility
Centre:
Financial outlay
S.no State Location of Cluster Status
(Figure in Crores)
Electronic
In Principle approval
1 Karnataka city 85.15
accorded
Bangalore
Chapter-
Chapter-6: Demand Assessment for Common
Industrial Infrastructure/facilities for
MSMEs
The rapid growth of the Indian economy in recent years has placed increasing stress on
physical infrastructure which already suffers from deficit in terms of capacities as well as
efficiencies. The pattern of inclusive growth averaging at 9 percent per year as conceived
under the Twelfth Five Year Plan (2012-17) can be achieved only if this infrastructure deficit
is overcome and adequate investment takes place to support higher growth and an improved
quality of life for both urban and rural communities. Based on projections provided in the
Mid-Term Appraisal of the Twelfth Plan, in order to attain a 9 percent real Gross Domestic
Product (GDP) growth rate, infrastructure investment should be on average almost 10 percent
of GDP during the Twelfth Plan. This translates into INR 41 lakh crore at 2006-07 prices
(real terms), as estimated by the Planning Commission of India. At an annual inflation rate
of 5%, this translates into an equivalent to INR 65 lakh crore in current prices
Total Twelfth
FY13 FY14 FY15 FY16 FY17
Year Plan
GDP at FY07 prices
68,825 75,019 81,771 89,131 97,152 411,898
(INR Billion)
Infrastructure investment as %
9% 10% 10% 10% 11% 10%
of GDP
Infrastructure Investment
6,194 7,127 8,095 9,180 10,395 40,992
(INR Billion in current prices)
Source: Mid Term Appraisal Twelfth Five Year Plan, Planning Commission
This section of the report will focus on assessing the demand of the projects elucidated within
the scope of this report and assess the need of such schemes. This covers the following major
schemes a) Scheme for Integrated Textile Parks b) Micro and Small Enterprises–Cluster
Development Programme c) Modified Industrial Infrastructure Up-gradation Scheme d)
Mega Food Parks Scheme e) Scheme for Cold Chain, Value Addition and Preservation
Infrastructure f) Comprehensive Handicrafts Cluster Development Scheme g) Scheme for
Development of AYUSH Clusters h) Mega Leather Cluster Scheme i) Plastic Parks Scheme
and j) Electronic Manufacturing Clusters Scheme. The major focus on such schemes
promoted by the government is creation of well equipped infrastructure for the promotion of
these sectors through a Cluster Based Approach. The design and implementation of the
schemes is a well thought out strategy by the central government wherein equal thrust is
given on skills development, technology up gradation and private sector involvement as well.
Overall these schemes seek to address the following gaps that are present in these sectors: a)
Access to finance b) Access to markets c) Access to infrastructure d) Access to people e)
Access to technology and f) Smoothening regulatory constraints.
Need for Cluster Based Infrastructure

The Report of Prime Minister’s Task Force on Micro, Small and Medium Enterprises
(MSMEs) published in 2010, identified infrastructural constraints which requires utmost
attention as MSMEs in India continue to suffer highly from infrastructural bottlenecks with
increasing competition, globalization and more recently due to uncertainty caused by global
downturn. According to the report, to sustain growth it is essential to have availability of
proper infrastructure for MSMEs. As per the report the following are the main issue faced by
MSMEs pertaining to infrastructure is that they are either located in industrial estates set up
many decades ago or are functioning within urban areas or have come up in an unorganised
manner in peri-urban or rural areas. The state of infrastructure, including power, water, roads,
etc. in such areas is poor and unreliable, leading to very high transaction costs. With the
growth of the industrial sector, including MSEs (which are an integral part of the value
chain), adequate areas for extension of MSEs are simply not available. This has resulted in
crowding of MSE operations in existing areas, often in conflict with environmental and urban
regulations. There is an urgent need for renewal and up-gradation of MSMEs infrastructure
located in existing industrial estates through cluster development approach. The development
process needs to be implemented properly and should be supplemented/ strengthened with
ample work space, captive power (within industrial estates), common effluent treatment
plants, proper water supply distribution, common tools rooms & design centre facilities, etc.
In the light of such constraints and gaps, it would be difficult for the outlined industries to
sustain their competitiveness in the absence of adequate infrastructure facilities. For example,
the dyeing and bleaching industry in Tirupur, tanneries in Kanpur, Knitwear processing
industry in Ludhiana, are all facing closure due to inadequate environment management
infrastructure. In Punjab, auto component clusters of Haryana and many other are facing
similar challenge due to technology obsolescence. The forging technology that was
introduced in late 70s is still the most prevalent technology and decades behind modern
technologies available to competing countries like China, Taiwan, etc. The sports goods
cluster in Jalandhar produces about 15 million soccer balls each year with about 30,000
workers, in comparison, a leading manufacturer of soccer balls in China produces 18 million
balls with about 6000 workers. The difference is due to adoption of technology which has
automated stitching to some extent. Similarly MSMEs in the auto component sector need
about 3 months for product development which can be achieved in less than 3 days with
access to technologies like Rapid Prototyping. The availability of such knowledge
infrastructure can address these technology related gaps. In the leather sector, which is highly
labor intensive, total capacity of institutional infrastructure for training is less than 5000
persons per annum while the demand is for more than 50,000 additional skilled workers for
the shop floor operations alone
The Indian Textile Industry contributes about 11 percent to industrial production, 14 per cent
to the manufacturing sector, 4 percent to the GDP and 12 per cent to the country's total export
earnings. It provides direct employment to over 35 million people, the second largest
provider of employment after agriculture. Besides, another 54.85 million people are engaged
in its allied activities. The primary production and inefficiency gaps that exist in the Indian
Textile Sector are as follows:
Availability of critical input material like raw materials, manpower and
technology
Acute shortage of new & skilled workforce in the industry
Inadequate Support Infrastructure
Issues impacting value addition
In the 11th Five year plan, a total of forty projects totaling Rs. 4183.26 crores in project cost
were sanctioned. In the 12th Five year plan, an additional forty parks has been sanctioned with
the total fund outlay of Rs.1400 crore by the government. During the 12th Five Year Plan the
Ministry of textiles estimates that the annual production of cloth is projected to increase from
64.90 billion square meters in 2011-12 to 111.85 billion square meters by the terminal year
i.e. 2016-17, with incremental production of 46.95 billion square meters which is a rise of
around 72 per cent. With the Textile Indus

Industry
try also being eligible for the Technological Up
Up-
gradation Fund (TUF) Scheme it is envisioned that much of this demand will be met by
existing industries upgraded with newer facilities. Therefore it is envisaged that the de
demand
for such scheme will rise substantially
bstantially in the near future
(II) Micro and Small Enterprises–Cluster

Enterprises Cluster Development Programme
(MSE-CDP),
CDP), Ministry of Micro, Small & Medium Enterprises
(MSME)
The MSME sector is a nursery of entrepreneurship, often driven by individual creativity and
innovation.
n. This sector contributes 8 per cent of the country’s GDP, 45 per cent of the
manufactured output and 40 per cent of its exports. The MSMEs provide employment to
about 60 million persons through 26 million enterprises. The MSE Cluster Development
Programmee focuses on imbibing increase in productivity and competitiveness in the clusters.
In a survey conducted by UNIDO, it is estimated that there are around 6400 clusters in India.
Out of these a total of 4259 clusters have been mapped. The typology of these clusters is as
follows:
Number of SME cluster: 1086

Number of Handloom clusters: 491
Number of Handicraft clusters : 2682
The following figure shows the zonal distribution of the SME clusters in India.
Zonal Distribution of Clusters

14%
28%
27%
East
West
South
North
31%
The state of Uttar Pradesh leads in terms of maximum clusters in a state. The figure displays
the distribution of SME clusters in India. 80 per cent of the clusters are present in the
following states: Uttar Pradesh, Tamil Nadu, Gujarat, Maharashtra, Kerala, Andhra Pradesh,
Karnataka, Punjab, West Bengal and Madhya Pradesh.
Statewise SME Clusters

Nagaland
Lakhsadweep
Goa
Tripura
Himachal Pradesh
Jammu &…
Bihar
States
Orissa
Rajasthan
80%
West Bengal
Karnataka
Kerala
Gujarat
Uttar Pradesh
0 50 100 150 200

Number of Clusters
The demand assessment of the Cluster Development Programme is carried out based on the
scope of activities of the scheme, which are as follows:
i. Diagnostic Study Reports
The Ministry of Micro, Small and Medium Enterprises has till date carried
out 470 Diagnostic Study Reports which means that only 43 per cent of the
clusters have been covered. There is a further requirement of Diagnostic
Study Reports to be prepared for 742 clusters.
Demand for Diagnostic Study Report
Remaining
Completed
Andhra…
Jammu &…
Madhya…
Uttar…
Himachal…
Karnataka
Goa
Haryana
Meghalaya
Odisha
Pondicherry
Bihar
Gujarat
Manipur
Jharkhand
Nagaland
Uttarakhand
Punjab
Rajasthan
West Bengal
Delhi
Kerala
Assam
Maharashtra
Tripura
Chattisgarh
Lakhsadweep
Tamil Nadu
ii. Soft Intervention
In terms of Soft Interventions, a total of 307 clusters have been covered.

Another 824 clusters are still require Soft Interventions.
Demand for Soft Interventions

Uttarakhand
Tripura
Rajasthan
Pondicherry
Nagaland
Manipur
Madhya Pradesh Completed
Kerala Remaining
Jharkhand
Himachal Pradesh
Gujarat
Delhi
Bihar
Andhra Pradesh
0 50 100 150 200
Number of Clusters
iii. Common Facility Infrastructure
Only 132 clusters have been implemented by the Common Facility

Infrastructure component.
Demand for Common Facility Infrastructure

Uttarakhand
Tripura
Rajasthan
Pondicherry
Nagaland
Manipur
Madhya Pradesh Completed
Kerala Remaining
Jharkhand
Himachal…
Gujarat
Delhi
Bihar
Andhra Pradesh
0 50 100 150 200
Number of Clusters
iv. Infrastructure Development and Up gradation
The Infrastructure Development and Up gradation component consist of

developing new infrastructure and up gradation of older infrastructure.
Under the Cluster Development Program, 124 clusters fall under new
infrastructure development and 60 clusters fall under upgradation of
existing infrastructure respectively.
Demand for Infrastructure Development and

Upgradation
Uttarakhand
Tripura
Rajasthan
Pondicherry
Nagaland
New
Manipur
Madhya Pradesh Upgradation
Kerala Gap
Jharkhand
Himachal Pradesh
Gujarat
Delhi
Bihar
Andhra Pradesh
0 50 100 150 200

Number of Clusters

A total of 388 industrial clusters across 21 states in India have been identified by the
Department of Micro, Small and Medium Enterprises. The identified clusters encompass all
the sectors ranging from agricultural implements, electronics and electrical manufacturing,
leather, auto components etc. Out of these clusters, only 39 clusters have been brought under
the ambit of the MIIUS scheme during the Tenth and the Eleventh Five Year Plan. These
clusters can be further segregated based on the following indicators: Maximum Potential for
Technology Up gradation and Export Potentiality of the products. Ranking the clusters on
High, Medium and Low for the aforementioned indicators the demand assessment for this
scheme is carried out. The present analysis takes into account only the High and Medium
ranks for the indicators. The analysis shows that there are a total of 305 clusters covering 20
states across India where MIIUS can be further implemented. The following table lists out the
state-wise potential number of clusters.
Number of Number of
States States
Clusters Clusters
Andhra Pradesh 26 Maharashtra 44
Bihar 3 Madhya Pradesh 9
Chattisgarh 2 Odisha 13
Delhi 14 Punjab 27
Gujarat 40 Rajasthan 18
Himachal Pradesh 1 Tamil Nadu 22
Goa 1 Uttaranchal 2
Haryana 15 Uttar Pradesh 30
Jammu & Kashmir 3 West Bengal 13
Karnataka 14 Kerala 8
Maharashtra 44
Total number of clusters = 305
Demand For Modified Industrial Infrastructure

Up gradation Scheme
Uttar Pradesh
Tamil Nadu Clusters covered till

date under MIIUS
Punjab
Madhya Pradesh Clusters which has

received In-Principle
States
Kerala Approval
Number of
Jammu & Kashmir clusters(Unmet
Goa demand)
Gujarat
Chattisgarh
Andhra Pradesh
0 10 20 30 40 50
Number of Clusters

Industries (MoFPI)
Vision 2015
To realize the vast potential of Indian agriculture by trebling the size of processed food
sector so as to enhance farmer income, generate employment opportunities, provide
choice to consumers at affordable price and contribute to overall national growth by
increasing the following:
A. The level of processing of perishables from 6% to 20%.
B. Value addition from 20% to 35%
C. Share in global food trade from 1.5% to 3%
The rationale behind setting up food parks is that small and medium entrepreneurs find it
difficult to invest in capital intensive activities. Thus, as a strategy to develop the food
processing infrastructure, Ministry of Food Processing has been actively pursuing setting up
of food parks in different parts of the country. It is envisaged that in such parks common
facilities like cold chain, food testing and analysis laboratories, packaging centers, training
facilities will be housed for the entrepreneurs. Such schemes are designed to provide impetus
to the Indian food industry which is expected to touch Rs. 13, 50,000 crore by 2015. The food
processing industry can be basically divided into the following three categories: a)
Agriculture based b) Livestock based and c) Fisheries based. MFPS is expected to facilitate
the achievement of the Vision 2015 of Ministry of Food Processing Industries. The below
table provides us with an indicative snapshot of the Primary Processed Products and Value
Added Products as per the above three categories
Primary Processed Products Value Added Products

Milled Grains, Spices
Agriculture
Beverages, Ready to eat/cook/drink,

Fruits and Vegetables
Bakery Products, Processed dry fruits
Tea and Coffee
Sugar Confectionary
Edible Oil
Fisheries Livestock
Milk UHT milk, Milk Powder, Ice cream
Eggs, Meat Egg powder, Packaged Meat
Processed aquatic foods

It is forecasted that the market size for Projects Approved in Mega Food Park Scheme
Status of Food Processing Units under Food Park and Mega Food Park
Scheme in India
processed foods will increase from Rs.
12th Five Year Plan 50
4, 60,000 crore to Rs. 13, 50,000 crore Total 34
(at 2003-04 prices) and the share of 11th Five Year Plan 15 30
Food Parks already setup
value added products in the processed 3rdFive

10th Phase
Year Plan 10 21 Sanctioned Mega Food Parks
Proposed Mega Food Parks
food consumption will grow from 38 Planned Mega Food Parks
9th Five Year Plan 39
%( Rs. 1, 80,000 crore) to 58 %( Rs.7,
2nd Phase 4
80,000 crore. 7While the Ministry of 8th Five Year Plan 2
Food Processing Industry (MoFPI) has

0 10 20 30 40 50 60
supported development of 54 Food 1st Phase 9
Parks in the country since the Eighth

Five Year Plan period, most of them
are yet to be operational. Against a physical target of 25 Parks during the 10th Plan, 18 Parks
have been sanctioned so far. Of these, only 8 Food Parks may be said to be operational. Even
those operational are facing problems of gross under-utilization, besides being unable to
attract entrepreneurs. Only 28 units are currently in operation in these 8 Parks. In the 11th
Five Year, against a physical target of 30 Mega Food Parks, only 15 have been sanctioned
and are under the stage of implementation. There has been a continuous demand from private
sector for participation in the Scheme. In 2008-10, the Ministry received 79 proposals (in two
phases) against the available slots of only 10 parks. Against the EOI in 2011-12, the MoFPI
received 63 proposals for setting up of Mega Food Parks where the available slots where only
15. This shows the demand and interest of private sector to invest in such projects. For the
12th Five Year Plan, the ministry has proposed to develop 50 Mega Mega Food Parks
7
http://www.dsir.gov.in/reports/isr1/Food%20Processing/6_5.pdf
(V) Scheme for Cold Chain, Valu

Value Addition and Preservation
Poor cold storage infrastructure not only Production Distribution of Horticulture

affects the freshness and quality of Crops
products, but also the price. Waste can 2% 5%
contribute to the doubling of fruit and FRUITS
23%
23%
vegetable
able prices; while milk can cost 50 VEGETABLES
per cent higher. In India, due to low FLOWERS

awareness of food freshness, lower 47% AROMATIC
quality fruits and vegetables end up being
consumed. Again, in the Scheme for Cold
Chain, Value Addition and Preservation
Infrastructure, MoFPI, every
ery EOI has received a huge response from the private sector. In the
first EoI invited by the Ministry in 2011
2011-12,
12, the Ministry received 164 proposals from the
private sector enterprises. Against another EOI in 2012
2012-13,
13, the Ministry received 146
proposals against about 16 available slots (although the Ministry later approved 66 projects
out of those proposals after upscalation of the scheme considering the huge demand).
Recently, the Ministry has come out with another invitation for EOI for about 15 more co
cold
chain projects under the scheme, against which 153
153 proposals have been received. India’s
cold storage market has a multitude of players, with over 3,500 companies in the value
chain.13 Cold chain solution provider companies constitute 85 per cent of the market, while
transportation services, such as refrigerated trucks (known as reefers), account for the
remaining 15 per cent. According to ASSOCHAM, during the period of 2009-2017,
2009 2017, the cold
chain industry in India is expected to grow at a CAGR of around 25.8
25.8 per cent to reach INR
6400 crores. The National Horticulture Board (NHB) recommends that investments worth
INR 55074 crores in new cold storage capacity are needed by 2015–16
2015 16 to keep up with the
increasing production of fruits and vegetables. Under the Cold Chain scheme, the ministry
has approved 122 cold chain projects worth total investment of Rs. 2806 crores till 2014. This
works out to only 5% of the demand being met by this scheme in terms of monetary
investment. In 2010, The Directorate of Marketing
Marketing and Inspection, Ministry of Agriculture
had mapped pan-India
India cold storage infrastructure availability. The study finds that there is
currently 25 million tonnes8 of storage capacity across 23 states whereas the total horticulture
production as per NHB data
ata is around 2807 million tonnes.
tonnes It is no wonder that in light of
such situation, India ranks high in food wastage globally.
Figures are in Million Metric Tonnes
8
http://www.thehindu.com/business/Industry/private
http://www.thehindu.com/business/Industry/private-investments-needed-to-fill-cold-storage-facility-gap-mfp/article5321214.ece
mfp/article5321214.ece

Textiles
According to a report developed by UNIDO in 2013 for the Department of Micro, Small and
Medium Enterprises reported that there are 2862 handicraft clusters in India. The following
states namely Uttar Pradesh, Odisha, West Bengal, Gujarat, Maharashtra, Madhya Pradesh,
Andhra Prades, Karnataka, Bihar and Rajasthan constitute for around 69 per cent of the total
such clusters in India.
Sl No State/UT Number of Handicraft Clusters

1 Uttar Pradesh 282
2 Odisha 271
3 West Bengal 245
4 Gujarat 199
5 Maharashtra 189
6 Madhya Pradesh 159
7 Andhra Pradesh 154
8 karnataka 137
9 Bihar 128
10 Rajasthan 120
Total 1884
Out of a reported 2 lakh artisans in India, Gujarat, Uttar Pradesh, Andhra Pradesh, Karnataka,
Kerala, Jammu and Kashmir, Odisha, West Bengal, Delhi and Assam constitute for 72 per
cent of the total artisans and 65 per cent of the total handicraft products produced. The
following table lists out the clusters/production centers along with the identified handicraft
identified by the Working Group, Ministry of Textiles report for the 12th Five Year Plan. For
the 12th Five Year Plan, the government has proposed Lucknow, Bareilly and Kutch for the
next set of Mega Clusters. The following table lists the identified major production centres
for various handicraft products.
State Cluster/Production Centers Identified Handicraft

Moradabad Art metal ware/ metal crafts
Farukabad Hand printed textiles
Saharanpur Wood craft
Bhadohi Carpet
Mirzapur Carpet
Uttar Pradesh Agra Zari and Zardozi
Varanasi Zari and Zardozi
Bareilly Zari and Zardozi
Varanasi Lacquer craft
Agra Stone carving
Varanasi Stone carving
Jaipur Hand printed textiles
Jaipur Carpets
Jodhpur Wood craft
Jaipur Hand printed textiles
Rajasthan
Barmer Hand printed textiles
Jaipur Imitation jewellery
Jaipur Stone carving
Jaipur Tie& Dye/Batik
Srinagar Carpet
Jammu and Kashmir
Anantnag Embriodery
Madhya
Bagh Hand printed textiles
Pradesh
Narsapur Lache and crochet goods
Andhra Pradesh
Pochampalli Tie& Dye/Batik
Delhi Delhi Imitation Jewellery
Karnataka Channapatna Lacquer craft
Chattisgarh Bastar Dhokra craft
Tamil Nadu Mahabalipuram Stone carving
Odisha Bhubaneshwar Stone carving
Puri Applique work

Puri Tie& Dye/Batik
Ahmedabad Applique work
Kutch Applique work
Gujarat
Surat Zari and Zardozi
Bhuj Tie& Dye/Batik
Assam Bamboo and Cane
Tripura Bamboo and Cane
Manipur Bamboo and Cane
North Eastern Region
Arunachal Pradesh Bamboo and Cane
West Bengal Bamboo and Cane
Kerala Bamboo and Cane
Further analyzing the identified production centers based on the following indicators: a)
Turnover of the Clusters b) Total Export Value and C) Artisans Involved, it can be seen that
Saharanpur and Agra has the potential to come up as Mega Clusters in the immediate future.
The combined turnover of these two clusters is Rs 600 lakhs, out of which 50 per cent comes
from exports indicating good export market for their products. The total number of artisans
involved for these two clusters is 80,000.
Cluster/Production State Craft Turnover Total Export Artisans

Centers of the Value Involved
Clusters
Uttar Wood
Saharanpur 400 200 50,000
Pradesh craft
Uttar Stone
Agra 200 100 30,000
Pradesh carving

“In a vast country like India, there should be at least one AYUSH industry cluster in each
state”.
The Scheme for Development of AYUSH Clusters was designed to promote the the
Ayurveda, Yoga and Naturopathy, Unani, Sidha & Homeopathy (AYUSH) industry which
represents the traditional form of Indian medicine and has been part of India’s socio- cultural
heritage. The estimated global herbal industry is valued over US$ 60 billion mainly in the
form of pharmaceuticals (US$ 40 billion), spices and herbs (US$ 5.9 billion), natural
cosmetics (US$ 7 billion) and essential oil (US$ 4 billion) and it is growing at the pace of 7%
per year and is expected to reach US$ 5 trillion by the year 2050. During the last four Five
Year Plans, total export of herbal products from India had increased from about Rs. 581 crore
in 1995-96 to about Rs. 1713 crore in 2010-11 showing a positive balance of trade despite the
fact that overall balance of trade has been negative since 1996-97. Despite a steady
performance of MAPs sector over the years, Indian share in the world’s herbal export is
insignificant comprising of around 1.6% and largely 2/3rd of it in the form of raw herbs9. This
industry has approximately an annual turnover of Rs. 5000 Crore and is essentially dominated
by micro, small and medium enterprises (MSMEs) which account for more than 80% of the
enterprises that are located in identifiable geographical clusters. Till now the government has
promoted the following 9 AYUSH clusters:
SL No State/UT AYUSH SPV

1 Andhra Pradesh Lepakshi Ayush Park Private Limited
2 Karnataka Ayurpark Health Care Limited,
3 Kerala CARE Keralam
4 Maharashtra Maharashtra Ayurved Center Pvt. Ltd
5 Maharashtra Konkan Ayur Pharma Pvt. Ltd.
6 Odisha Rushikulya Ayurvedic Cluster pvt Ltd.
7 Punjab Herbal Health Research Consortium Pvt. Ltd.
8 Rajasthan M/s Ayushraj Enterprises Pvt. Ltd.
9 Tamil Nadu Traditional Ayurveda Cluster of Tamilnadu
9
Vision 2050, Department of Medicinal and Aromatic Plants Research
The Plan outlay for Department of AYUSH for 2014-15 is Rs. 1069.00 crore10.The system
wise details of manufacturing units in India in India as per the Department of AYUSH are as
follows11:
System Number of Units

Ayurveda 7494
Unani 414
Siddha 338
Homeopathy 398
Total 8644
Among the four industries, Ayurveda has the largest number of manufacturing units
constituting 86 per cent of the total AYUSH industry. The total production of aromatic and
medicinal plants in India for 2013-14 is 904,000 metric tonnes. The top 10 production centers
for aromatic and medicinal plants are as follows: a) Madhya Pradesh b) Tamil Nadu c)
Rajasthan d) Arunachal Pradesh e) Chattisgarh, f) Karnataka g) Uttar Pradesh h) Andhra
Pradesh i) Punjab and J) Haryana. The production data12 of these states are as follows:
Total production of Aromatic and Medicinal Plants('000

States
MTs)
Madhya Pradesh 404.6
Tamil Nadu 162.12
Rajasthan 133.29
Arunachal Pradesh 109.18
Chhattisgarh 50.25
Karnataka 21.66
Uttar Pradesh 13.4
Andhra Pradesh 4.52
Punjab 1.67
Haryana 1.14
TOTAL 901.83 (97% of total production in India)
AYUSH Clusters
10
Expenditure Budget Vol.I, 2014-2015
11
http://www.indianmedicine.nic.in/showfile.asp?lid=44
12
Indiastat, accessed on 13-august-2014
The supply chain in these production centres can be categorized into the following13: a)
Number of Growers b) Number of Traders c) Number of Manufacturers and d) Number of
Exporters14.Of these four categories, traders constitute 45% of the total supply chain agents
indicating that most of the products are traded in non-processed form. Estimating cost of raw
materials at Rs 41.4015 per kg, it can be observed that Madhya Pradesh provides an
immediate need of establishing an AYUSH cluster followed by Arunachal Pradesh,
Chattisgarh, Uttar Pradesh and Haryana respectively.
Total production of Estimated Share of Total

States Aromatic and Medicinal Market Size( Rs. Industry in
Plants('000 MTs) Crore) India
Madhya Pradesh 404.6 1675.04 34%
Arunachal Pradesh 109.18 452.01 9%
Chhattisgarh 50.25 208.04 4%
Uttar Pradesh 13.4 55.48 1%
Haryana 1.14 4.72 0.09%

The Indian Leather industry is spread over the formal as well as informal sectors and
produces a wide range of products from raw hides to fashionable shoes. The industry
comprises of firms in all capacities starting from small artisans to prominent global players
and employs 2.5 million persons. A large part nearly 60-65% of the production is in the
small and unorganized sector. Leather Industry is amongst top eight export earners for India.
India ranks first among major livestock holding countries in the world and thus has a rich
endowment of raw materials in terms of the cattle population. India is endowed with 10% of
the world raw material and Indian Leather export constitutes about 5%16 of the world trade.
It has the capacity to fulfill 10% of the global leather requirement.
Leather Goods & Accessories 2007 2008 2009 2010 2011

World Import 16388 18117 14376 17059 22216
13
Organized sector
14
http://www.nmpb.nic.in/index1.php?level=0&linkid=92&lid=694
15
Calculation: As per Vision 2050 document, total industry size is Rs 5000 crore with 2/3rd of it in raw form which equates to around Rs
3750 crore. The total production of MAP is 904.94 ‘000 metric tonnes, which results in Rs 41.40 per kg.
16
http://www.leatherindia.org/products/leather_goods_23-4-13.asp
India's Export 800 873 757 855 1089

% Share Of India 4.88% 4.82% 5.26% 5.01% 4.90%
Values are in US $ Millions
In 2012-13 leather exports increased by 17%, to Rs 350 crore up from Rs 300 crore in 2011-
12. For 2013-14, leather exports are expected to have a 15 per cent export growth. The
Department of Micro, Medium and Small Enterprises has listed 14 leather clusters in 9 states.
The below table shows the potential leather clusters17 based on export potential:
Sl.
Export No. of Units Annual
No State District Employment
Potential in the Cluster Turnover
.
Andhra
1 Hyderabad High NA NA NA
Pradesh
2 Delhi South Delhi High 100-500 NA NA
High Less than or
3 Gujarat Ahmedabad 100-500 0-10 Crore
equal to 1000
4 Karnataka Bangalore High NA NA 100-1000 Crore
5 Punjab Jalandhar High 100-500 1,00-10,000 10-100 Crore

High Less than or
6 Punjab Jalandhar 500-1000 10-100 Crore
equal to 1000
More than 1000
7 Tamil Nadu Chennai High 500-1000 NA
Crore
8 Tamil Nadu Vellore High 500-1000 NA
Uttar High 10,000 to
9 Agra 1000-10000 100-100 Crore
Pradesh 1,00,000
Uttar High
10 Allahabad NA NA
Pradesh
Uttar High More than 1000
11 Kanpur 100-500 NA
Pradesh Crore
West High Less than or
12 Kolkata 100-500 10-100 Crore
Bengal equal to 1000
13 Karnataka Raichur Medium NA NA 0-10 Crore
Medium 10,000-
14 Maharashtra Satara 1000-10000 10-100 Crore
1,00,000
17
http://www.dcmsme.gov.in/clusters/clus/smelist.htm#clus
The Indian Plastics Industry is

Year Wise Comparison of the Plastic Industry
spread across the country,
employing about 4 million people 100%
90%
and over 2,000 exporters. It operates 80%
70% 64% 60% Import
more than 30,000 processing units, 67% 66%
60%
of which 85 per cent to 90 per cent 50%
40% Export
are small and medium enterprises 30%
(SMEs). India has emerged as one of 20% 36% 34% 40%
33%
10%
the most promising exporters of 0%
plastics among developing 2008-09 2009-10 2010-11 2011-12
countries. In 2011–12, exports of Indian plastics stood at US$ 7.19 billion. In 2012–13,
exports of Indian plastics stood at over US$ 7.2 billion, and are expected to reach the US$ 10
billion by 2015-16. India's plastic exports are increasing at a high rate, as such, during May
2014 to June 2014, India exported plastic products worth US$ 971,273, followed by Saudi
Arabia and United States with exports valued at US$ 200,316 and US$ 174,471 respectively.
Indian plastics exports have grown at a rate of 19.9 per cent since 2007–08. Products from the
Indian plastics industry are exported to more than 150 countries; major trading partners being
China, the US, the UAE, Turkey, Italy, the UK, Indonesia, Germany, Vietnam, Bangladesh,
Nigeria, Pakistan, South Africa, Brazil, Singapore, Saudi Arabia, Nepal, Egypt, Sri Lanka
and the Netherlands18. With such a promising future for the industry, the Department of
Chemicals and Petrochemicals under the Ministry of Chemicals and Fertilizers sought to
provide impetus to the sector through the Plastic Park Scheme. Through this scheme, it
envisioned to bring the SMEs involved in the plastic sector with the much needed
infrastructural support. AIPMA (All India Plastics Manufacturers Association) envisages an
additional investment of Rs 25,000 crore for the industry in the coming years. According to
AIPMA officials, the country's plastics consumption is expected to grow to 20 million tonnes
by 2020 from the present 8 million tonnes. Even though exports of plastic and plastic
products have been growing at a brisk rate, the trade of balance for plastic and plastic
products has not been in India’s favour in the past19. The primary reason behind this is lack of
technological advancements in this sector. The industry representatives have been making
18
http://www.ibef.org/exports/plastic-industry-india.aspx
19
http://chemicals.nic.in/petro1.htm
requests for the sector to be brought under the ambit of TUF (Technology Up gradation
Fund). Unless the industry is nurtured with such schemes, it is very unlikely that standalone
Plastic Park Schemes will encourage the industry in terms of investments and expansion20.

The Indian Electronic System Design and Manufacturing industry is expected to grow at a
CAGR of 9.9% to reach US$94.2 billion by 201521.According to the study, products like
mobile phones, television and computing device alone account for 60% of the overall
electronics consumption. Currently a majority of the electronic products (65%) are imported
in the country, and the remaining 35% of the products that are manufactured in India belong
to "Low Value Added Manufacturing". Out of the 25 product categories, mobile phones lead
the demand with 38.85 per cent share, followed by FPD TV at 7.91 per cent, notebooks at
5.54 per cent and desktops at 4.39 per cent. Buoyed by the IT Industry, where India remains a
market leader globally, the hardware sector is also expected to rise in India. The government
in a bid to push the electronics manufacturing sector has identified seven Greenfield
Electronic Manufacturing Clusters to be set up. It is envisaged that this sector will employ
close to 28 million persons. The identified clusters are identified at Bhopal, Bhubaneswar,
Hyderabad, Maheshwaram, Bhiwadi, Jabalpur, Hosur and Kakhanada. Further to this,
recently the Department of Electronics and Information Technology has identified 5 clusters
in 3 states for Brownfield Electronic Manufacturing Clusters under the Modified Special
Incentive package Scheme22. The identified clusters are shown in the following table:
Brownfield Electronics Manufacturing Cluster

State Cluster-ID
for MSIPS, scheme
Bengaluru, Bengaluru Rural, and Tumkur KK-I
Karnataka
Mysore KK-2
Dewas, Indore, &Dhar MP-I
Madhya Pradesh
Bhopal MP-2
20
http://zeenews.india.com/news/eco-news/set-up-plastic-parks-provide-technology-upgrade-fund-group_894219.html
21
http://articles.economictimes.indiatimes.com/2014-01-13/news/46149784_1_iesa-warehousing-zone-mobile-phones
22
http://www.efytimes.com/e1/creativenews.asp?edid=102854
Uttar Pradesh Noida - Greater Noida UP-I
However the Government has put an upper limit in the Research and Development
component as 50% of the total project cost which is very surprising given that the electronics
industry is highly research oriented. It would not be surprising if this deters potential
investors from participating in this scheme notwithstanding the potential. This scheme will be
open for five years from the date of notification i.e. 22nd October 2012 until notified
otherwise.
Chapter-
Chapter-7: Public Private Partnerships
Partnerships in
India
“The Twelfth Plan must continue the thrust on accelerating the pace of investment in
infrastructure, as this is critical for sustaining and accelerating growth. Public investment in
infrastructure will have to bear a large part of the infrastructure needs in backward and
remote areas to improve connectivity and
Definition: “Public Private
expand the much needed public services. Since
Partnership” or “PPP” means an
resource constraints will continue to limit public arrangement between the Appropriate
investment in infrastructure in other areas, PPP- Government or a statutory entity or a
government-owned entity or Central
based development needs to be encouraged Public Sector Undertaking on one side
wherever feasible”. and a private entity on the other, for the
provision of public assets and/or public
- Approach to the 12th Five Year Plan, services, through investments being
made and/or management being
Planning Commission, GoI undertaken by the private entity, for a
specified period of time, where there is
The Government of India has clearly assimilated
well defined allocation of risk between
PPP as a significant part of its policy framework the private entity and the public entity
and the private entity receives
for infrastructure development in the country.
performance linked payments that
There has also been considerable progress in this conform (or are benchmarked) to
direction with share of PPP projects in total specified and pre-determined
performance standards, measurable by
infrastructure investments showing a rising trend the public entity or its representative.
PPP approach in India, as elsewhere in the

world, has been guided by the belief that it not only brings much needed financial resources
from private sector but also ensures greater efficiency in provision of public services.
However, the PPP infrastructure investments in the country are largely dominated by roads
and ports in the country. The shares of roads and ports, in total value of project contracts
awarded and under implementation of Rs. 293,367 crore (pppinindia.com), are around 80 per
cent and 14 per cent respectively. Thus, there remains a large untapped potential for PPP
projects across the country
It may be noted that the above figures are from PPP database of the Ministry of Finance,
Government of India and all projects have to meet prescribed guidelines to qualify as a PPP
project which would then also become eligible for Viability Gap Funding
Civil aviation
Sports
1% Tourism and
2%
Railways
Ports 1% each
12%
Housing
3%
Roads
82%
(I) Viability Gap Funding Scheme (VGF)

The financial assistance available under VGF of Ministry of Finance, Government of India is
normally in the form of a capital grant at the stage of project construction. The financial
assistance is equivalent to the lowest bid for capital subsidy, but subject to a maximum of 20
per cent of the total project cost. In addition, the sponsoring Ministry/ State Government/
statutory entity may propose to provide assistance up to a further 20 per cent of the total
project cost
(1) Sectors Eligible for VGF
a. Roads and bridges, railways, seaports, airports, inland waterways;

b. Power;
c. Urban transport, water supply, sewerage, solid waste management and other physical
infrastructure in urban areas;
d. Infrastructure projects in Special Economic Zones and internal infrastructure in
National Investment and Manufacturing Zones;
e. International convention centers and other tourism infrastructure projects;
f. Capital investment in the creation of modern storage capacity including cold chains
and post-harvest storage;
g. Education, health and skill development, without annuity provision;
h. Oil/Gas/Liquefied Natural Gas (LNG) storage facility (includes city gas distribution
network);
i. Oil and Gas pipelines (includes city gas distribution network);
j. Irrigation (dams, channels, embankments, etc);
k. Telecommunication (Fixed Network) (includes optic fibre/ wire/ cable networks

which provide broadband /internet);
l. Telecommunication towers;
m. Terminal markets;
n. Common infrastructure in agriculture markets; and
o. Soil testing laboratories.
(2) Eligibility Criteria for VGF
In addition, to be eligible for consideration under VGF, a project needs to meet the following
criteria:
a. The PPP project has to be implemented, i.e. developed, financed, constructed,

maintained and operated for the project term by a private sector company to be
selected by the Government or a statutory entity through a transparent and
open competitive bidding process. This is thus most commonly understood
PPP model viz. Build-Operate-Transfer (BOT) or its variants.
b. The criterion for bidding is the amount of viability gap funding required by the
private sector company for implementing the project where all other
parameters are comparable.
c. The project should provide a service against payment of a pre-determined

tariff or user charge.
d. The concerned sponsoring entity has to certify with reasons the following: The
tariff /user charge cannot be increased to eliminate or reduce the viability gap
of the PPP project. The project term cannot be increased for reducing the
viability gap. The capital costs are reasonable and are based on standards and
specifications normally applicable to such projects where the capital cost
cannot be further restricted for reducing the viability gap.
e. Finally, the Scheme will apply only if the contract/concession is awarded in

favour of a private sector company in which 51 percent or more of the
subscribed and paid up equity is owned and controlled by a private entity.
(II) PPP Variants

It needs to be appreciated that the PPP offers a range of options and is much more than a
BOT model. The PPP options may range from concessions and joint ventures to service
contracts and O&M contracts. In fact, service contracts and O&M contracts are considered to
be first steps in involving private sector as these may be implemented quickly
(1) BOT vs BOT -Annuity models
BOT model has got two main approaches to handle traffic/market risk. Under the toll-based
BOT projects, traffic/market risk is borne by the private operators.
Under this model, capital subsidy may be provided to selected bidder for meeting the
projected “viability gap” during construction phase. An important variant of this approach is
“shadow tolling”, wherein private partners do not collect tolls from the road users but are
exposed to traffic risks, as they are paid on the basis of the volume of actual traffic. This
model has been found attractive due to provision of subsidy during construction phase. In
fact, as mentioned earlier, VGF which is the main scheme providing government support to
PPP projects has provision for providing capital subsidy normally during construction phase.
On the other hand, the private bidder remains exposed to traffic/ market risk under this model
which may make it unattractive for projects which are seen to have large market risks
Under BOT- Annuity Model though, the sponsoring entity (government or its agency)
absorbs the traffic risk and the private operator is paid for making the specified level of
infrastructure/service available regardless of the extent of traffic/market, these are also known
as “availability based” projects. This model has thus been found acceptable for NHAI
projects for highways which assures private operators the regular “annuity” payments over
project period. Of course, in this case, private operators may need to arrange for large capital
funds for completing the project which has its own cost implications
PPP Models supported by the Government
User-Fee Based BOT models - Medium to large scale PPPs have been awarded mainly in
the energy and transport sub-sectors (roads, ports and airports). Although there are
variations in approaches, over the years the PPP model has been veering towards
competitively bid concessions where costs are recovered mainly through user charges (in
some cases partly through VGF from the government)
Annuity Based BOT models – In sectors/projects not amenable for sizeable cost recovery
through user charges, owing to socio-political-affordability considerations, such as in rural,
urban, health and education sectors, the government harnesses private sector efficiencies
through contracts based on availability/performance payments. Implementing “annuity
model” will require necessary framework conditions, such as payment guarantee mechanism
by means of making available multi-year budgetary support, a dedicated fund, letter of
credit etc. Government may consider setting-up a separate window of assistance for
encouraging annuity-based PPP projects. A variant of this approach could be to make a
larger upfront payment (say 40% of project cost) during the construction period
Performance Based Management/ Maintenance contracts – In an environment of
constrained economic resources, PPP that improves efficiency will be all the more relevant.
PPP models such as performance based management/maintenance contracts are encouraged.
Sectors amenable for such models include water supply, sanitation, solid waste
management, road maintenance etc
Modified Design-Build (Turnkey) Contracts: In traditional Design-Build (DB) contract,
private contractor is engaged for a fixed-fee payment on completion. The primary benefits
of DB contracts include time and cost savings, efficient risk-sharing and improved quality.
Government may consider a “Turnkey DB” approach with the payments linked to
achievement of tangible intermediate construction milestones (instead of lump-sum
payment on completion) and short period maintenance / repair responsibilities.
Penalties/incentives for delays/early completion and performance guarantee (warranty) from
private partner may also be incorporated. Subsequently, as the market sentiment turns
around these projects could be offered to private sector through operation-maintenance
(2) SPV Model
Large sized and complex PPP projects are often developed through an SPV route, wherein a
project SPV is incorporated and it takes the responsibilities of acquiring land and other
statutory and environmental clearances. The SPV, along with the project, is then bid out
through a transparent process
There are other variants possible of this model which may though vary from traditional PPP
approach. For example, it may be envisaged to invite private operators for participation in the
equity structure of the SPV along with the government agency. The equity being offered to
private operator may be either majority share (51 % or more) or minority share (49 % or
less), depending on the nature of the project and decision of the concerned government
agency in this regard. The selected private operator shall also be given responsibility of
O&M of the project under this model
(III) Capital Grant vs VGF

The Government of India has thus broadly supported the development of infrastructure
projects on a PPP basis through three instruments:
(a) Viability Gap Funding

(b) Annuity Payments
(c) Provision of Capital Grants as a percentage of projects
Given the wide array of contractual frameworks that cover infrastructure projects, variants of
the above have been adopted to support infrastructure development. The Cluster
Development approach for creating common industry infrastructure and facilities has though
been different, largely based on capital grant, taking into consideration uniqueness of the
challenges associated with MSME sector. For appreciation of the reasons for adoption of a
different approach, it may be considered necessary that the difference between a stand-alone
infrastructure project and a cluster based approach for creating common facilities, aimed at
developing competitiveness of MSME industry verticals, is understood:
(a) In a stand-alone infrastructure project, Government typically enters into a long

term Concession Agreement with the provider of the service, on the basis of a pre-
determined tariff structure for that service. A common infrastructure project
though does not conform to a singular definition but rests on multiple
stakeholders organized around a business vertical, to make the cluster as a whole
more competitive. Thus, in a cluster, the singular effort is to enhance
competitiveness by encouraging each member unit to evolve over the medium to
long term, in terms of skill, technology, products and services, etc
(b) In a stand-alone infrastructure project, levels of services are typically determined

for the entire duration of the Concession. In a Cluster based approach, the focus is
to organize the member units of a cluster to evolve standards in an organized
fashion to meet the challenges of a global marketplace. As a result, there is no ab
initio specificity on project parameters
(c) As a result of the foregoing, unlike in a stand-alone infrastructure project, the

establishment of common industry infrastructure assets and/or levels of services
are focused on the overall competitiveness of the clusters in a global environment.

In the absence of a uni-variant parameter, such as rate of return on investment, the
determination of viability gap would be difficult to establish ab-initio
(d) Unlike in a stand-alone infrastructure project, therefore, common infrastructure

projects also demand a great deal of effort to be devoted to building capacity.
The capacity building efforts commence when efforts are made to agglomerate a
critical mass of MSME entrepreneurs to participate in a cluster to the
establishment of their businesses in the clusters, choice of technology, building
market linkages for the clusters, establishing inter-se working relationships
between member units, arranging financing including working capital support,
accessing and providing infrastructure, establishing common non-infrastructure
utilities to support the cluster’s operations, etc. In sectors such as food
processing, successful clustering would also depend critically on the establishment
of suitable backward and forward linkages that go well beyond the creation of
infrastructure-centric assets
(e) Finally, it may also be noted that clusters are, at least in part, being made to
overcome deficiencies in the provision of public services which should have
ordinarily been made available to support such activities
In view of the foregoing, the government agencies have adopted financial assistance in form
of a capital grant, as a percentage of project cost, administratively more efficient and
effective in supporting creation of common industry infrastructure projects. In providing
grant to such projects, Government agencies have established necessary conditions that need
to be available before the grant is released
Chapter-
Chapter-8: Existing Legal and Regulatory
Framework for PPP Projects
As PPP projects entrust responsibility of providing public assets and/or public services to
private sector entities which are provided public funds and other concessions for this purpose,
these projects have always been under close scrutiny of both policymakers and public at
large. The Draft National Public Private Partnership Policy, in the process of finalization by
the Ministry of Finance, Government of India, therefore stresses need for a clear legislative
and regulatory framework for PPP projects
The said Draft National PPP Policy, in this context, highlights following imperatives:
(a) Need for a transparent and objective process for selection of projects taking into
consideration concessionaire (private sector) concerns about ‘Value for Money’
and welfare consideration even as process design must be consistent with the
governing framework for public procurement;
(b) Clearly defined approval, compliance and performance monitoring jurisdiction;
(c) Clear definition of role, responsibility and rights of various parties in the
governing instruments including the scope of public service, service standards,
pricing, and scope of governmental intervention or assistance ;
(d) Participation of private parties in ownership and/or management of public assets

and/or delivery of public utility services;
(e) Vesting in such private party, the power to –

a. Collect, retain and appropriate revenue to meet reasonable expenses
incurred in implementation of the PPP project including a pre-
determined/agreed return on the funds employed; and
b. Seek revision of the charges and/or collection in terms of the concession
agreement, in order to facilitate business planning and financing.
(f) Role of the Concessionaire in maintaining and managing the PPP asset/services
and in controlling access to and usage of the infrastructure facility; and
(g) Scope of bankability and securitization of the Concession, Project Assets and
revenue (including assignability) so that the Concessionaire is in a position to
avail affordable debt finance by securing lenders.
The size and complexity of PPP projects require a very detailed and robust legal framework
which cover the entire project life cycle, starting from the stage of selection of the
project/beneficiary itself, for which there are prescribed guidelines for inviting proposals and
bidding process. Various stages of a PPP project and prescribed legal and regulatory
framework are given as follows:
(I) Procurement stage

The procurement and award of a PPP project are often a complex process. It is required that
“transparent, accountable, non-discriminatory, competitive and timely” procurement
processes are followed so as to encourage maximum participation by private sector and to
imbibe public confidence in the procedure
It has been prescribed that the bid documents used for procurement of private sector entities
may comprise of one or more of expressions of interest, request for qualifications, and
request for proposals. It has been suggested that technical proposals may also be invited,
depending on the complexity of a project, to assess the ability of the private entity to deliver
and appreciate desired outcomes. The financial proposals are prescribed to be ideally in the
form of a single objective parameter. The bid process and the model bidding documents viz.,
model Request for Qualification (RFQ) and model Request for Proposal (RFP) for PPP
projects in infrastructure sector, are prescribed by the government through notifications
issued from time to time
The Draft Contract Agreements or Concession Agreements, containing provisions on the

roles and obligations of the parties (the Contracting or Concessioning Authority and the
Concessionaire respectively), performance standards and monitoring arrangements, reporting
requirements, penalty conditions, force majeure conditions, dispute resolution mechanism
and termination arrangements, are also to be provided to the prospective bidders as part of the
bid documents
All the implementing agencies are required to observe the prescribed process or take
necessary approvals of the competent authority on the process proposed to be undertaken,
prior to commencement of the bid process. It has also been provided that a web based market
places, including e-tendering and auction may be promoted based on the project requirements
to promote wider participation and transparency in the process
(II) Revenue Sharing or Revenue Support Mechanisms

The procurement process may be said to start with the Contracting Authority getting a
Feasibility Study done for the project and then taking a decision, based on the Study, whether
to provide for revenue sharing and/or revenue support mechanisms or a combination thereof
within the Concession Agreement for the PPP Project. It is expected that the Contracting
Authority would take a decision considering monopoly nature of the public service being
provided by the Concessionaire under a PPP Project. It is also expected that the revenue
sharing or revenue support mechanism does not curtail private efficiency or compensate the
Concessionaire for risks allocated to the Concessionaire under the Concession Agreement. It
is further expected that in case of a monopoly in the provision of the public service, the
Concessionaire does not enjoy super-normal profits and at the same time does not suffer due
to unforeseen revenue-side risks
(III) Request for Qualification

Once a decision has been made on the kind of support to be provided under a project, it may
be followed by Invitation for Expression of Interest (EoI) or Request for Qualification (RFQ).
A RFQ document normally contains following:
(a) Description of the PPP Project, the estimated project cost and the project
structure;
(b) Description and schedule of the Tender Proceedings;
(c) Conditions of eligibility of Applicants, information sought from Applicants for
qualification and the form and procedure of the Application;
(d) Description of the parameters and method of evaluating qualification of
Applicants, the objective of the evaluation should be to identify Qualified
Applicants that have the requisite capability to take up the PPP Project; and
(e) Criteria or conditions, if any, for the disqualification of Applicants, such as,
Conflict of Interest, national security and other relevant considerations
(IV) Request for Proposal

The completion of RFQ process should result in shortlisting/selection of eligible bidders who
would be requested now to submit their proposals through a RFP document. A RFP
document should normally contain following:
(a) Feasibility Report/ Project Information Memorandum: This is designed to provide

sufficient information to Bidders to help them evaluate the PPP Project and
estimate their Final Offer. This Report may contain, inter-alia, project objectives
and rationale, site details, role of the government agencies and other stakeholders,
project scope and output specifications;
(b) Instruction to Bidders: This component gives description of Bid submission and
evaluation and should include all procedures, terms and conditions which would
be followed by the Bidders for submission of their Bids and the Contracting
Authority in accepting and evaluating the Bids;
(c) Draft Concession Agreement: This may be said to form core of the PPP structure
and governs the contractual relations between the Concessionaire (Preferred or
Selected Bidder) and the Contracting Authority. The draft Concession Agreement
is to contain, inter-alia, rights and obligations of both the parties, payment terms,
performance obligations, defaults and their consequences, events of termination
and other ancillary clauses. For some sectors, Model Concession Agreements have
been notified, which would need to be used by the Contracting Authority. In case
Model Concession Agreements are not available for a particular sector, existing
Model Agreements may be customized to the project requirements
(V) Evaluation Criteria

To ensure transparency in selection process, the evaluation criteria are already given in RFP
documents. It is required that evaluation criteria would be fully objective and the Contracting
Authority would select a Preferred Bidder solely on the basis of highest or the lowest Final
Offer, as specified in the RFP. It is also important to ensure that RFP clearly and specifically
define the form and content of the Final Offer and state that Preferred Bidder would be
selected on the basis of the most advantageous Final Offer
The criterion specified in the RFP would depend on the nature of a PPP project and Final
Offer may be submitted as: grant sought, expected revenue/annuity, tariff/shadow toll,
present value of lifecycle cost, period of the concession, upfront premium, equity stake,
extent/share of subsidized facilities to the Contracting Authority, revenue share etc.
(VI) Quality and Cost Based Selection (QCBS)

QCBS is one of the procurement methods, often used in the competitive selection for
specialized services, which takes into account the quality of the proposal (technical proposal)
as well as cost of the services (financial proposal) in the selection of the successful firm. Cost
as a factor of selection is to be used judiciously. The weight for the “cost” may normally be
20%, thus the weight for the “technical” would be 80%. However, the relative weight to be
given to the quality and cost is to be determined for each case depending on the nature of the
assignment
(a) The evaluation of each technical proposal may be done taking into account several
criteria such as relevant experience, quality of the methodology proposed,
qualifications of the key staff proposed etc. Each criterion is marked on a scale of
1 to 100. Then the marks are to be weighted to become scores
(b) The evaluation of the proposals is to be carried out in two stages: first the quality,
and then the cost. The total score is obtained by weighting and adding the
technical and financial scores which would determine the overall ranking of the
proposals. This method is considered normally appropriate when scope of work
can be precisely defined and when the TOR is well specified and clear
(VII) Formation of Tender Evaluation Committee/ Appointment of

Independent Monitor
Under PPP rules, the evaluation process needs to be independent and transparent and so the
Contracting Authority is required to not only form a Tender Evaluation Committee for
evaluation of proposals/responses but also appoint Independent Monitor to oversee the
process. The Independent Monitor is expected to monitor and record the tender proceedings,
review all documentation and to submit an independent report to the Approving Authority to
verify that activities have been conducted as per prescribed Rules and document deviations or
exceptions, if any. However, it is also provided that advice by the Independent Monitor
would not be binding on the Approving Authority
(VIII) Appointment and role of Independent Engineer
Once the tender process is complete and the Concession Agreement has been signed, it
becomes critical to ensure that project is implemented, as per prescribed objective and
specifications. The PPP infrastructure projects involve large scale of construction works
which need close monitoring. The operations of the project also need to comply with given
specifications to achieve defined outcomes. It is required, therefore, that the Contracting
Authority appoints an Independent Engineer which would have responsibility of supervising
the Concession Agreement. The responsibilities of an Independent Engineer, inter-alia,
include, following:
(a) Reviewing, inspecting and monitoring of construction works, examining the
designs and drawings and conducting tests and issuing completion certificates
during the construction period;
(b) Reviewing and inspecting the operations and maintenance arrangements, and
monitoring compliance with the performance and maintenance standards, during
the operations period;
(c) Identifying delays and lapses that require action on part of the Contracting
Authority for enforcing the agreement terms;
(d) Determining the reasonableness of costs for any works or services, as required
under the Concession Agreement;
(e) Determining the period or extension thereof, for performing any duty or
obligations, as required under the PPP or Concession Agreement
(IX) Role of Lead Financial Institution

Infrastructure PPP projects also require close monitoring of fund flows and the
Concessionaire is required to identify a financial institution which would act as the Lead
Financial Institution for the project. This Institution is expected to submit periodical report on
financial progress and statement of debt and equity contribution, and any other relevant
financial information, as required. Such reports are to be submitted at least every six month
during the construction period as applicable and annually till the operation period. Lead
Financial Institution is also required to inform the Contracting Authority at the earliest of any
payment delays by the Concessionaire to the lenders or if the Lead Financial Institution
comes to know of any financial irregularities by the Concessionaire
(X) Certified Accounts

During the subsistence of Concession Agreement, the Concessionaire is also expected to
maintain all documents and supporting evidences for its financial statements including
agreements and documents with respect to all capital and debt raised by the Concessionaire,
capital and revenue expenses towards the Project, component-wise information and details of
traffic/volume, tariffs charged and the amount of rates received. The Concessionaire is to
submit to the Contracting or Concessioning Authority periodical financial statements, duly
certified by its Statutory Auditors
(XI) Escrow Account
The mechanism of escrow account is to further ensure capturing of project fund flows in an
independent and transparent manner. The Concessionaire is therefore required to maintain an
escrow account with a bank approved by the Lender(s) during the subsistence of Concession
Agreement and enter into an agreement with such bank to ensure that all proceeds for
financing the project and all revenues and other receipts arising from the project are deposited
into such escrow account
The withdrawals and appropriations during the Concession Period, from the escrow account
may be done normally in the following order of priority:
(a) for all taxes due and payable by the Concessionaire;

(b) all construction/implementation expenses relating to the project, subject to limits
if any set out under the Financing Documents;
(c) all expenses relating to operations and management of the project, subject to
limits if any set out under the Financing Documents;
(d) towards its debt service obligations under the Financing Documents ;
(e) towards payment of Royalty and other sums payable to the Contracting Authority
and liquidated damages, if any;
(f) towards any reserve requirements in accordance with the Financing Documents;
The Concessionaire would be at liberty to withdraw any sums outstanding in the escrow
account after all the aforesaid payments due in any Quarter or other specified period of time,
have been made and/or adequate reserves have been created in respect thereof for that
Quarter/other specified period. The elaborate legal and regulatory framework given above is
essentially aimed at ensuring fairness and transparency during the entire PPP project life
cycle. Award and operation of PPP projects often invite close scrutiny by all stakeholders and
considering the size of projects and funds involved, it is imperative to adhere to prescribed
framework even as this may involve some delays in project implementation
Chapter-
Chapter-9: Legal and Regulatory Framework
Framework
for Common Industrial Infrastructure
Projects
The preceding chapter has given details of legal and regulatory framework being followed for
PPP infrastructure projects in India. This chapter would examine legal and regulatory
provisions in various schemes for promoting common industrial infrastructure projects. It
would be important to appreciate that while schemes such as SITP, MFPS, IIUS etc. are often
referred to as PPP programmes, the projects under these schemes may not be regarded as PPP
projects. There are some pre-requisites for PPP projects, as defined by Ministry of Finance,
Government of India, which may not be met by common industrial infrastructure projects.
The structuring of common industrial infrastructure projects on PPP model may also be
considered challenging due to following key factors
(I) Challenges of PPP model for Common Industrial Infrastructure

Projects
(1) Ownership of project assets with the Government
To satisfy this core condition of PPP definition, land for the projects would normally need to
be arranged by the concerned government agency (Concessioning Authority), mostly by the
state governments. Under most of the schemes promoting common industrial infrastructure
projects, the responsibility of arranging land lies with the private sector. This is also due to
the fact that these Schemes are being implemented as central sector schemes by the Ministries
of the Government of India and it was not found feasible by these Ministries to take
responsibility of providing land
It may also be noted that the condition of arrangement of land by the government has, in fact,
led to huge delays in various infrastructure projects in the country. In recent years, land has
become an extremely sensitive issue for most of the state governments, which are
increasingly unwilling to acquire and transfer land for industrial and infrastructure projects
The requirement of land allotment by state governments has already had severe impact on the
progress of the Modern Terminal Market Scheme, the flagship scheme for modern marketing
infrastructure, by Ministry of Agriculture, Government of India. Most of the state
governments have not been able to find or willing to earmark a relatively large parcel of land
(say, around 40-50 acres) for terminal market projects and consequently the projects have
shown some progress in hardly 2-3 states. Even in case of projects which may not require
large size of land, finding land at locations with suitable basic infrastructure and market
connectivity remains a challenge
(2) Private sector given a contract/concession for the project term to recover
its investments
It may be appreciated here that typically PPP projects like roads, ports, airports etc provide
certain captive market to interested developers and, therefore, may not require large efforts at
market development. In fact, many PPP facilities evolve as monopolies which ensure certain
traffic (market) to private sector bidders selected for building and operating these facilities. In
case of roads and seaports/airports under PPP, most of these projects have little competition
and get assured traffic. In case of modernisation of airports under PPP in India, no new or
existing airport is permitted by Government of India to be developed as, or improved or
upgraded into, an International/Domestic Airport within an aerial distance of 150 kilometres
of the Airport before completion of 25 years of operation. Thus, the project operators in all
these cases are assured of a captive market and “market risk” to a large extent is taken care of
under PPP model. Of course, the market risk of accuracy of traffic projections would remain
This may though not be applicable to common industrial infrastructure projects. The facilities
created under these projects, though need based, would require to compete with similar
existing and future facilities, both in the public and private sectors. Considering the
effort/investment required in building forward and backward linkages for these projects, the
condition of transferring ownership of the projects back to the government/sponsoring entity
may also discourage private enterprises from bidding for these projects under PPP
(3) User charges need to be determined before implementation of project
This would be another challenge for common industrial infrastructure projects if these need
to be aligned with PPP model. User charges need to be determined in advance for projecting
“viability gap” for PPP projects, which may be a difficult exercise due to greater market
uncertainties in industrial and agribusiness infrastructure sector. Moreover, any private
enterprise operating in dynamic and competitive market conditions needs to have flexibility
in pricing its services. The absence of such flexibility may come in the way of commercial
sustainability of these projects
(II) Selection of Common Industrial Infrastructure Projects

As mentioned in the previous chapter, procurement of PPP projects is a very detailed and
complex exercise. There are clearly prescribed bidding guidelines and all the
Contracting/Concessioning authorities necessarily have to follow these guidelines for
selecting a preferred bidder. The Ministries implementing schemes/programmes promoting
common industrial infrastructure projects/facilities though follow different procurement
processes and some of these processes do not involve any bidding, technical or financial
The selection of projects under SITP initially was on “first come, first served” basis. The
Scheme provided for eligibility criteria for assistance, and all proposals from eligible
applicants were considered for approval by the Ministry of Textiles, Government of India.
The Ministry had though provided for a Project Management Consultant (PMC) under the
Scheme which was responsible for “speedy implementation of the Projects in a transparent
and professional manner so as to achieve high degree of quality at a low cost acceptable to
the members of the SPV for which fee will be paid to the PMC”
It was provided that PMC would report to Ministry of Textiles, which would directly
supervise the implementation of projects under the superintendence and control of Secretary
(Textiles). PMC was to discharge, inter-alia, following functions:
(a) Identifying the locations for setting up the projects based on a scientific assessment
of the demand and potential of the area.
(b) Facilitating formation of SPV at each project level with the participation of local
industry.
(c) Preparation of Project Plan including the setting of standards for infrastructure.
(d) Structure and appraise the projects and submit the same for consideration of Project
Approval Committee (PAC).
(e) Assist the SPVs in selection of agencies for preparation of bid documents,
construction, operation and maintenance of the facilities in the Project.
(f) Assist the SPV in achieving financial closure.
(g) Monitor the implementation and submit periodical progress reports to the MOT.
(h) To liaise with the State Governments to resolve state-related problems.
(i) Ensure timely completion of project(s) as fixed by the PAC
After going through responsibilities of PMC, it is evident that the Ministry clearly regarded
“project development” as an important pre-requisite for development of the textile parks and
thus invitation for proposals or “bidding” was not found appropriate without sufficient project
development work by the PMC. It was felt that without necessary hand-holding support to
textile entrepreneurs in various textile clusters of the country, setting up integrated textile
parks may not be found feasible by them and the Ministry therefore may not receive
sufficient number of proposals through a bidding process. There were also no specific
criteria given to evaluate proposals submitted for setting up textile parks and decision of the
Ministry depended on the evaluation and appraisal of projects by concerned PMC. During
12th Plan, though, the Ministry of Textiles has come out with detailed evaluation criteria, on
the basis of which proposals would be ranked and given approval. However, the
advertisement seeking proposals for textile parks released by the Ministry of Textiles did not
specify any last date for submission of proposals and thus may not be regarded as a bidding
process. In case of IIUS Scheme, too, DIPP has kept the Scheme “on tap”, and project
proposals can be submitted provided the eligibility conditions are met and due submission
process is followed
In case of MFPS, though, the Ministry of Food Processing Industries has been following the
bidding process from the first phase itself. One probable reason may be that the Ministry of
Food Processing Industries had in the first phase invited proposals for only 10 mega food
parks in the country and so it decided to not only invite Expression of Interest but also
specified the States in which these projects can be set up. It may be noted that later when this
Ministry invited proposals for more mega food parks in the country, the requirement of
Expression of Interest along with evaluation criteria of proposal was continued
In case of Mega Food Parks, the approval of projects is given in two stages: first, in-principle
approval is granted to projects after evaluation of technical proposals and these projects are
required to meet conditions of final approval within 6 months of in-principle approval
(1) No financial Bidding
A major difference between procurement methods of PPP projects and common industrial
infrastructure projects is the absence of financial bidding in the latter category of projects,
even if proposals are invited and evaluated as per pre-determined criteria. Thus, bids or
proposals in these cases are only evaluated on technical criteria, and all selected proposals
become eligible for grant amount, as provided under respective schemes.
It may be noted that in case of PPP infrastructure projects, financial bids play a critical role
and often become the determining factor in selection of a proposal/bidder. While need for
introducing financial bidding in common industrial infrastructure projects has been often
discussed by policymakers, it has been felt that such a provision would necessitate pre-
determining user charges, to estimate “viability gap”, as practiced in case of PPP projects. It
may be appreciated that bidders for PPP projects need to clearly mention user charges, based
on which viability gap has been estimated, and once grant has been sanctioned on given
assumptions, these user charges/tariff need to be adhered to during project period, subject to
permitted escalation benchmarks
As mentioned above, considering absence of captive market and prevailing dynamic and
competitive conditions, it has not been found desirable to insist on pre-determining user
charges for common industrial infrastructure projects. Thus, selection of such projects has
been done through evaluation of technical proposals alone
(2) MoA/MoU in place of Concession Agreement
As the common industrial infrastructure projects/facilities are provided grant funds and other
concessions by the government agencies, even though these are owned/ managed by private
sector entrepreneurs, legal and regulatory safeguards are necessary to ensure that project
objectives are met and public funds are not misappropriated but used in a justified and
transparent manner
There are various legal arrangements for involved parties to reach on consensus or mutually
agreed terms and conditions. Memorandum of Understanding (MoU), Memorandum of
Agreement (MoA), surety bond etc are some of the arrangements that have been incorporated
for the parties involved in the projects while designing schemes. MOT and MoFPI require
MoU/MoA to be signed by concerned parties for the project implementation by SPVs for the
schemes SITP, CHCDS and MFPS. On the other hand, there are some schemes, such as
Scheme for Development of AYUSH Clusters and Scheme for Cold Chain, Value Addition
and Preservation Infrastructure where the concerned parties sign a Surety Bond on a non-
judicial stamp paper. Surety bond is a concise excerpt of project description, financial
assistance to be provided, clauses to prevent undue delay of the project implementation and
to minimize the instances for unlawful use of taxpayers’ money on the part of concerned
party
Criteria of Robust Legal Contracts:

A clear legislative and regulatory foundation enabling the public entities/utilities to enter into
PPP contracts and arrangements is desirable, to secure:
• A transparent and objective process for selection of infrastructure projects taking into
consideration concessionaire concerns about ‘value for money’ and welfare
consideration. In doing so, the process design must be consistent with the governing
framework for public procurement;
• A clearly defined approval, compliance and performance monitoring jurisdiction. This is
especially relevant in relation to the rights of local and other authorities such as the
Development Authorities, Municipal Authorities and Panchayat Raj Institutions;
• A clear definition of the role, responsibility and rights of various parties in the governing
instruments including the scope of public service, service standards, pricing, and scope
of governmental intervention or assistance;
• The participation of private parties in ownership and/or management of public assets
and/or delivery of public utility services;
• The vesting in such private party, the power to:
Collect, retain and appropriate revenue to meet reasonable expenses incurred in
implementation of the PPP project including a pre-determined/ agreed return on
the funds employed;
Seek revision of the charges and/or collection in terms of the concession
agreement, in order to facilitate business planning and financing.
• The role of the Concessionaire in maintaining and managing the PPP asset/services and
in controlling access to and usage of the infrastructure facility; and,
• The scope of bankability and securitization of the Concession, Project Assets and
revenue (including assignability) so that the Concessionaire is in a position to avail
affordable debt finance by securing lenders.
- Draft National Public Private Partnership Policy (2011), DEA, Ministry of Finance
•
(III) MoA/MoU: Salient Features

A well written agreement outlines the detailed terms and conditions that bind the two or more
parties involved in the project. Apart from specifying project location, area of the location,
facilities/ infrastructure (including the capacities/specifications) to be set up, grant-in-aid for
the project, the MoA/MoU also mentions roles, responsibilities and obligations on the part of
the implementing agency as well as the Ministry/Department of Government. It is important
to freeze the above project parameters so as to minimize the chances of disputes and to ensure
timely completion of the planned projects. A comprehensive MoA/MoU also includes various
other clauses such as inspection and audit, events of default, force majeure risks, dispute
resolution mechanisms, representation and warranties, liabilities and indemnities etc. Some
major features of MoA/MoU relevant to the present study are summarized below:
(1) Roles and responsibilities of SPV:
As described in the previous chapters, generally the projects under most of the schemes are
implemented through involvement of Special Purpose Vehicle (SPV). Following are the tasks
which are generally incorporated in the MoA/MoU for SPVs as a part of project requirement:
• Conceptualize, construct, implement and maintain the project assets/project facility as

per the guidelines and the requirements of the schemes.
• Obtain all required permissions and clearances, appropriate proprietary rights,

licenses, agreements etc for the systems involved in the project.
• Procurement of the land and development of infrastructure and maintaining utilities

keeping the guidelines of the scheme into considerations.
• Provide all kinds of required reports to the concerned Ministry/Department
• To develop, implement, administer surveillance system and maintain safety

conditions on the project site to ensure soundness and durability of the project facility
and to minimize accidental damage at the project site, if any.
• Securing finance from bank, appointment and hiring the staff and officials appointing
contractors/consultants in compliance with the Scheme guidelines;
• Implementation of the project as per the compliance conditions apart from facilitating
the Ministry or program management agency for inspection;
• Maintain transparency and lucidity in activities throughout the project implementation

and operational phase.
(2) Roles and Responsibilities of Concerned Ministry/Department
MoAs in some of the schemes delineate the roles and responsibilities of the concerned
Ministries in implementation of the project, such as:
• Release of grant installments, subject to the SPV complying with the guidelines and
provisions of the scheme as well as of the agreement within stipulated time frame
from the time of approval by the Integrated Finance Wing
• Hold meetings at regular intervals to review the physical and financial progress of the
project;
• Liaise with other government agencies to expedite the process of necessary approvals
and clearances
(3) Trust & Retention Account (TRA)/ Escrow Account

Government schemes usually stipulate a separate escrow account/TRA for routing the grant
proceeds to ensure that the grant funds are utilized for the intended purpose. This is typically
monitored by the PMA appointed under the scheme. As part of the lending arrangements, the
escrow account is included in the TRA framework, whereby the loans disbursed are also
monitored through a designated bank account. In some cases, a third party TRA Agent is
appointed which is authorized to make all payments from the TRA, after certification from a
lenders’ agent. For this purpose, TRA Agreement is signed between the SPV and the bank
who acts as the TRA Agent. It is done to minimize the risk of misutilization or diversion of
funds by the management. This has been followed in the PMDO Facility, wherein IL&FS
Trust Company Limited (ITCL) acts as TRA Agent, and IUIML, the Asset Manager approves
all payments
On project completion, in the operations phase, the TRA is used to route all collections from
members, and payments are directly routed to the lenders by the TRA Agent. This not only
provides comfort to the lenders, but also to the members of the SPV, who are assured that
their payments to the SPV are used only for debt service
As per the guidelines of SITP, it is mandatory for the SPV to open an escrow account for the
project to receive all funds for implementation of the project including grant-in-aid disbursed
by Ministry. This account is subject to audit by Comptroller & Auditor General of India. It is
mandatory for SPV to allow the Ministry/PMA or their representatives to inspect books and
records pertinent to the grant funds and its utilization from time to time.
In case of CHCDS and MFPS, the SPV/applicant is required to open a TRA with the TRA
Agent in order to seek release of grant-in-aid sanctioned to the applicant by Ministries. TRA
Agent is generally a nationalized bank with satisfactory capital adequacy. The bank agrees to
be TRA Agent based on the terms and conditions mentioned in the TRA Agreement
The MoU under CHCDS further prescribes the SPV to enter into a TRA Agreement with a
Schedule-A Commercial Bank to utilize the grant-in-aid and other funds for the project
In MoA of MFPS, it is mentioned that the MOFPI will get the details of amount deposited in
TRA account and interest earned on the same. The interest earned by SPV from the
investments of MFPI grant in TRA account is adjusted against the total approved grant by
MOFPI
As per the clauses for TRA in MFPS, the company is required to open a current account as
TRA and deposit all cash inflows during the period of agreement including but not limited to:
• Equity share capital from sponsors.

• Non-refundable infrastructure contribution towards capital expenditure of the Mega
Food Park from sponsors under Lease Agreement / Leave and License Agreement, as
the case may be.
• Grant/s
• Fees received from the Sponsors under the Lease Agreement / Leave and License
Agreement.
• Proceeds of insurance under the Insurance Contracts
• Any other funds received by the Borrower
The withdrawals from the TRA commences only upon written communication from MOFPI
to the Trust and Retention Account Agent and the amounts deposited in the Trust and
Retention Account is utilized only for some specific purposes mentioned in the Agreement.
TRA Agent needs to notify the Ministry regarding deposits and withdrawals
The SPV may invest the surplus in Permitted Investments23 through the TRA. Such Permitted
Investment is made in the name of the SPV. The SPV should ensure that all Project Proceeds
are paid directly to the credit of the TRA during Period of Agreement. The duties of TRA
Agent are also specified in the TRA Agreement, which are as follows:
• To maintain TRA as a separate and distinct account;

• Keep proper books of accounts;
• No syndication charges to be paid out of TRA for any equity funding provided by
sponsors;
• No payment out of TRA in respect of Restricted Payments.
To maintain transparency in financial transactions, the company is required to operate three

accounts under TRA framework:
• TRA-I: This account is used to credit all the contributions raised from shareholders,
lenders and other sources except the grant from Ministry. The funds in this account
are used towards the payment of construction and equipment contractors/vendors,
PMC/engineering consultants for fees for providing engineering / architectural /
project management services and for pre-operative expenses.
• TRA-II: This account receives only the grant from MoFPI. The amount lying in TRA-
II can be utilized towards the payment to construction & equipment
contractors/vendors, PMC /engineering consultant(s) for fees for providing
engineering / architectural / project management services
• Regular Current Account: It is used to meet the salary and administrative expenses
during the project implementation period
(4) Release of funds

Generally, the grant assistance is released in installments subject to fulfillment of various
conditions. Different documents are being scrutinized at every stage of release of grant-in-
aid including Utilization Certificate (UC) in the format prescribed under the General
Financial Rules (GFR) before submitting claim for next installment. Phase wise release of the
financial assistance is an attempt to ensure the proper utilization of the funds towards the
23
As per TRA Agreement, “Permitted Investments” mean investments in Government of India securities, AA
and any superior rated/liquid securities (as rated and accepted by Rating Agency) or other liquid securities as
may be approved by the Company.
project execution
(5) Nominee Director

A nominee is a representative of Ministry who is appointed to supervise the operations and
implementation of the project and to sit-in on the proceedings of the board. MOT nominates
a director on the board of SPV as per the SITP Scheme Guidelines. In this way, the MOT
ensures effective implementation of the project and proper utilization of the grant.
However, there is no such clause in other schemes studied
(6) Timeline Requirements

The SPV is required to adhere strictly to the timeline of project implementation. The
approval of the Ministry is mandatory in case of any revision in the period of
implementation. In case of delays in implementation of the project beyond the agreed time
schedule, Ministries secure the right to levy penalties on the SPV based on the clauses
given in the MoA. This is because it has huge financial and operational implications on the
project which may impact the viability of the project adversely. Ministries also secure the
right to levy penalty on SPV if it is found that the grant has been utilized by the SPV for
non-eligible components of the project
(7) Dispute Resolution

A MoA generally clearly outlines the dispute resolution mechanism in its clauses. Any
unresolved dispute or difference between the parties is referred to arbitration of the sole
arbitrator to be appointed by the Secretary of the concerned Ministry on the recommendation
of the Secretary, Department of Legal Affairs (Law Secretary), Government of India
(8) Force Majeure Risks

A clause dealing with force majeure risks is generally incorporated to safeguard the interest
of the SPV. In case the performance of SPV has been affected due to any event which is
beyond the control of the concerned party, flexibility of time extension has been made
under these circumstances
(9) Dovetailing
Normally, the SPVs are entitled to dovetail the assistance from other schemes of GoI and/or
State Governments to finance the project subject to certain conditions. In MFPS, it is
specifically mentioned that there should be no duplication of assistance for the same
component/activity of the project. However, CHCDS does not mention any clause related to
dovetailing
(10) Intellectual Property Rights (IPR)

Although generally the schemes do not address the issue of IPR, however, due to the very
nature of the facilities and products, there is an attempt to point out the issues of IPR in
CHCDS. As per CHCDS, the concerned parties recognize the IPR of each other in the
materials to be delivered in connection with the activities in connection with the activities
to be carried out and agree not to publish any paper, file any patent/copyright, trademark,
design registration application in its own name or in the name of its associates on any matter
relating to the details supplied / disclosed by the other party, nor take any other action that
may prejudicially affect such intellectual property rights. Mutual agreement of the parties is
mandatory while taking up the ownership of the IPR in the work carried out under this
assignment
(11) Termination
A comprehensive MoA defines the Events of the Default which may be the reason to
enforce the termination clause by the Ministries. In case of default, Ministries are entitled to
recall the grant-in-aid given under scheme guidelines along with accrued interest thereon. It
also has right to recover the monies as arrears of land revenue
In the MFPS, the termination process has been described in detail. As per the MFPS, it is
binding on behalf of Ministry to issue a Preliminary Notice to the concerned party to inform
its intention to issue Termination Notice. In case the SPV does not take corrective measures
within 60 days of issuing Preliminary Notice, the Ministry is entitled to terminate the
agreement and recall the grant given under MFPS along with accrued interest thereon.
Alternatively, MoFPI is empowered to attach project assets created out of the grant given
under this scheme and use them for purpose or invite fresh bids from potential investors,
make changes in project scope and do anything else in the interest of the revival of the
project. While termination of the contract and/or attaching the project assets, clauses under
MoA under MFPS suggest the MoFPI to take lenders’ rights into consideration and consult
lender banks/financial institutions and conclude the best possible way to revive the project.
Hence, in case of financial closure for the project, the ownership of all project assets created
with the grant amount will not come in the way of SPV creating mortgage, lien on assets for
raising term loan. Similar process has been outlined in CHCDS Scheme
(IV) Surety Bond: Important Considerations

In case of Scheme for Development of AYUSH Clusters and Scheme for Cold Chain, Value
Addition and Preservation Infrastructure, surety bonds are signed between the respective
Ministry and the implementing agencies. Similar to the provisions of MoA/MoU, surety
bonds cover legal provisions of the contract, ensure them to be properly followed and
respected by the parties involved. In the surety bonds, the applicant generally has to specify
the amount of grant-in-aid sanctioned, purpose of financial assistance and location of the
project site. The surety bond comprises a clause indicating the conditions of the obligors and
compliance conditions mentioned in Letter of Sanction. It is mandatory for the applicant to
oblige to the terms and conditions of the grant by target dates, if specified. To prevent the
diversion of grant-in-aid for the purpose different from what is mentioned in Letter of
Sanction, the applicant is required to declare that he/she shall not divert the grant and entrust
execution of Scheme or work concerned to another institution(s) or organization(s). In case of
breach of the bond, Ministry is entitled to recall the grant-in-aid already disbursed to the
project along with interest of 10% per annum thereon
Chapter-
Chapter-10:
10: Special Purpose Vehicles for
Common Industrial Infrastructure/
Facilities for MSMEs
(I) Definition and Overview

A Special Purpose Vehicle (SPV), also known as Special Purpose Entity (SPE) is a legal
entity created for a specific objective. The SPV could take any legal form; it could be a
company (private limited or public limited), corporation, trust/ society etc. The SPV after its
formation is governed by the law/ act under which it is registered
The concept of SPV was primarily used for financial transactions especially in the mortgage
sector. It started getting used as an implementation instrument when projects in Public Private
Partnership (PPP) as a mode of implementation in infrastructure projects were introduced.
SPVs were looked at as vehicles for facilitating private investment into infrastructure
development. Subsequently the concept of SPV was extended to cluster model based
infrastructure schemes also. While most of the schemes do not strictly follow PPP model of
implementation or the Viability Gap Funding (VGF), however they have been loosely
structured around these principles. The assistance provided is fixed with an upper limit and is
provided to all those eligible under such schemes, however the objective of providing
assistance remains the same i.e. encouraging private investment into viable infrastructure
projects. While VGF primarily aims at general infrastructure development and is aimed at
large projects, the cluster based schemes aim at development of industrial infrastructure and
in most of the cases sector specific facilities. The procurement under VGF is through bidding
while the funds under the schemes are available on tap based on the financial outlay for the
scheme
(II) Genesis
The cluster concept in development of infrastructure gained prominence in the late 90’s with
the launch of IIUS. Before SPVs became the instrument for implementation of schemes,
industry associations were recognized as the beneficiaries. However it was gradually realized
that though industry associations could be the promoters of such projects, it will be more
efficient to have separate legal entities created for setting up large projects. This shall also
address the conflict of interest issue between the industry associations and the project
shareholders
(III) Functions
A typical SPV under any Government of India scheme would generally have the following
responsibilities:
a. Prepare the feasibility and/ or Detailed Project Reports for the project covering the
technical, financial, institutional and O&M aspects of the projects.
b. Achieve the financial closure of the project through debt/ equity i.e. to raise the balance
of the financial assistance available under the scheme
c. Obtain any statutory approvals/ clearances for the project from the respective authorities
d. Documentation for release of funds
e. Recruit suitable functional professionals in order to ensure that the project is executed
smoothly
f. Implement various interventions as outlined and approved in DPR
g. Operations and maintenance of assets created under the project
h. Regular reporting to stakeholders
i. Meeting statutory and regulatory compliances under the law governing the SPV
(IV) Structures
While an SPV can be set up as any legal entity such as company, trust, cooperative society,
corporation etc, the most common form of SPV in most of the schemes has been a company.
Some of the schemes such as IIUS insisted on a Section 25 company (which has undergone a
revision now), scheme such as MSECDP though is flexible about the structure insists the
profits to be ploughed back into the SPV which essentially is a feature of a Section 25
company. While the legal structure of the SPV remains flexible, it is imperative that the
structure allows the flexibility to enter into arrangements with other stakeholders providing
backward and forward linkages to the project, service providers, financiers etc. A typical
SPV, supported by a Government scheme would enter into the following agreements/
relationships during project execution:
Most of the schemes prescribe the industry/ entrepreneurs to hold majority stake in the SPV
while balance could be held by State Government, strategic investors/ mother units etc. While
some of the schemes specify the minimum number of enterprises in the SPV, such as 15 in
case of AYUSH, 7 enterprises on board in case of EMC scheme, 20 in case of MSECDP etc
there are schemes which have changed criteria over
o a period of time. Under SITP, the
Ministry of Textiles while reviewing the projects under the scheme felt that some guidelines
with respect of number of entrepreneurs and investments should be specified for the benefits of the
entrepreneurs. After deliberation,
iberation, the following criterion was devised:
No. of Entrepreneurs Aggregate minimum investment in land,

factory buildings
ngs and Plant & Machinery
(Rs. in Crores)
50 and above 100
Between 25 and 49 150

Between 5 and 24 300
Some of the latest schemes such as EMC specify that the investment in the park has to be
four times of the approved grant. Almost all the schemes specify that the maximum share of
any single enterprise cannot be such that the management control is held by him. While SITP,
Scheme for setting up of AYUSH Clusters etc specify that any individual unit cannot hold
more than 25% of equity stake, MSECDP limits this to 10%. These measures have been
included in the schemes to ensure that the benefits under the scheme are not cornered by a
few of the enterprises and the collective nature of the project is maintained
(V) Advantages
Some of the advantages which these SPVs offer are as follows:
• Transparency: The SPVs are legal entities and hence comply with the rules laid down
under the law governing that entity. The operations of the entity are more transparent and
regular reporting and compliance make the entity more open to its shareholders and
remain committed to its objectives
• Managing stakes of multiple stakeholders: In most of the cluster based projects, the
project promoters could be from diverse backgrounds with different level of interest in
the project. Typically the shareholders would be the entrepreneurs, Government agencies
(Central/ State), financial institutions/ banks and in some cases strategic partners such as
buyers etc.
• Better financial management: The SPV structure gives the flexibility to the promoters
and the members to invest as per individual capacity. The accounts of the SPV are kept
separate from the accounts of the members and the financial status of the promoter has a
limited bearing on the financial status of the SPV
• Limited risk by the promoters: By having a separate SPV, the promoters could restrict
their liability as well as risk to their equity share in the SPV. This provides confidence to
the members to go ahead with complicated and large projects
• Developmental Initiatives: The SPV provides a platform to the members to pursue
collective initiatives beyond setting up of infrastructure facilities. These include
initiatives for raw material procurement, collective marketing, shared logistics etc. This
brings positive externalities to the members associated with the SPV
• Role allocation as per strengths: Generally under the SPV, committees are set up to
pursue responsibilities such as financial, procurement, technical etc and members based
on their individual strengths are nominated for the committees. This brings a lot of
operational efficiency into the functioning of the SPV and also gives a sense of
commitment since most of the members are involved
(VI) Disadvantages
• No credit history hence limited financing avenues: The SPV is a new entity and does
not have any credit history. In most of the projects where external financing is involved,
banks and financial institutions have reservations on the lack of credit history of the SPV
and perceive it to be a high risk proposition. Further there are schemes such as MSECDP,
where the ownership of assets does not lie with the SPV and the first charge on the assets
remains with Government. In such cases, it becomes very difficult for the SPV to raise
finances. The documentation in the case of SPVs is more stringent and conditional based
on approvals and clearances. The cluster based model of financing is in the process of
evolution, however it shall take time to standardize the procedures and remove the
discretions to ease the financing
• Dependent on promoters’ credibility and eligibility: Due to lack of credit history of the
SPV, the promoters or the Directors of the SPV are required to give personal guarantees
in order to secure loan from the financial institutions. This is over and above their
contribution into the equity. This becomes a deterrent for many of the MSMEs to
participate in the project
• Difficult to manage diverse interests: The SPVs have stakeholders drawn from diverse
groups and their interests are driven by the nature of their own business. Though the
SPVs should ideally be managed by professionals, in cases where these are weak or
nonexistent the personal interests of the shareholders may lead to an unstable SPV
• Lack of ownership: Being collective projects and limited stake of the members, there is
lack of ownership of the members. Many a times this leads to weak management of the
project and ultimately leading to the project not getting successful
(VII) SPVs in Common Industrial Infrastructure Projects

The establishment and smooth operation of common industrial infrastructure Projects would
require a cohesive SPV structure. Considering the objective of setting up these facilities and
also the amount of financial assistance involved, it becomes imperative that SPV should not
only be committed to the project but also it should address the concerns of all stakeholders
The challenge for the sponsoring institutions thus is to ensure that such facilities are indeed
available for “collective” use for MSMEs located in the cluster or at least to all the
shareholders/members of SPV. This remains a huge challenge, as experience over the years
suggests that in many cases, such facilities are mostly used by some of the dominant
shareholders/members of the SPV, and other stakeholders of SPV are often deprived of the
advantages of these facilities
This becomes a much bigger challenge in case of the schemes which allow shareholders of a
SPV to own project assets, which becomes a huge attraction for private sector entrepreneurs,
all of whom may not be guided by the spirit of collective benefits. Two key challenges in
such projects are first, to ensure that project assets are being used for the benefit of all
shareholders of SPV and cluster stakeholders, and second, the ownership or control of project
assets is not transferred for material benefits.
The government agencies have attempted to meet the above challenges by prescribing nature
of SPV formation and its management, so as to ensure its collective and transparent
functioning. Most of the schemes stipulate a requisite number of members to from a SPV so
as to discourage concentration of control over project operations. There are also provisions to
induct government officials and other key stakeholders in SPV, so that project meets the
larger objectives of benefiting concerned cluster. In addition, under some of the Schemes, all
the shareholders need to enter into a prescribed Share Subscription Agreement (SSA) which
contains appropriate safeguards clauses. The obligations of the shareholders are clearly
prescribed in SSA and all the members are expected to adhere to these obligations
(VIII) Obligations of SPV and Shareholders under SSA

To start with, one of the obligations of SPV is to make the necessary changes to the
Memorandum and Articles of Association so as to incorporate, as far as it is legally valid and
possible, the provisions of this agreement in the Articles. It is also to be confirmed by SPV
that shareholding in the Company by approved shareholders is not diluted in any manner,
without requisite approval and their shareholdings are free from encumbrances
In addition, the shareholders of SPV are also obliged to meet certain conditions under SSA,
such as being responsible for implementation of the project in compliance of project
requirements notwithstanding the appointment by SPV of the contractor(s) to implement the
project facilities. SSAs often have an important provision that the members will do only the
stated activity i.e. textiles, etc and not just be investors or speculators, Thus the SSAs bind the
members into a common sharing and collaborative arrangement The shareholders are further
required to ensure compliance with performance standards at the time of commissioning the
project and execute such financing documents, agreements and provide necessary guarantees,
undertakings and security as may be required or stipulated by the lenders to the project
The above stipulations have been designed to provide a legal framework to the relationship
between SPV and its shareholders, which may be a set of diverse entities, with the aim to
implement the project in an appropriate matter
This provision of SSA has been used under both SITP and MFPS which had SPVs
incorporated under Companies Act. In case of the MFPS, additionally, the initial shareholders
are required to undertake that they would by themselves or through their affiliates, hold at
least 51 % of the equity share capital of the SPV at all times in case of induction of new
shareholders or any other changes in the equity structure of the SPV. This provision has two-
fold purpose, on the one hand, it is expected that the initial shareholders of SPV who came
together to form SPV remain committed to implement the project and meet its objectives; on
the other, it is to prevent these initial shareholders to transfer control of the assets and gain
premium, which may become possible after approval of large capital grant to the project
(1) MSE-CDP
In case of MSE-CDP, while there is no provision of SSA, as SPV need not be a company and
may take the form of a cooperative society, registered society or a trust, there remains strong
stress on ensuring “collective” uses of the facilities. The scheme guidelines provide that in
addition to the contributing members of the SPV, there should be written commitments from
‘users’ of the proposed facilities so that their benefits can be further enlarged. It is also
prescribed that bylaws of SPV should have provisions for inducting a state government
official as member of the SPV
There is provision of a minimum of 20 MSE cluster units serving as members of SPV, with
no ceiling on the maximum number of members, even as in some exceptional cases, a
minimum of 10 MSE units may also be considered for the SPV. To ensure democratic
functioning of SPV, it is further provided that a single unit would not be allowed to hold
more than 10 per cent in the equity capital (or equivalent capital contribution) of the SPV.
Although the scheme provides that large mother manufacturing firms, other major buyers of
the cluster MSE products, commercial machinery suppliers, raw material suppliers and
business development service (BDS) providers are eligible to contribute up to 49 per cent for
SPV, the management of SPV has to remain clearly with the intended beneficiary SPV
The scheme guidelines also provide for a Tripartite Agreement among the Government of
India, concerned State Government and project SPV for managing Common facilities centre
(CFC). The Agreement requires SPV to follow the directions of the central or state
government for better management of the SPV or the better running of the CFC. To prevent
misutlilisation of such facilities, the scheme guidelines also stipulate that in case CFC project
assets are sold or otherwise disposed of, the Government of India would be entitled to recover
the amount of loss as arrears of land revenue from the SPV and /or persons connected with its
management jointly and severally
(2) IIUS
In case of IIUS, there was initially provision of incorporation of SPV by the cluster
association for developing, operating and maintaining the infrastructure facility created in the
industrial locations. The scheme guidelines provided that SPV would be a Corporate
Body/Association registered under Companies/Societies Act and the stakeholders could be
the Private Companies, Industrial Association, Premier R&D Institution, Financial Institutes,
Local Authority (optional), Govt. of India - mandatory and State Government (District
Authority)- mandatory.
In 2009, the IIUS scheme was revised and it was provided that the project would be
implemented through a SPV, which would be a non-profit making company, registered under
section 25 of the Companies Act. SPV was required to have representatives from local
industries, financial institutions, State & Central Government and R&D organisation.
Another revision in IIUS guidelines now has done away with SPV structure itself. The
modified IIUS guidelines have also mentioned reasons behind this rethink. It has been
mentioned that the scheme was implemented through SPV in PPP mode during 10th and 11th
Plan, and this model faced serious practical difficulties which led to enormous delay in
implementation, cost escalation in case of majority of the projects, lack of project

accountability and shortfalls in achievement of outcome. It has also been mentioned that it
was found challenging for stakeholder industries to unite to form a SPV for creating a
common infrastructure due to internal conflict among industries. It has been further
mentioned that SPVs faced difficulties in raising equity from its members as envisaged in the
project; and some SPVs defaulted in raising funds and in some cases, state government and
local bodies contributed funds to the extent of failed contributions from the Industries.
Further, optional involvement of the State Governments in the scheme led to weak ownership
of the project with reduced financial, monitoring and mentoring support to the project. The
modified IIUS now requires State Implementation Agency (SIA) such as State Industrial
Development Corporations to be the implementing agency for promotion of industrial
infrastructure under the scheme.
These observations can be considered raising serious questions on the model of industry
promoted SPV, a model which has long been the most accepted implementation model for
common industrial infrastructure projects.
(3) Mega Leather Cluster
The recently launched scheme for establishment of Mega leather cluster by Department of
Industrial Policy & Promotion, Ministry of Commerce and Industry, Government of India
also provides for a flexible SPV structure. It is envisaged that SPV would be a legal entity
duly registered for this purpose. SPV may though be promoted by private companies
registered under the Companies Act, 1956 engaged in leather industry value chain, industry
organizations registered under Societies Act, financial institutions, R&D institutions, State or
Local governments or their agencies and units within the Leather Industry. It has been further
provided that the structure of SPV would be approved by the Empowered Committee at the
time of in-principle approval for the project
(4) Mega Clusters for DC (Handicrafts)
In case of Mega clusters being assisted by Development Commissioner (Handicrafts),

Ministry of Textiles, Government of India, while there is requirement of Implementing
Agency being a SPV and a legal entity, preferably a company, it can also be registered under
Societies Act. It has been provided that majority of the equity of such SPV would be with the
artisans/ craftsmen/entrepreneurs of the cluster and/or their associations/cooperatives/
federations/ SHGs. The remaining stake is to be held by strategic investors such as buyers,
large scale production units, banks, financial institutions, State Government agencies etc.
However, the individual stake of such agencies is not to exceed 26 percent.
(5) Plastics Parks
In case of Plastics Parks being assisted by Ministry of Chemicals and Fertilisers, Government
of India, SPV is required to be a distinct legal entity, ordinarily registered under Companies
Act, though it can also take other forms, with requisite approval. In this case, SPV is to be
promoted as a joint venture, to be formed by the State Government or any of its agencies such
as State Industrial Development Corporation (SIDC) in association with user enterprises
representing the plastic sector / sub sector. It is provided that the equity contribution of the
State Government or State Industrial Development Corporation or similar agencies of the
State Government would be at least 26% of the cash equity of the SPV (excluding value of
any land given as equity).
(6) Scheme for Development of AYUSH Clusters
The scheme, aimed at setting up of common facilities for development of unorganized and
micro AYUSH enterprises, mandated 15 enterprises operating in the cluster to be members of
the SPV. The structure of the SPV is preferably prescribed to be a company, however the
scheme monitoring committee has the authority to approve any other structure of the SPV as
well. These 15 members together need to hold atleast 51% of the equity and share of any
single entity has to be below 26%. The board of the SPV need to have three nominee
directors, one from Department of AYUSH, one from State mission on medicinal plants/
State horticulture mission and one from the PMC. This structure was to ensure that there are
enough checks on the decisions taken by the SPV as the projects involved a lot of financial
management. The members of the SPV were supposed to sign a SSA with the SPV besides
giving letters assuring usage of facilities. All the SPVs are advised to have functional/
technical committees to decide on operational matters and make recommendations to the
board on specific matters. Some of these committees are for civil works, equipment
procurement, capacity building, financial management etc. This structure also encourages
participation of most of the SPV members in the functioning of the SPV.
It is mandatory for all the 15 members to hold a valid AYUSH manufacturing license,
however to ensure that the member units have sufficient experience in dealing with the
sector, 12 out of 15 units had to be in business for more than three years while rest 3 could be
new entities. The members of the SPV are to be legally independent entities as per AS18.
However as the scheme progressed, due to the nature of the sector, it was felt that all the
members of the SPV needs to be GMP ( Good Manufacturing Practices) certified as without
that it was not possible for AYUSH enterprises to operate legally without a GMP license.
Hence, this clause was introduced in the guidelines.
When the scheme was launched, it was silent about the financial position of the members,
however it was felt by the Government that while it is important to have an equitable
structure of the SPV so that benefits are not cornered by relatively bigger units, it is also
important that the SPV has people with financial resources available to be able to invest in
the project. To ensure this, the scheme was revised in October 2008 and it was stipulated that
at least 3 to 5 of the participating units should have annual turnover of Rs.50.00 lakhs and
above and 5 units of Rs.20.00 lakhs and above.
(7) Electronic Manufacturing Clusters (EMC) Scheme
EMC Scheme was launched in April 2013. The projects under the scheme are to be
implemented by an SPV, however the scheme allows a Chief Promoter (a strategic investor)
to file the application and take all approvals for the project. The Chief Promoter, however is
required to form the SPV within 24 months from the date of approval. While the chief
promoter could be a unit, financial institution, academic/ R&D institution, Government
agency etc, the SPV needs to have seven constituent units on its board and it should be a legal
entity (company/ society). The electronics manufacturing units need to hold 51% of the share
capital of the SPV with no single unit owning more than 25%. The Chief Promoter or any
other legal entity (financial institutions, Government agencies, academic institution etc) could
also be part of the SPV. In case the SPV has a Government agency on board, it is mandatory
to have a State Government represented on the board in the cases where project is jointly
promoted by industry and Government. The scheme also prohibits the same SPV to set up
more than one project under the scheme.
(8) Scheme for Cold Chain, Value Addition & Preservation Infrastructure, MoFPI
(SCC)
In case of the SCC, there is no requirement of creation of an SPV for the implementation of
the approved projects. Any business entity including individuals (proprietorship concerns),
cooperative societies, Self Help Groups (SHGs), Farmer Producer Organizations (FPOs),
NGOs, Central/State PSUs, Partnership Firm, Private/ Public Ltd. company, LLP etc. can
apply for grant under the scheme. The projects approved under the scheme are typically in the
range of Rs. 20-25 crore with an average grant of about Rs. 8 crore per project. Applications
under the scheme are invited by MoFPI through EOIs. The proposals found eligible based on
predetermined eligibility criteria are further evaluated as per the approved assessment criteria
and proposals with higher scores are approved for grant assistance based on the number of
slots available. One of the basic criteria for a proposal to be considered eligible is that the net
worth of the applicant should be at least 1.5 times of the grant applied for. The revised
scheme guidelines have also made it mandatory for the projects to avail term loan from
Bank/Financial Institution for an amount not less than 10% of the project cost.
The SCC is fundamentally different from other common industrial infrastructure schemes as
these projects are primarily infrastructure development projects (with facilities such as cold
storages, IQF, blast freezers, sorting, grading, packaging, farm level primary processing, etc.
and refrigerated logistics) without any requirement of plot development for units. The
facilities under the scheme are created by the promoters after gauging the demand of such
facilities/ services in the production areas and/or in the consumption centres. The promoters
are free to decide the appropriate business model for the projects without any imposition of
conditions from the Ministry. The facilities, thus created, are either rented out to users (rental
model) such as farmers, traders, etc. or utilized for captive use by the promoter. The rental
model of the projects ensures that the facilities are used as common infrastructure especially
in the production clusters by providing storage spaces, logistics and other facilities to the
farmers and other entrepreneurs. Hence, the SCC, although not envisaged as a common
industrial infrastructure scheme, plays an important in creation of such common facilities in
the agriculture and allied sectors clusters
Chapter-
Chapter-11:
11: Challenges Faced by Lending
Institutions in Financing of Common
Industrial Infrastructure Projects for
MSMEs
(I) Common Industrial Infrastructure – As a Business Model
It has been observed that term loan component accounts for about 30-40 percent of total
project cost in case of schemes such SITP and MFPS. In Schemes such as MSE-CDP and
IIUS though the debt component is relatively small, there remains a need for bank finance to
achieve financial closure. The banks and financial institutions have to therefore play a
significant role to ensure implementation and operation of common industrial infrastructure
projects and facilities. However, the availability of loan for these projects is dependent on
establishing the financial viability of project operations, which has often been considered a
challenge by lending institutions. This chapter would examine the business models of these
common infrastructure projects and suggest measures to make them more acceptable to
lending institutions
It would be important to note here that business models for these projects under various
schemes vary a lot. But the core of business model remains that of SPV earning its revenue
through user charges for project core facilities and maintenance charges for basic
infrastructure
The difference between common infrastructure projects promoted by groups of MSME

entrepreneurs and developer led industrial parks and special economic zones promoted by
private developers is in the business model. For MSME SPVs, formed in the cluster model,
the objective is to share costs and achieve benefits for the owners (i.e. the MSME units which
form the SPV), while for developer led parks and SEZs, the objective is to earn income by
selling (or leasing) the developed industrial plots at a premium. In the latter model, the focus
of the promoters is to take the risk of land acquisition, clearances, investments, etc and earn
adequate return by way of appreciation in value of land due to infrastructure development
For cluster SPVs, thus the business model is usually based on a cost plus approach with
provision to earn income by way of user charges for common facilities and/or common
processing, effluent treatment charges, etc
The advantage in the cluster model is that the focus is on deriving benefits for the industry
and that is why govt schemes provide grants for such projects with the specific aim of
providing impetus to the concerned sector. Grants for developer led projects are rare and
benefits to SEZs are given by Govt in the context of export promotion rather than so much on
infrastructure developments
(1) SITP Business Framework
(a) Revenue Model
Under SITP, a SPV owns all textile park project assets which have been funded by the
Ministry of Textiles. Thus, project land, factory buildings and all other basic infrastructure
assets and common amenities are owned by SPV. Individual entrepreneurs (shareholders of
SPV) are provided readymade factory buildings to set up and operate their units by installing
necessary plant and machinery and other requisite equipment
SPV enters into a lease Agreement with the units. The lease Agreement provides rights to the
units for setting up textile facilities in the park and also contractually binds these units to pay
all such charges as may be levied by SPV for the allotment, development and maintenance of
infrastructure assets and provide recourse by way of right to replace units that have defaulted
in respect of payments to the SPV
SPV is responsible for the Operations and Maintenance (O&M) of all project assets including
common facilities and normally maintains adequately staff for this purpose. SPV recovers
O&M charges from the units by way of the following monthly charges:
• Charge I - Fixed Infrastructure Charge
This may include lease rentals and asset replacement charges apportioned to all industrial
units on the basis of allocable area. The asset replacement charges are for replacing fixes
assets at the end of their economic life (depreciation) and amount collected is to be deposited
into a “sinking fund”.
• Charge II - Variable Utility Charge
This is based on monthly consumption of utilities such as water, power and effluent treatment
and other O & M cost together with variable expenses of the SPV apportioned to all units on
the basis of allocable area to each of the industrial units
• Charge III - Finance Charge
Finance Charge is recovered from the units for paying the interest charges and principal
repayments of the loan taken by SPV for infrastructure development. This charge is also
apportioned on the basis of area under occupation by the individual Units.
SPV recovers all its costs from the entrepreneurs and also generates a small profit margin to
protect its future cash flows from any exigencies. It is important to ensure here that
operations of the units have the requisite capacity to absorb the cost of infrastructure as is
proposed to be charged by SPV to recover its capital and operational costs.
An illustrative profitability statement of an Integrated Textile Park

Operating Year 0 1 2 3 4 5 9 10
(Rs. Lakhs)
Revenues
Charge I - Fixed Infrastructure Charges
Finance charges 566.38 573.10 817.69 818.94 818.97 819.09 819.13
Asset replenishment fund 355.95 355.95 355.95 355.95 355.95 355.95 355.95
Charge II - Variable Utility Charges
Common Utility Charges
Maintenance charges (common infra.) 66.40 66.40 66.40 66.40 66.40 66.40 66.40
Administration charges 171.81 171.81 171.81 171.81 171.81 171.81 171.81
Power charges - SPV consumption 62.21 62.21 62.21 62.21 62.21 62.21 62.21
Specific Utility Charges
Maintenance charges (common amenities) 9.90 9.90 9.90 9.90 9.90 9.90 9.90
Total revenues 1232.65 1239.37 1483.96 1485.21 1485.24 1485.37 1485.41
Expenditure
Maintenance cost (common infra) 66.40 66.40 66.40 66.40 66.40 66.40 66.40
Power cost 62.21 62.21 62.21 62.21 62.21 62.21 62.21
Maintenance cost (common amenities) 9.90 9.90 9.90 9.90 9.90 9.90 9.90
Employee costs 19.32 21.25 23.38 25.71 28.29 41.41 45.56

Water cost 6.24 6.24 6.24 6.24 6.24 6.24 6.24
Other administrative costs 3.28 3.32 3.36 3.41 3.46 3.72 3.81
Total expenditure 167.35 169.32 171.49 173.87 176.50 189.89 194.11
PBIDT 1065.30 1070.05 1312.47 1311.33 1308.74 1295.48 1291.29
Interest
on term loans 559.71 559.71 545.87 513.26 476.51 276.61 209.85
on working capital borrowings 6.67 13.39 14.67 15.92 15.95 16.07 16.11
Depreciation 418.76 418.76 418.76 418.76 418.76 418.76 418.76
PBT 80.16 78.19 333.17 363.40 397.52 584.03 646.57
Tax 9.08 8.86 37.75 41.17 45.04 188.41 222.97
PAT 71.08 69.33 295.42 322.22 352.48 395.62 423.60
Net cash accruals 489.84 488.09 714.18 740.99 771.25 814.38 842.36
(2) MFPS Business Framework
A major difference between integrated textile parks and mega food parks is that while a SPV
normally constructs and owns all factory buildings in case of former, in case of latter, SPV
only constructs and owns factory buildings for core processing facilities and MSME sheds,
and leases out remaining developed plots to interested entrepreneurs for setting up food
processing units. SPV recovers O&M charges from the units by way of the following
monthly charges:
• Charge I – Lease rentals
Lease rentals for developed plots and MSME sheds are determined by SPV based on its own
cost of developing the park and may also take into consideration the market rates for such
plots/sheds.
• Charge II – User Charges for Core processing facilities and common amenities
User charges for use of core processing facilities such as warehouses, cold storage facilities,
ripening chambers, IQF and Deep Freeze facilities, aseptic/tetra pack facilities, weigh bridges,
plastic crates etc. are normally based on market rates. Similarly, common amenities such as
office space, canteen, guest houses may be made available to users on market rates.
• Charge III – Variable Utility Charge
This is based on monthly consumption of utilities such as water, power and effluent treatment
and other O & M cost together with variable expenses of the SPV apportioned to all units on
the basis of allocable area to each of the industrial units
An illustrative profitability statement of a Mega Food Park

Year 1 2 3 4 5 9 10
Capacity Utilization 50% 65% 75% 85% 90% 90% 90%
(Lakhs Rs)
Revenue
CPC
Land Lease Rentals 250.30 433.86 433.86 433.86 183.56 0.00 0.00
Rentals from SDF Sheds 22.50 39.00 39.00 39.00 16.50 0.00 0.00
Rentals from Core Infrastructure 1116.83 1599.66 2033.94 2540.60 2965.39 4389.02 4844.36
Rentals from Non Core Infrastructure 111.45 159.37 202.28 252.18 293.71 430.03 473.03
Rentals from Enabling Infrastructure 1767.43 2527.43 3207.89 3999.17 4657.86 6819.57 7501.53
Management Fee 69.41 127.25 139.98 153.97 169.37 247.98 272.77
Total CPC 3337.93 4886.57 6056.95 7418.78 8286.39 11886.59 13091.69
Revenue PPC
PPC – 1 53.42 76.39 96.95 120.87 140.77 206.11 226.72
PPC – 2 53.42 76.39 96.95 120.87 140.77 206.11 226.72
PPC – 3 53.42 76.39 96.95 120.87 140.77 206.11 226.72
PPC – 4 53.42 76.39 96.95 120.87 140.77 206.11 226.72
PPC – 5 53.42 76.39 96.95 120.87 140.77 206.11 226.72
Total PPCs 267.08 381.93 484.76 604.33 703.87 1030.53 1133.58
Revenue 3605.01 5268.50 6541.71 8023.11 8990.26 12917.12 14225.28
Expenses
Power 1404.99 2009.14 2550.07 3179.08 3702.69 5421.11 5963.23
Water 195.76 258.15 300.72 344.08 366.06 366.06 366.06
ETP 248.86 323.52 373.30 423.07 447.95 447.95 447.95
Fuel 262.80 375.80 476.98 594.64 692.58 1014.00 1115.40
Employee Cost 316.20 347.82 382.60 420.86 462.95 677.80 745.58
Maintenance 125.56 138.12 151.93 167.13 183.84 269.16 296.07
Insurance 79.94 79.94 79.94 79.94 79.94 79.94 79.94
Admin & Selling Overheads 61.00 67.10 73.81 81.19 89.31 130.76 143.83
Provision for Crates replacement 40.17 57.42 73.00 90.95 105.90 154.80 170.10
Total Expenses 2735.28 3657.01 4462.34 5380.93 6131.22 8561.59 9328.17
EBITDA 869.73 1611.49 2079.37 2642.18 2859.04 4355.54 4897.11

Interest Long Term Debt (LTD) 831.85 803.75 722.72 630.17 524.49 0.00 0.00
Interest Working Capital borrowing 55.48 78.10 96.29 117.29 132.31 187.94 206.09
Interest paid to BIADA for land 16.05 13.69 11.22 8.61 5.88 0.00 0.00
Depreciation 636.53 636.53 636.53 735.52 735.52 735.52 735.52
PBT -670.18 79.41 612.62 1150.59 1460.84 3432.08 3955.50
Tax 0.00 14.69 113.33 212.86 112.25 1130.97 1305.35
Net Profit (PAT) -670.18 64.72 499.29 937.73 1348.59 2301.11 2650.15
Net Cash from Operations -33.65 701.25 1135.81 1673.25 2084.10 3036.63 3385.67
(II) Distinct Business Models

While both SITP and MFPS essentially attempt to promote sector-specific industrial parks by
groups of private sector entrepreneurs, there are some major differences between envisaged
business models under these two schemes. In case of SITP, the revenue sources are largely
limited to recovering fixed infrastructure and variable utility charges along with finance
charges, which can be termed as a “cost recovery” model. Under MFPS, though, SPV has an
additional and significant revenue source in form of core processing facilities at both Central
processing centre (Hub) and Primary processing centres (Spokes). The user charges/rates for
these facilities account for major part of total revenue of SPV under MFPS. More important,
this part of revenue is benchmarked to the market rates and is likely to grow with time. The
benchmarking of user charges/lease rentals to prevailing market rates for developed plots and
other project facilities is possible in case of MFPS, as promoters of SPV and their clients
(industrial units in Park) are likely to be different. In case of SITP, though, the promoters of
SPV are in most cases entrepreneurs setting up industrial units (clients of SPV) and this puts
restrictions on the SPV in determining various rates/charges
The “cost recovery” model of SITP though has a distinct advantage as promoters of SPV are
envisaged as user entrepreneurs and so “market risk” may be regarded as quite low. In case of
MFPS, this “market risk” may be considered high as SPV would need to find entrepreneurs
willing to set up industrial units in the Park and also use their core processing facilities. Thus,
SITP and MFPS may be considered to provide two distinct business models of setting up
common industrial infrastructure/facilities
Patanjali Food and Herbal Park Pvt. Ltd – A Case Study

of the Hub and Spoke Model
Patanjali Food and Herbal Park Pvt. Ltd. (PFHPPL) was accorded Final Approval by the
Ministry in March 2009 to set up a Mega Food Park in Haridwar, Uttarakhand under the
Mega Food Parks Scheme. It was one of the first projects approved by the Ministry under this
Scheme and also the first of its kind public-private partnership project in the food processing
space in the hill state of Uttarakhand.
The total project cost of this food park was approximately Rs. 95 crore. The Central
Processing Centre (CPC) is spread over 70 acres on Laksar Road (in Haridwar district). The
Primary Processing Centres are located at Lal Tappar, Kotdwar, Daudpur Haji, Budhana,
Devprayag and Bazpur. The project (CPC and PPCs combined) possesses state-of-the-art
processing infrastructure like cold storage, Tetra Pack, warehousing, ripening chambers,
sorting & grading line, IQF, grain milling and world class quality testing laboratory among
others. In addition, to facilitate in processing activities, the CPC is equipped with a host of
enabling basic infrastructure facilities like roads, drainage, STP, ETP, WTP, rainwater
harvesting, 11 KVA electrical supply and 33 KVA sub-station. A fully equipped
administration building, office spaces, conference facilities and workers’ canteen
complement the processing activities at the project CPC. The CPC also has standard design
factory sheds for micro and small enterprises (MSEs). These sheds serve as plug-and-play
facilities for MSEs. As far as setting up units in the Park is concerned, CPC has
approximately 35 acres of leasable area for plots. At present, 17 processing and packaging
related units are operational in the Park spread approximately 30 acres. These units are
engaged in the production of candy, juice, murabba, flour, spices etc. State-of-the-art
packaging facilities are also available to these units. The cumulative turnover of these
industries is in excess of Rs. 250 crore, serving as a huge boost to the food processing sector
in general and state’s economy in particular. More importantly, the project CPC employs
over 5000 people (direct and indirect) and has become an important source of livelihood for
the people of the region. In addition, the storage facilities in these farm proximate facilities
shall help reduce wastage through the entire supply chain, a focus area, especially in a hill
state like Uttarakhand. This food park has been shining example of the success of the Mega
Food Park Scheme. It has provided an impetus to the local economy. Now the local producers
of raw materials are directly connected with the market, hence results in lesser wastage and
higher returns of the primary producers.
Photographs of the Patanjali Food and Herbal Park Private Limited
(III) Challenges of Business Models

The business model of SITP was designed to minimize market risk by insisting that only
those entrepreneurs who are willing to set up their units in the park, would be the
shareholders in SPV. It was thought that entrepreneurs setting up units in the park would
ensure financial sustainability of SPV as the owners of this entity and thus a textile park
project would remain support worthy by lending institutions. Two key assumptions to sustain
this business model are : (i) The textile units are set up and start commercial operations as per
the project schedule and (ii) the units themselves remain profitable and generate sufficient
margins to pay various charges of SPV (infrastructure, variable, finance)
The experience of implementation of textile park projects under SITP though has been mixed
and in many cases, the above two assumptions have not been met. While the model assumed
that all shareholders of SPV would be keen to set up their plant and machinery in allocated
factory sheds and start operations, in many cases this was not possible due to various reasons.
This also meant that those shareholders of SPV who have not started their operations in the
park, may not be willing to pay due charges to SPV, making it difficult for SPV to honour its
financial commitments to lending institutions
A key challenge to business model of cluster SPVs is that the SPVs are vulnerable to some
units not setting up their units in the agreed timeframes and/or not performing satisfactorily,
leading to delayed or reduced cash flows, affecting the financial health of the SPVs and also
affecting the debt servicing. As the revenue model is cost plus, and there is no market pricing
of land at the time of allotment, the scope for high profits is very less. Therefore, cluster
SPVs deserve special dispensation from regulators like inclusion in priority sector lending,
reduced capital adequacy on loans to such SPVs, easier provisioning norms, treating such
projects as infrastructure projects rather than industrial real estate, etc
(IV) An Innovative Model – Upgradation of Vatva Industrial Estate

Project, Ahmedabad, Gujarat
Vatva Industrial Estate is the largest and oldest estate set up by Gujarat Industrial
Development Corporation (GIDC) in 1960. It is spread over 560 hectares of land and houses
more than 3000 units in engineering, pharmaceutical and chemical sector. The estate employs
more than 1.50 lakh people and total turnover of the estate is estimated at Rs 15,000 crores
out of which approx Rs 4000 crores is exports. The units within the estate came together to
form an association named Vatva Industries Association (VIA) for looking after the welfare
of the estate
In 1986, the area came under Ahmedabad Municipal Corporation (AMC) Jurisdiction. From
1960 to 1986, GIDC collected services charges from all the units in the estate. After the estate
came in AMC’s jurisdiction, AMC started collecting property tax and octroi from all the units
and it collects approx. Rs 3.5 crores of property tax annually. The property tax collected by
AMC was meant to be utilized for maintenance of existing infrastructure facilities within the
estate. Over a period of time, the infrastructure facilities in GIDC Vatva did not keep pace
with the industrial growth in the area thereby considerably affecting the service levels. The
roads became un-motorable during monsoons and black top was usually washed during rains
creating deep potholes and undulations on the roads. There were also no proper rain water
drainage leading to massive water logging in the estate during the monsoon which used to
disrupt the movement of goods and services. The sewerage system was also in shambles and
all the units used septic tanks to take care of domestic sewerage
With an objective to improve the facilities in the estate, VIA took up an initiative for
developing an integrated infrastructure development program. However, VIA being a welfare
association did not have the requisite funds to take up the infrastructure development activity
on its own. After some efforts, it convinced AMC to share part of the property tax collected
from Vatva GIDC area for the development of the estate. After 2 years of pursuance, AMC
agreed to sign a MOU with VIA whereby AMC agreed to remit 75% of the property tax
collected by it from GIDC Vatva into an Escrow Account with a bank. The funds remitted to
the above Escrow Account were to be utilized by VIA/SPV created by VIA for the purpose of
infrastructure development in GIDC Vatva. VIA formed an SPV - Vatva Industrial Estate
Infrastructure Development Limited (VEL) for taking up the infrastructure development
activities. VIA applied to Department of Industrial Policy and Promotion (DIPP),
Government of India for comprehensive up-gradation under Industrial Infrastructure
Upgradation Scheme (IIUS) and obtained sanction of Rs 24 crores for
upgradation/development of the Estate for the following components:
(i) Upgradation of Roads and Construction of Storm Water Drainage
(ii) Solid Waste Treatment Facility
(iii) Upgradation of CETP
(iv) Disaster Management System
(v) Centre of Excellence and Training Centre
(vi) Acid Reconcentration Plant
VEL (SPV formed by VIA) also applied to State Government under Critical Infrastructure
Upgradation Scheme (CIPS) wherein they got a sanction of grant Rs 41.00 crores for
infrastructure upgradation of the estate. The project was implemented in three phases as given
below (along with the project costs for each phase):
Title Particulars (Rs lakh)

Phase I Roads, storm water drains and sewerage system 4800.00
Phase II Roads & storm water drains 2853.00
Phase III Roads & storm water drains 120.00
TOTAL 7773.00
The project was funded through the following means of finance:

Title Particulars (Rs lakh)

Users’ Contribution Property tax collections remitted to VEL 944.00
Grants IIUS Grant 679.00
CIPS Grant 3771.00
Debt Rupee Term Loans 2379.00
TOTAL 7773.00
VEL obtained term loans of Rs 23.79 crores and bridge loan of Rs 7 crores (the bridge loan
was required as the State Govt grant was back-ended) as per the following details:
S. No Bank Amount
Term Bridge
Loan Loan
1 Bank of India 10.00 5.00
2 Oriental Bank of Commerce 7.00 Nil
3 SIDBI 6.79 2.00
Total 23.79 7.00
In addition, Indian Overseas Bank also agreed to sanction financial assistance for the project.
The term loans were sanctioned only on the basis of hypothecation on property tax receipts
deposited by AMC into the escrow account opened by VEL. The term loans were structured
only on the basis of escrow of property tax receipts deposited by AMC into the escrow
account opened by VEL and MOA between AMC and VIA/VEL. No collaterals or personal
guarantees were stipulated as the project was to build public assets and no direct ownership
of any individual or industrial group was present
The project was successfully implemented with the creation of world class infrastructure in
the estate
Photographs showing the facilities created by the project
(1) Key Challenges during the project development and execution
The key challenges faced during the project development and execution stages are given
below:
(a) For the property tax reimbursement, initially there was no legal agreement
between AMC and VIA, there was only a MoU. Hence for the term loan
repayment, it was a requirement of the banks to convert the MoU into a MoA.
This was a challenge and it took almost a year to convert the MoU into a MoA.
Finally, a tripartite agreement between the banks, AMC and VEL was signed
(b) The sanctioning of term loan by the banks was also a challenge as there was no
security of assets against the term loan. The only security was the property tax
reimbursement agreement between AMC and VEL
(c) The estate was around 46 years old and there were no records or drawings of the
existing utilities. Hence during execution, lots of trial pits had to be done before
initiation of any activity. The existing utilities were then shifted and new activities
were planned accordingly. This issue delayed the project to a certain extent
(2) Impacts
The infrastructure development project had a strong positive impact on Vatva Industrial
Estate with the number of units increasing from 1800 to about 3000 during the project
execution. There was also an increase in turnover and export of most of the companies/units
present in the estate. The property tax collection also increased after the implementation of
the project. The World Bank published a case study on the project, highlighting the unique
structure which makes it one of the most innovative projects in the emerging economies. This
model was replicated by Odhav Industries Association (Odhav GIDC), the 3rd largest
industrial estate in Ahmedabad, and it has also successfully completed the infrastructure
upgradation project through CIPS grant and support from IL&FS
(V) Major Challenges Faced by Lending Institutions
One of the key constraints of common industrial Infrastructure project delivery for MSMEs is
the raising of finances. While its suits the initial objective of the SPV to develop project for
which it has been set up, larger aspects of parentage and the SPVs ability to support project
development, considering risks involved have always been under discussion. As SPVs,
irrespective of who the promotes are, do not have credit histories, it makes the lenders extra
cautious when it comes to project based lending
Lenders are, by-and large, comfortable to carry out collateral based lending so that, should
the loans go bad, they have adequate security to fall back upon. However, when such SPVs
are structured for project delivery, they are new companies and hence do not have the
wherewithal to provide any collateral for borrowing loans for part financing of projects. The
lenders thus have to fall back upon project recourse based financing, which means they
depend upon the project income once they are set up. In a project recourse based financing,
the security to the lenders will also be limited to all project assets created in the present and
future. However, for lending agencies like banks and financial institutions like SIDBI, these
projects offer viable lending options. The structure and nature of such projects has some
benefits like:
a. Part-funding by Government improves the viability and also reduces the effective
up-front cost to the industry, which is the ultimate source of repayment of any loan
given to such projects
b. Grant funding and minimum stipulated promoters’ contribution of 10-20% usually

sought, reduces the lending to only about 40-50% of the project cost, thus resulting
in an asset cover of 2:1
c. Grant schemes require the land to be in possession of the SPVs before grant release.
Therefore bank funding is protected from land acquisition related risks. Capital
appreciation in the industrial real estate of industrial parks is usually very rapid and
with land acquisition being the key hindrance to new industrial projects, industrial
parks have the cushion of appreciation in valuation of the projects
d. Association with such projects provides opportunity for lending agencies to build up
a large customer base for traditional banking business of working capital and term
loans, trade finance, and liabilities business
Such SPV based financing for projects is at least a decade old phenomenon in the country and
already many insights have been gained regarding the same. Cutting across various cluster
based projects in common industrial infrastructure/facilities for MSMEs, there have been fair
amount of learnings which are elaborated below:
(VI) Strengths of SPV Financing for Common Industrial Infrastructure

Projects for MSMEs
(i) Promoters find it comfortable to have an off-balance sheet financing, especially if the
projects are promoted by large groups
(ii) Promoters can rope in other stakeholders in the SPV, without having to worry about
sharing group related information
(iii)Promoters can address risks related to such projects on a standalone basis, and need
lesser effort to demonstrate the same to anyone concerned
(iv) As such projects focus on a specific project to be delivered, the management is able to
focus better on accomplishing the tasks set at hand
(v) Government agencies part funding the project can monitor the project development
and be a part of the process as well
(vi) Lenders can ascertain the quality of revenues very early in the project and suggest
corrective actions to the SPV management
(vii) Lenders can proceed in a cautious manner in disbursing loans to the project after the
SPV contributes their part of the funds and so does the Government agency, in case of
part funding coming from the Government
(viii) Members of cluster based SPVs can look at arranging loans for their respective units
on a common framework
(VII) Weakness of SPV Financing for Common Industrial Infrastructure

Projects for MSMEs
(i) As SPVs do not have credit history, there is a need to structure working capital for
projects which are developed for common facilitation purposes
(ii) Although the SPV financing happens on a project recourse basis, lenders generally
insist on promoter guarantees, apart from other project covenants and terms. Absence
of such guarantees has a bearing on the rate of interest of borrowing
(iii)As SPVs do not have a credit history, lenders look at the strength of the balance sheet
of promoters, more than that of project sector strengths, likely revenues the project
would earn and overall payment capability of the project SPV. While that is
important, it still leads to non recourse funding and dilutes the spirit of project based
funding
(iv) In case of infrastructure SPVs, any failure by project would still be contained by
promoters of the SPV. However, when it comes to cluster based projects, there would
always be a combination of members who are prompt in their payments and some
members who default, due to various reasons
(v) In order to cover up eventualities like defaults or non payments, special reserves or
covenants would need to be built up at initial stages by the SPV, which members may
have hesitation to or it may lead to disagreements
(vi) Project implementation, no matter how well they have been planned, may lead to
delays in completion and in earning revenue thereafter. As lenders look for
continuous compliances to structured covenants, SPV maybe in specific defaults to
covenants if there is no specific excuse / covenant waiver mechanism
(vii) As lenders will not be able to monitor such loans on a daily basis, there is an
imminent need of third party appointments like Lenders Engineers, Asset Managers,
Trust to hold security etc. These transactions increase the cost of borrowing to the
project SPVs
(viii) It has also been observed that banks often ask corporate as well as personal guarantee
from promoters of SPVs of common industrial infrastructure projects. Hence,
promoters may be liable to repay without having complete project ownership. Since
SPVs generally have no one owner, the promoters are reluctant to provide such
guarantees to the banks for loans to the SPVs. This, sometimes, discourages the
promoters to come forth for the project implementation. The banks generally have
comfortable security cover against the term loan provided to the SPVs. Hence, banks
may forgo personal/corporate guarantee of the promoters given the huge financial
assistance from Government and security protection for the project
(VIII) Bankability of Common Infrastructure Projects

The basic objective of SPVs that are promoted for setting up common infrastructure projects
is to invest in the assets, develop & lease out plots, receive grants and loans, and O&M of the
facilities created. In the financial models used for bank financing, income is projected for the
SPV usually through service charges linked to project, recovery of depreciation costs by way
of charges like asset replacement fund, sinking fund, maintenance charges for the facilities,
etc. This gives adequate debt service cushion to the SPVs and provides comfort to lenders.
However, in reality, there are very few SPVs which actually levy these charges due to
resistance by the members. This affects debt servicing and gives SPVs a negative outlook in
credit monitoring by the lenders and risk rating by rating agencies
The actual source of repayment of loans is through collection of dues by the SPVs from their
members which are industrial units operating in the facilities created. As all units do not
commence their operations at the same time i.e. the projected SCOD, debt service gets
affected in initial stages
(1) Distributed Ownership
The ownership of all project assets, including building, plant and machinery, misc. fixed
assets, utilities etc. constructed with the grant amount vests with the SPV which is
responsible for operation and maintenance of such assets. Generally, common infrastructure
projects do not have one single promoter or promoter group, which makes identification of
responsibilities for compliances and repayments difficult. Usually, a few units and their
owners take initiative and responsibilities at the time of project initiation and are usually
Directors on Board of the SPV. Accordingly, they take care of project implementation and
liaise with lenders for sanction of loans, documentation and disbursements. So the lenders
usually rely on them to ensure debt servicing. However, it is to be understood that the actual
source of repayment of the loans is not just these directors but all the members of the park.
As all members are exclusive to each in their individual operations, their ownership and
obligations are limited to their holding of the land in the project. Therefore, their obligations
for debt repayment are also pro-rata allocated accordingly and therefore each member’s debt
service obligations are limited to a discreet amount. In such an event, default by few
members is not usually made good by other members. Due to this, plausibility for having
irregularities in debt servicing may arise
Due to the nature of ownership and distribution of equity, personal guarantees are not
structured in the sanction terms as the debt service obligations are not ‘joint and several’ in
nature
(2) Collateral
Typically, banks have practice of taking additional collateral security which is in addition to
the primary security i.e. project assets. This has been done through immovable properties of
promoters in MSMEs and such collateral acts as deterrent to defaults by the borrowers. In
common infrastructure projects, there is no collateral available with the SPVs. This makes
some banks reluctant to sanction such projects
(3) Security
While there is adequate asset cover for lenders, as large portion of assets are funded by the
grants from the government, the individual members face difficulty in arranging for security
when they borrow for setting up projects in the land allotted to them by the SPV. This is
because the ownership of land (and also buildings thereon in projects like SITP) is vested
with the SPV, and therefore the same gets mortgaged to SPV lenders. Thus, there is usually
difficulty faced by members in leveraging the value of the property for raising loans
(4) Debt Servicing
Several common infrastructural projects that are funded by banks face difficulty in ensuring
timely repayment to lenders. This is because the SPV usually has to rely on collections from
multiple sources every month to make interest & principal payments to the lenders. If some
members default in their obligations to the SPV, there is a shortfall in debt service. This is
usually made good in subsequent month by collection in arrears from the members. However,
due to the 90-day NPA norm of financial sector, there is little time cushion available to SPV
to manage its collections from the members
The Palladam Hi-tech Weaving Park: A Case Study on Structured Financing

Model
Palladam Hi-Tech Weaving Park is a textile park located in Palladam, between Coimbatore &
Tirupur, Tamil Nadu. It is the first of its kind integrated textile Park in the country and is spread over
65 acres with a project cost of Rs 55.42 crores. The Park has 90 units of which 74 are operational and
was inaugurated in April 2008. The Park has been set up under the Scheme for Integrated Textile
Parks (SITP), an initiative of the Government of India. It is a Public-Private Partnership operated
through a Special Purpose Vehicle (SPV) named PHWP, constituting the entrepreneurs, banks and the
Government. IL&FS Cluster Development Initiative Ltd (IL&FS Clusters) was the project
implementation advisor that has assisted the SPV from the level of conception to commissioning of
the project. The Ministry of Textiles (MOT) had approved a grant of Rs 22.17 crores to PHWP for the
Park. Therefore, the SPV was required to raise the balance 60% of the project, and also to meet the
pre-operative expenses. The majority of the members were SSI units will little financial backing to be
able to raise such a large quantum of loan from banks directly. Further, the shareholding was widely
dispersed across more than 90 shareholders with no member having stake substantial enough to be
termed as main promoter. In the event of such pre-determined conditions, it was difficult to establish a
bankable model for financing the park and financial closure was being delayed. It was at this juncture
that IL&FS Group intervened with its expertise in project structuring, debt syndication and
documentation. It took the lead in achieving financial closure and negotiated with banks with whom
IL&FS had previous relationships through other large infrastructure projects. The borrowing was
arranged for the SPV to financing the SITP infrastructure. As a precursor to this arrangement, IL&FS
Group facilitated the whole deal by drawing up the resource distribution and usage arrangement
between the SPV and members. All the key documents were vetted by the international legal firm
White & Case. To arrive at the financing requirements, a business model with a standard 6 loom unit
was designed with an annual turnover of Rs. 52.5 crore and cash profit of Rs. 10.7 crore. The loan
features were also designed very competitively with the following features:
a) Term of 13 years
b) Interest rate of 9% per annum to be reset every 3 years and
c) Pledge the shares of SPV and members as security.
Based on these terms and conditions, term loans of Rs.27.68 crores from the following lenders were
raised for the park:
a) IL&FS: Rs 5 crore
b) SIDBI: Rs 5 crore
c) Indian Bank: Rs 5 crore
d) Central Bank of India: Rs 5 crore
e) Bank of India: Rs 5 crore and
f) Canara Bank: Rs 5 crore.
With a present loan outstanding of Rs 22.50 crores, the model whereby the SPV initially borrows the
loan but the repayment liability vests with the individual members seems to be a workable viable
model. The key success factor of this project was due to the key anchor promoters, Mr Senthil Kumar
in this case, professional management for running of the Park, strict action against defaulters and an
inherent sense of commitment from the members to meet their dues for ensuring sustainability of the
Park.
Photographs of Palladum Hi-Tech Textile Park
(IX) Risk Assessment Framework

As mentioned earlier, common Industrial Infrastructure projects involve certain challenges
and complexities during implementation phase as well as during operational phase. Such
challenges and complexities may lead to certain risk factors during implementation which are
needed to be analyzed based on an appropriate risk assessment framework. Mechanisms for
minimizing such risks include: (a) conducting due diligence as to the possibility of the
relevant risks; (b) allocating such risks to other parties as far as possible and (c) buying
adequate insurance cover which would cater to financier’s interests.
Financiers are concerned with minimizing the dangers of any events which could have a
negative impact on the financial performance of the project, in particular, events which could
result in the project not being completed on time, on budget, or at all; the project not
operating at its full capacity; the project failing to generate sufficient revenue to service the
debt; or the project prematurely coming to an end.
Every project is unique and it is not possible to compile an exhaustive list of risks or to rank
them in order of priority. What is a major risk for one project may be quite minor for another.
Therefore, it is important to categorize the risks according to the phases of the project within
which they may arise - (1) Project Design and construction period and (2) Operating period.
It is useful to divide the project in this way when looking at risks because the nature and the
allocation of risks usually change between the construction phase and the operation phase. In
the following sections, indicative Risk Assessment Frameworks for different phases of
infrastructure projects have been given.
(1) Project Design & Construction Risk
Risk Assessment framework for project development and construction phase are as follows:
Risk Mitigation Framework
Project Design/Construction risk
Availability of suitable land is one of the most critical requirements for

successful implementation of large infrastructure projects and hence
the due diligence of land is a very important part of the risk
Status of Land assessment. Some of the key parameters of evaluation of risk rating of
the identified land involve assessment of the following:
• What is the status of land procurement and acquisition?

• Is the land free from dispute regarding the title, acquisition and/ or
compensation of the land?

• Is there any political opposition/hostility regarding the acquisition
of the land?
• Whether the land title rests with the SPV? (Mutation)
• Whether the land is agricultural or Industrial land?
• If it is agricultural land, what is the CLU status?
• Is the land already mortgaged to other bank/s?
• Is sub-leasing of plots allowed by the State Government?
• Is the land located in Ecologically/ Environmentally Sensitive
Area or Coastal Regulation Zone?
• Is the land notified for other purpose by the state/central
government?
• Is the soil type suitable for the proposed activity?
• How prone is the land to flood, earthquake or other natural
calamities?
• Is there any other issue which may hinder the implementation and
operations of the project?
The connectivity of the identified site is highly important for the
infrastructure projects. As discussed earlier, many of the government
schemes require the project land to be larger than certain area.
Considering the paucity or the high price of large contiguous land
parcels near urban/ business centres, sometimes the proposed land is
situated in remote areas which are away from the urban/ business
centres without good connectivity and generally the land is completely
undeveloped. Such conditions affect the feasibility of the projects and
hence it is important to assess the risk associated with site connectivity
and prioritize it accordingly. Some of the key parameters of evaluation
of risk rating of the site connectivity involve assessment of the
following:
Site Connectivity
• Is the site connected with an all weather road?
• How far is the site from the nearest National Highway and State
Highway?
• Is there any requirement of enhancement of connectivity of the
site? If yes, what type of enhancement is required and at what
cost?
• How far is the land from the nearest Airport and Railway Station?
• How far is the land from the nearest port?
• Is the site well connected to the raw material producing areas?
• Is the site well connected to the main consumption centres/
forward markets?
• Does the site have water and power connectivity?
Project Design • Has the SPV appointed a professional agency as its Project Management
Approvals, bid Consultant, which will assist the SPV in Project Development, Approval
management and Process, Bid Process Management and Construction Supervision of the
construction Project during implementation?
supervision of the
Project
The promoters of SPV and the SPV structuring/ dynamics is critical for
the success of any large infrastructure project. For the financing banks,
it is very important to very
The key parameters of evaluation of risk rating of promoters involve

assessment of the following:
• Background, experience, financial strength, SPV ownership

details.
Promoter Risk
Moreover the following important parameters should also be
specifically assessed in details.
• Does the SPV have diversified ownership?

• Do the roles and responsibilities of all the SPV members are pre-
defined properly without conflict?
• Does the equity contribution by all members have been defined?
• Is the management structure of the SPV decided and agreed upon
by all the members?
In common industrial infrastructure projects, financing of projects is
primarily done on a stand-alone basis, with banks and financial
institutions adapting the same risk models which are applied to the
manufacturing sector. The key parameters of evaluation of risk rating
of companies involve assessment of the following:
• Financial risk: Evaluation of the financial position of the company,

turnover, profitability, liquidity, debt burden, debt service
Financing/ Project capability and repayment, asset quality, financial flexibility and
Risk cash flow adequacy, interest and inflation rate volatility, etc.
• Industry risk: Industry characteristics, size, growth potential,
cyclicality, Government policies (duties, price controls, licensing
etc.), competition, threats of imports/substitutes/unorganized
sector, technology risk, entry barrier/s, bargaining power with
supplier/s, etc.
• Business risk: Market position, product range, quality, brand
equity, operating efficiencies, availability of raw material, market
for finished products, etc.
Delay in project • Whether certain fixed price contracts with contractors and
completion and / or suppliers of the equipments are in place?
construction cost • Whether the risk of delay and cost overrun will be passed on to the
overrun contractors/suppliers? Such clauses should be suitably provided for
in the TOR/MOU to be entered into with various contractors and
equipment suppliers.
• The technical consultant should periodically submit progress
reports on the project construction and would bring any time
slippages to the attention of the Board of Management.
The utilities such as water and power are extremely important for
successful implementation and operations of such project. The risks
related to availability of water and power need to assessed during the
project designed and suitable mitigation measures need to be adopted
Availability of against the associated risks. The key parameters of evaluation of risk
Water & Power related to availability of water and power involve assessment of the
following:
• What are the proposed sources of water and power?

• Is there any cogeneration of power proposed?
• What are the alternate sources of water and power?
Proper utilization of funds by SPV is a critical aspect of project
financing and risks associated with fund utilization should be assessed
in details. It is also important to put in place efficient checks and
balances based on the risk assessment to prevent unauthorized
payments by the SPV. The key parameters of evaluation of risk related
to utilization of funds involve assessment of the following:
• What kinds of provisions have been made for receipt of funds and
expenses to be incurred?
• Whether project funds would be routed through Trust & Retention
Account (TRA) to ensure that all the money raised by the SPV
Utilization of funds (from the promoters as equity contribution, from the units by the
by SPV for way of long term / non refundable deposits, if any, GoI’s grant and
unauthorized debt) are utilized in a transparent manner for authorized
payments expenditure during the project implementation and operational
phase?
• Are there discrete sub-accounts of the TRA exclusively for
receiving grant and loans?
• Who will be the TRA agent? A bank should be designated as TRA
agent for escrowing all funds flows / cash flows of the SPV during
the project implementation stage.
• Whether a proper system is in place which would ensure that funds
are withdrawn from the TRA account for the purpose of utilization
in and order of priority laid out below (indicative):
For the construction of the project – Payments to be made to
contractors and equipment suppliers for various components of
project. The invoices should be duly verified by the various

technical consultants/engineers for the specific areas appointed
by SPV. The contractors and equipment suppliers should be
selected through prescribes and defined guidelines for
procurement of goods & services for which a procurement policy
approved by Board should be followed.
For operating expenses such as:

o Payments towards salary and other administrative
expenses during the project construction as well as O &
M expenses incurred by the SPV directly through the
O&M contractor(s), if appointed for the operations
assistance. Such expenses should not exceed beyond pre-
specified percentage of the projected monthly expenses in
the annual budget approved by the Board of Directors of
the SPV. All exceptions in this regard should be cleared
by the Board of directors through passing resolution on
the same.
o On approval of the Board of Directors for budgeted
operating expenses for specific period, the TRA agent
should release the requisite amount in a current account
maintained at the Escrow Bank at the beginning of each
calendar month.
For Loan Repayment: Monthly installments (including interest

and repayment) of the loans taken by the SPV should be remitted
by the TRA Agent directly to the Lenders
Payment into Debt Service Reserve Account (DSRA) and

Common Debt Service Fund (CDSF) and other reserves
stipulated by the Lenders, if any, to maintain the required
balances and minimum coverage amount therein
Payments of Dividends to the shareholders of the SPV should be

approved by the Board of Directors and the Shareholders of the
SPV.
Force Majeure • Is there suitable insurance cover for insurable items/ events?
Events
(2) Operating Period Risk

Risk Assessment framework for operating period is as follows:
Risk Mitigation Framework

Operating Period Risk
Risk of recovery of • Are there suitable agreements between the SPV and individual
charges and/or members (units) for fixed and variable charges?
members' businesses • Do the agreements have provisions such as recourse by way of
not doing well rights of replace units that have defaulted in payments or which
do not commence operations within a given time period?
• Do the agreements have suitable clauses to claim compensation
and/or recover payments in case of breach of agreement by the
units?
• Do the agreements have other provisions such as security
deposit, etc. which would be forfeited in case of defaults in
payments by the units?
• Is there a provision for re-possession of the factory shed / plot
Units do not by SPV in the event a unit does not commence production
commence production within a given time period or such time may be extended By
SPV?
• Has the SPV entered into suitable O&M contracts for the
operation and maintenance of project assets?
• Do the contracts have suitable clauses to claim compensation
O & M risks
and/or recover payments in case of breach of contract by the
O&M contractors?
The risk associated with availability of skilled manpower in the
project area should be assessed carefully. The key parameters of
evaluation of risk related to availability of skilled manpower
involve assessment of the following:
• Is there easy availability of skilled manpower in the project

area?
Availability of • Is the political/ trade union environment in the project area
manpower suitable for engaging suitable labour force for the project?
• Are the Labour Laws and other relevant Laws being
implemented strictly by the SPVs and the units?
• Have necessary steps been taken by the SPV to organize
training programs for unskilled manpower?
• If yes, have the training programs been designed and
undertaken in consultation with professional agencies having
requisite competency?
Chapter-
Chapter-12:
12: Way Forward
During 10th and 11th FYPs, the GoI introduced several schemes to develop common industrial
infrastructure in manufacturing sector with huge grant assistance to private sector with an
objective to achieve economic growth. There was a paradigm shift in which the thrust on PPP
models for infrastructural development of the country witnessed large scale participation of
the private sector. In this regard, the GoI trusted the private sector with the belief that it
would bring efficiency in the implementation of various schemes and programs through
demand driven and commercially viable interventions. Also, it was assumed that private
sector participation would enable the Ministries to timely complete such capital intensive
projects. Most of such private sector participation came through schemes providing capital
grant which, although may not be defined as a classical PPP model, but was in the spirit of
the private sector participation as envisaged by the GoI. During the last 2 FYPs, a large
number of private sector driven common infrastructure projects have been approved and are
at various stages of implementation. For example, the MoT has approved as many as 61 ITPs
and the MoFPI has approved a total of 34 MFPs (excluding 8 projects which have been either
withdrawn or cancelled). However, considering the demand for such projects, these projects
have not been able to meet the requirements of the concerned sector and many states and
regions remain devoid of due coverage. In the following section, the response of the private
sector to the schemes and programs has been discussed
Experience of Implementation by
Number of Textile Parks Approved
Private Sector
However, the experience of Government Total 61
Ministries/ agencies with private sector FY 2012-2013 21
in execution of such projects in the past FY 2009-2010 1
decade has been mixed, with some of the FY 2008-2009 12
projects showing huge delays in FY 2007-2008 3
implementation period and even when FY 2006-2007 17
the projects have been executed the core FY 2005-2006 7
objective of creation of such common

industrial facilities has often not been served. Private agencies have largely failed to address
the demand for creating infrastructural facilities in timely and efficient manner. Based on the
experience and glitches in implementation of the government schemes through such models,
12th FYP had brought in a change in approach in the whole process by encouraging increased
roles and responsibilities of state agencies in implementation of such projects. For instance,
as mentioned earlier, schemes such as IIUS and MFPS calls for increased involvement of
state agencies. The revised guidelines of IIUS have now done away with SPV structure itself
and have allowed only State Implementing Agencies (SIAs) such as SIDCs or any equivalent
state entity as identified and recommended by the respective state governments to apply
under the scheme. In revised MFPS scheme as well, the MoFPI has now allowed state
government/ state government entities on their own to apply under the scheme even without
forming separate SPVs. Earlier, the scheme allowed state government ownership of the SPVs
up to only 26%. These decisions have been taken based on appreciation of the challenges
faced by the private sector in implementation of such projects
It is appreciated that there may have been other external factors, which may have affected the
scheme implementation adversely in the previous Five Year Plans. In the last 4-5 years the
economic downturn, which was experienced all over the world including India, might have
impacted the capacities of private players which in turn affected growth and momentum in
the common industrial infrastructure projects
Moreover, it has been observed that in many cases, the implementing agencies had faced
several obstacles such as delay in change in land use permissions, environmental clearances
and other statutory clearances. Such considerable delays have huge ramifications not only in
terms of timeline of the project but also in financial health of the project making many
projects unviable. Further, during this period, land acquisition, especially for large projects,
became a difficult issue which did not allow some projects to take off. In many cases the state
governments were unable to hand over the duly allotted land to the SPVs in time due to
various complications involved, which includes opposition from local communities etc
In spite of the above issues, there have been enough opportunities in the sector for successful
private investment especially when assisted by GoI with large financial grants/ subsidies.
However, many a time such private investments in the common industrial infrastructural
projects were not successful. Large corporate players generally have not found the schemes
very promising because of some inherent issues. This is especially true for the schemes which
make it mandatory for SPVs to have at least a certain number of members and restrict the
percentage of share holding of each member in SPV. Many of the large corporate players are
not comfortable with such diluted ownership and most of the times, they want complete
control on the decision making process for the projects. The entrepreneurs who came forward
for the implementation of these schemes have mostly not been able to show adequate
enthusiasm, willingness and appetite for long term investments in infrastructural projects.
As noted earlier, the rationale for providing such huge capital grant by the Government was
based on the assumption that without such grants, the large infrastructural projects may not
be commercially sustainable. It was assumed that initially such projects may not have
sufficient capacity utilization and may face revenue deficits, although overall the projects
would credit worthy and financially viable
In most cases, the SPVs/ promoters have developed cold feet in facing the challenges of
raising adequate capital for projects which have long gestation period and thus many of the
projects were not completed. This may have also happened due to inability of the private
sector promoters to raise requisite debt, with reasonable rate of interest and sufficiently long
repayment period, even as the very nature of the private sector requires quick returns and
ready cash flows for continuance of operations. In some other cases, the SPVs have been
eager to utilize common facilities for their own benefits rather than passing them on to
individual entrepreneurs for setting up units in the park. Such deviations in project
implementation have put a question mark on the entire rationale of private sector driven
implementation of schemes and programs
Recommendations
The recommendations made in the study have been categorized into the following:
III. Recommendations for Restructuring of Schemes and Programmes

IV. Recommendations for Banks/ Financial Institutions
(I) Recommendations for Restructuring of Schemes and Programmes

In view of this, some suggestions have been put forward in the following sections which, in
our view, would make these schemes and projects more investment friendly and successful in
the long run
(1) Grant restructuring

One of the main objectives of providing financial assistance by the Government to the SPV is
to ensure the benefits are passed on to the end users. It has often been argued that the huge
investments made for the project do not translate into the intended purpose. In many cases, it
has been observed that SPVs often fail to pass on the benefits/assistance received from the
government proportionately to the entrepreneurs/units. It is also a matter of concern that these
investments may not be efficiently utilized thereby making the infrastructure and capital
expenditure inefficacious and idle. So, such unproductive capital infrastructure may not be
beneficial to the investors i.e. promoters, banking institutions and government agencies
• In order to mitigate such risks, restructuring of the financial assistance may be

designed appropriately to ensure proper long term utilization of the created assets and
to ensure that the grant assistance may also be passed on to the entrepreneurs/units in
the park. One option is to divide the total grant amount in two parts-one may be given
directly to the SPV as assistance to develop the park and the other part may be given
directly to the units as grant assistance
• To ensure proper operationalization of the facilities created, the grant assistance may
be divided into ‘capital subsidy’ (for creation of infrastructure) and ‘interest
subvention’ facility which will be provided during an initial fixed period. The interest
subvention facility would only be provided to the SPV on yearly basis on successful
operations of the facilities/infrastructure. Such initiative has already been taken by
some Ministries such as MoT for Technology Upgradation Fund Scheme (TUFS) and
MoFPI for the Scheme for Cold Chain, Value Addition and Preservation
Infrastructure under the National Mission of Food Processing
• It has been observed that in many of the industrial parks, the intended numbers of
units are not coming up for various reasons as discussed earlier. Keeping the interests
of units as well as of SPV and to ensure setting up of proper number of units, MFPS
guidelines have been modified by linking release of grant amount to the leasing out of
the plots to independent units. The revised guidelines of MFPS make it inter alia
mandatory for SPV to allot at least 25% of the total allotable plots for becoming
eligible for the release of 3rd instalment of grant. Similarly, before the release of 4th
and final instalment of grant-in-aid, SPV is required to allot at least 75% of the total
allotable plots and commencement of operations in at least 25% of the units
• Another way to ensure proper operationalization of the facilities created would be to
carve out a part of the allocated grant for specific purposes. For example, about 80%
of the total admissible grant may be disbursed for infrastructure creation. Of the
balance 20% of grant admissible, 50% may be structured as seed funding / working
capital funding once the units in the respective projects are ready to get operational.
The remaining 50% may be escrowed in the SPVs bank account as a bonus / penalty
for timely completion of project. The bonus / penalty, so structured, would be
appropriated only on lenders comforts. If the SPV insists on lenders for release of
such amounts, same could be done after a Bank Guarantee is furnished by the SPV to
the lenders for the amount being transferred. This way, lenders would have an
additional security for any unforeseen dips in revenue, which may hamper any
payment obligations. Similar structures could be worked for various schemes,
depending upon the nature of projects, the extent of capital required by units at start
up stage and examining the amount of lender involvement required. The percentages
suggested above are only indicative in nature and is a representation for making
schemes work better and address various quarters of stakeholders. Specifics would
need to be worked out in consultation with all stakeholders involved
(2) Project Implementation
• Under different schemes, the project proposals are either invited as Expression of
Interest (EoI) or the assistance under the schemes is available on ‘on-tap’ basis.24 The
selection of proposals through EoIs is generally accepted as a transparent way of
selection with well-defined appraisal process and evaluation criteria. Many a time,
when the number of project slots is limited due to budget constraints or other reasons,
selection through invitation of EoIs ensures that the best proposals/projects are
selected for grant assistance. However, the process for selecting proposals through
EoI may sometimes become cumbersome and lengthy. Also, as there are limited slots
available, the certainty for the proposals to be supported by the government is not
ensured even if all the eligibility criteria are met by the proposals. In such a scenario,
for the promoters, the timeline for the project implementation may be compromised
and may lead to higher costs. Also, unlike ‘on-tap’ schemes, where applicants have a
sufficient time window to apply for the financial assistance, EoI restricts the time for
applying for the grant-in-aid. The applicants may not get sufficient time for fulfilling
compliance conditions and incomplete and ill-prepared proposals may lead to delay in
24
On-tap schemes are open schemes which do not have fixed deadlines to apply for grant assistance by eligible
promoters.
selection. In view of this, the Ministries/ Departments should ensure predictability in

the selection process in terms of number of the projects to be supported and the
timeline of the selection process. On the other hand, number of projects to be selected
in case of ‘on-tap’ method depends on availability of the funds with the government.
While the funds provided for the scheme for a particular year is generally fixed,
predictability for the number of proposals to get through is quite less. Moreover, as
the selection on ‘on-tap’ basis is an open and ongoing process and generally there are
no transparent and standard evaluation criteria, it may sometimes lead to
inefficiencies and undesirable procedural implications
• In some cases, terms and conditions for selection and implementation of the projects
are so cumbersome that it becomes difficult for the projects to take off. For example,
during initial phase of MFPS, it was mandatory to have five independent members to
form an SPV. It was found that such a condition discouraged established and big
industry players to apply. Later on, the mandatory numbers of members in the SPV
was reduced to three. After realizing the glitches in the implementation framework in
such cases, now even a single entity owned SPV has been made eligible under the
scheme. Hence, the terms and conditions for the selection and implementation of the
projects should be simplified to ensure efficient implementation of the projects by
considering the practicability and ground realities
• In most of the schemes, SPVs are expected to determine lease rentals or price of the
land based on total cost of developed plots including creation of basic enabling
infrastructure etc. Generally, there is no direct role of the Ministries to supervise the
pricing mechanism adopted by the SPVs in this regard. Many a time, even the SPVs
have no standard procedure for the same. While it is not desirable that the
Government should enter into procedures for price determination for the plots by
SPVs since it may be detrimental to the project development itself, however, the
Ministries may encourage the SPVs to adopt a transparent and an unambiguous
pricing mechanism that would make the project viable and also ensure that the
assistance received from the Ministries are also passed on to the units coming up in
the parks
• As discussed earlier, the private sector involvement has not been very encouraging in
implementation of such projects on PPP basis. Considering the challenges and
constraints for implementation of PPP projects from past years, there is a need to
revise PPP model and reconsider the roles and responsibilities of key stakeholders.
The involvement of state agencies may be increased and such agencies may be given
the ownership and implementation responsibility of the projects. Private sector may
be allotted the task of O&M for the projects
• It is also advisable to ensure active involvement of banks in designing, revising and
launching of schemes and programs to support industrial infrastructure projects. The
banks as an important stakeholder should be involved in the decision making process
in this regard.
(3) Categorization as ‘Infrastructure Lending’ Projects
Industrial parks generally face challenges such as low returns on huge investments and often
fail to address its financial concerns. SPVs face such issues due to high capital & operating
costs and limited market penetration. They also have to grapple with procurement issues
which lead to low capital utilization. Moreover, it has often been observed that industrial
parks are considered as ‘Real Estate’ projects rather than ‘Infrastructure Lending’ projects by
the banks and financial institutions. This leads to difficulty in accessing easy and better credit
facilities from lending banks
In view of this, to tackle the issues of financial viability of such projects, the Government
may consider the Industrial Parks as ‘Infrastructure Lending’ projects as the RBI provides a
differential treatment to a credit facility categorized as “Infrastructure Lending”. As per RBI
norms, ‘Infrastructure Lending’ inter-alia includes “common infrastructure for industrial
parks, SEZ, Post harvest storage infrastructure for agriculture and horticultural produce
including cold storage, Cold chain25”. Based on this definition, the Industrial Parks should be
categorized as ‘Infrastructure Lending’ Projects. Such categorization of the projects would
provide the following benefits:
• Infrastructure Status would allow the SPV to claim tax benefits as per section 80-IA
of the Income Tax Act which allows deduction of 100% profit from its income during
initial 5 years of operation and then 30% deduction of profit from income during
another 5 years. For this purpose, ‘infrastructure’ already covers electricity, water
supply, sewerage, telecom, roads & bridges, ports, airports, railways, irrigation,
storage (at ports) and industrial parks/SEZ
25
Cold chain includes cold room facility for farm level pre-cooling, for preservation of storage of agriculture
and allied produce, marine products and meat.
• Categorization of projects as “infrastructure lending” allows banks and financial

institutions to provide better terms and conditions to borrowers for infrastructure
projects. This becomes possible due to, inter-alia, lower provisioning requirements for
banks in terms of these loans, banks allowed to classify their investments in non-SLR
bonds issued by companies engaged in infrastructure activities and having a minimum
residual maturity of seven years under the held to maturity (HTM) category etc. This
may help the SPVs to set up their units by accessing long term credit facilities at
lower rates of interest
(II) Recommendations for Banks/ Financial Institutions

Based on in-depth analysis of the major challenges in the implementation and operations of
common industrial infrastructure for MSME projects, the recommendations for banks/ FIs for
increasing bankability and financing of such projects are given below:
(1) Knowledge and Understanding of Different Schemes for Common Industrial

Infrastructure
As mentioned earlier, bankers generally have serious apprehensions regarding lending to

large common industrial infrastructural projects in spite of huge financial assistance from
government for these projects. One of the main reasons is lack of information &
understanding of the nature of such projects, schemes & programs of GoI. There is little
interaction between the bankers (and banking bodies) and the Ministries/Departments leading
to information gap. The banks/ FIs generally lack the understanding of the nuances of the
schemes and programs especially in terms of the project concepts, business plans, eligible &
ineligible components and activities. Many times a project appraised and funded by the
banks/ FIs under a scheme does not fully adhere to the requirements of the scheme and there
are variances which may delay or cancel the project at a later stage. For example, there are
instances that although the procurement and marketing by the SPVs are not allowed under
certain schemes, the bank appraisal notes consider revenue assumptions for SPVs through
these activities and hence deviating from the requirements of the scheme. It has also been
seen in certain cases that although the scheme allows only leasing (not sale) of plots to the
units, however, the business plan proposed by the SPVs envisage sale of plots to the units.
These kinds of variances can delay the project approval and implementation process. It is
important to note in this context that the approval of a project by the Ministry under a certain
scheme does not necessary mean that the entire DPR has been vetted by the Ministry and
issues may come up at a later stage of the project implementation due to variances with the
scheme guidelines.
To address this, the banks/ FIs should actively study and analyze the different schemes for
common industrial infrastructure. They should also continuously follow up with Ministries
for any changes in the scheme guidelines. State Level Bankers’ Committees (SLBCs) should
be encouraged to disseminate information regarding project status and getting feedback from
banks regarding their experience in this regard. Involvement of Lead Bank at district level
where the projects are coming up may also help in the process.
Quality of Appraisal of Projects by Banks/ FIs
It has also been noticed that the quality & details captured by the banks in project appraisals
vary greatly from bank to bank. Some banks do conduct proper appraisals and capture all
necessary details in the appraisal report before sanctioning term loans to projects. However,
there are many banks which do not conduct proper appraisal and hence have limited
understanding of the project and the business model. It has been observed that many times
TEV reports submitted by consultants become the basis for project approval without proper
validation. This leads to sanctioning of term loans to unviable projects resulting in defaults
and NPA. In this regard, the banks/ FIs should develop certain standards for appraisal of such
infrastructure development projects and all the banks/ FIs should be encouraged to follow
such standards for the appraisal process. The banks/FIs should also create PPP cells which
would deal with large common infrastructure development projects and the employees in the
cell should be adequately trained for the same
(2) SPV/ Promoter Level
Generally, common industrial infrastructure projects do not have one single promoter or
promoter group and they are promoted by SPVs which have unrelated and independent
promoters/ shareholders. This sometimes may lead to slow progress due to lack of
coordination among the different SPV members. Moreover, there can be conflict amongst
independent/ unrelated promoters due to the lack of understanding and clearly delineated
roles and responsibilities for management of the SPV. The lack of role clarity and
understanding among the SPV members may also lead to serious conflict for larger control
and representation in the management of the SPV and project. There are instances of
promoters taking legal course by approaching Company Law Board due to such conflicts.
Such issues may cause inordinate delays in the project implementation and result in lack of
progress. In view of this, it is imperative that the banks/ FIs conduct serious appraisal and
strict due diligence of SPV structure and ownership especially related to the clarity of roles &
responsibilities and management structure of the SPV. Proper attention to these aspects of the
SPVs with more effort and time may help the banks/ FIs to avoid avoidable delays in the
progress of the projects.
(3) Statutory Approvals
The common industrial infrastructure projects typically require a large number of statutory
approvals ranging from CLUs for land to environmental clearances for project construction
and implementation. Moreover, many times further complexities may arise during the
implementation which may require further approvals/ clearances from the concerned
departments. It is critical to understand the requirements of different statutory approvals so
that the project can be designed and planned accordingly. Otherwise, inordinate delays may
result in the project implementation due to issues with obtaining statutory approvals. The
common industrial infrastructure projects generally require large contiguous land areas and it
is unusual to expect that there will be no issues with approvals/ clearances for such large tract
of contiguous land areas. Many times there are existing irrigation channels running through
the land and removal for these channels requires permission from Department of Irrigation.
Similarly, felling of trees in the land would require permission from the Forest Department.
Also, in certain states the permission for acquisition of large tract of land and CLU for
industrial purpose is accorded by the highest decision makers. Due to this, obtaining such
permissions make take long time causing delaying in the project implementation.
Similarly, many hindrances may occur while obtaining environmental clearances for the
projects. It is very important to assess the environmental concerns regarding the project at an
early stage of project designing. During the project appraisal the banks/ FIs should critically
assess the environmental risks such as whether the land is located in Ecologically/
Environmentally Sensitive Area or Coastal Regulation Zone. The banks/ FIs should also
assess whether the project would require an Environmental Clearance as there are minimum
requirements regarding land and built up area for qualifying for environmental clearance.
Also, there are multiple steps in obtaining environmental clearance such consent to establish
and consent to operate from state Pollution Control Boards (PCBs). Hence, clear
understanding and assessment of different types of statutory approvals and clearances is vital
for a proper appraisal of a project by the banks/ FIs.
(4) Creation of Security
As mentioned earlier, in common industrial infrastructure projects, generally all project

assets, including land & buildings, are mortgaged to the lenders in case of financing of SPV.
Thus, the members/unit promoters cannot mortgage the same directly to its lenders. The plot
of land (and building, in few cases) is provided on leave & license or lease to the member.
Therefore, the member can mortgage its leasehold rights under the lease agreement in favour
of its lenders. However, as the lease agreement provides for recovery of debt service dues,
and the asset is already mortgaged to SPV lenders, the mortgage of leasehold rights is always
subordinate to the rights of the SPV lenders. Therefore, usually SPV lenders provide second
charge on the land (and building, as the case may be) in favour of the lenders to the unit. The
above arrangement leads to discomfort amongst some members of SPVs.
The above mentioned challenge may be addressed through following arrangements:
• One possible solution may be that the entire land is not mortgaged to lenders by SPV.
The land area available for Core Processing Facilities (Common Facilities) and for
basic enabling infrastructure only may be mortgaged by SPV to the banks for term
loan purposes by keeping the land area for units free of mortgage. In this way, the
units coming up in such parks will be able to arrange finances by mortgaging the plots
to the banks. Such arrangement has already been taken up in some of schemes.
• In most of the industrial parks, the title of the land is never conveyed to the units/
members, as the Government Schemes require the assets to be vested in the SPV. In
such cases, the land/plots are given on long term leases to each unit separately. The
units may be required to pay annual lease rentals to the SPV towards the plots. In this
way, there would be no capital expenditure on land and the lease rentals would
become a part of operating costs of the unit. In such cases, as the cost of land is not a
part of project capital cost, the land may not be used as mortgage by the bank. The
P&M and other assets may be used for mortgage for leveraging bank finance
• The bank(s)/consortium of banks which have extended the financial support to the
SPV for the project should be encouraged to provide term loans to the units in the
park. As the lending bank(s) already have a fair idea about the project components,
financial projections, the viability of the project and overall project structure, their
comfort level would be higher regarding such units. Also as the land for the park is
already mortgaged to the bank(s), they would most likely come up with suitable
arrangement for further lending to the units
• To encourage common infrastructure projects, it is also suggested that banks may be
more flexible in releasing of partial security. This would streamline compliances by
the SPV, reduce its administrative costs and also encourage clear and discrete division
of responsibilities between members
(5) Project Structuring Options for Improving Bankability
Several structures have been introduced to improve the creditworthiness of SPVs promoting
common infrastructure projects. IL&FS has been the pioneer in arranging debt finance for
cluster projects and has arranged loans for several industrial cluster projects. It has raised
loans from banks, institutions like SIDBI, LIC, IIFCL, and has also taken debt exposure in
few projects. As mentioned earlier, due to distributed ownership, and mutually exclusive debt
service obligations of the members, there could be shortfall in debt service in some of the
months. To address this, IL&FS has used the following two measures:
• Debt Service Reserve Account (DSRA): In the project cost, provision is made for
DSRA which is equivalent to 6 months’ debt service obligation of the SPV. Thus, in
case of temporary mismatch in cash flows of the SPV, the DSRA can be used to
ensure timely repayment to the lenders. Therefore, if all the members default in
repayment, the loan can become NPA only after 6 months, and likelihood of all
members or even a significant proportion of members defaulting is limited
• Common Debt Service Fund (CDSF): In some of the projects, an additional reserve
is stipulated. This involves collection of an additional amount equivalent to 10% of
monthly debt service payment by each member, which is kept in a separate account.
The CDSF is collected till the balance is equivalent to 50% of net outstanding term
loan allocated to the member. In case of any temporary shortfall or default in payment
in any month by the member, the CDSF can be used to make payment to the lenders
Considering the nature of the large infrastructural projects with different types and tenure of
revenue generations, the banks, instead of a blanket fit for all repayment schedules, should
come up with innovative loan products with repayment schedules aligned to the revenue
generation
The banks may also consider creating other innovative risk mitigation strategies to protect its
loans for these kinds of projections. Products in line with the Credit Guarantee Scheme
(CGS) of GoI & SIDBI, suitably modified for large infrastructural projects, should be
developed. Other forms of innovations such as risk sharing funds, insurance mechanism for
credit risk etc. may also be explored in this regard. The banks may also incorporate suitable
ways of bringing in new promoters/ management and/ or funds into the project to help
recover the projects in case of default due to low operational level etc.
Annexure-
Annexure-1
• Study of existing PPP models, schemes and programs presently being implemented by
various central government ministries for promoting industrial infrastructure for MSMEs.
• Performance of such PPP models and other models of assistance
• Major challenges being faced by such programs and issues involved
• Impact of such PPP based programs and other such models
• Success Stories for such models and its potential for replication
• Legal and regulatory framework for projects under such schemes and programs.
• Operation and Management framework for such PPP models of assistance including
various structures of Special Purpose Vehicles (SPVs) being used (in PPP and Private
projects)
• Financial Models for raising funds for capital expenditure for such projects
• Project structuring for creation of mortgage rights/other securities for lenders to facilitate
debt for project
• Response of banks and financial institutions towards funding of such projects and
challenges being faced in this regard
• Existing policy constraints (land, other statutory approvals etc.) for such PPP based
schemes/programs
• Assessment of demand for such projects in the country vis-à-vis schemes/programs
promoting these projects
• Policy recommendations for addressing key concerns of banks and financial institutions
for such projects.
185
Annexure-
Annexure-2
S No. Scheme Beneficiary/Eligibility Intervention GOI Contribution Remarks / Benefits
1 Micro and Small A minimum of 20 MSE units required to A combination of Hard and Soft The GOI contribution is as follows: (i) Scheme under Ministry of Micro, Small
Enterprises - Cluster be member of the SPV interventions, as emerging from the For preparation of Diagnostic and Medium Enterprises
development Programme Diagnostic study. Study Report: Rs 2.50 lakhs
They can be: For Soft Intervention, contribution (ii) The scheme is open to all industries and
Creation of Common will be 75% and 90% for North follows a collective approach of development
FacilityCentres Eastern states and for clusters
Infrastructure Development where more than 50% are women, (iii) The GOI contribution does not include
SC/ST units. land and civil works cost
For Detailed Project Report, GOI
will contribute Rs 5 lakhs. (iv) The scheme has been utilized largely only
For Setting up CFC, GOI will for softer interventions as of March 2006, thus
contribute maximum 70% of the the Ministry has decided to broad base the
total project cost and 90% for NE scheme for including HARD interventions
states.
For Infrastructure Development,
GOI will contribute maximum
60% of the total project cost and
80% incase of North Eastern and
hill states.
2 Modified Industrial State Implementing Agencies Support to be provided for developing 75% of the project cost subject to a ceiling of (i) Scheme under Ministry of Commerce &
Infrastructure Common infrastructure, ICT Rs. 50 crores. Industries, Department of Industrial Policy &
Upgradation Scheme infrastructure, R&D Infrastructure Promotion
(Research), Quality Certification Center,
International Marketing Infrastructure, (ii) Only selected existing, high potential
Infrastructure for process reengineering bearing clusters to be provided funding limited
to Rs. 50 crores
(iii) Follows a very inclusive approach of

Development
(iv) Post marketed facility, which may not

have sector specific infrastructure in so far as
some capital goods sub sectors are concerned
(v) Not extended to green field clusters

especially sectors which may need to be catered
to, like heavy engineering
186
3 Scheme for Integrated SPV formed by likeminded entrepreneurs Support to be provided for developing Grant support to the extent of 40 % of the (i) Scheme under Ministry of Textiles
Textile Parks in the textile value chain of activities Common infrastructure, Factory Project cost or Rs. 40 crores, whichever is
Buildings, Common Facilities and Plant lower. For NE states and Jammu & Kashmir, (ii) Textile Machinery Manufacturing is not
& Machinery this support can be 90% of total project cost included to extend benefits of this scheme
with a maximum ceiling of Rs. 40 crores.
(iii) Industry is the torch bearer of the scheme
with Government as a facilitator
(iv) Facilities being developed are pre

marketed so as to map every participants
requirements and provide for them, thereby
ensuring adequate viability
(v) Grant money cannot be used for land

purchase.
4 Scheme for SPV formed by likeminded entrepreneurs The interventions are as follows: The assistance would be restricted to 60 % of (i) Scheme under Ministry of Health and
Development of AYUSH from AYUSH sector the Project Cost subject to a maximum of Rs Family Welfare
clusters Primary Interventions 10 crores.
First Level Processing (ii) The scheme requires atleast 15 enterprises
Testing facilities to form the SPV in a cluster. Given the
Laboratories geographical dispersion of availability of
Quality control and standards raw materials, it proves to be a limiting
factor for such an arrangement
Add on Interventions
Common Marketing Brochure
Common Website
Joint Participation in National
and International Exhibitions
Business Delegations Abroad
Brand development and
promotion
Infrastructure to support the
production units such as
water supply, roads,
sewerage, effluent treatment,
power supply, boundary wall
etc.
187
5 Mega Food Park Scheme SPV formed by individuals, private The interventions will comprise of the The GOI contribution will be a capital grant (i) Scheme under Ministry of Food
enterprises from the food sector. following: as of 75% of the total eligible project cost for Processing Industries
(Earlier there was a requirement of more Core Processing Facilities, general areas and 90% of total project cost
than one individual to form the SPV, but Factory Buildings, Enabling for hilly and difficult areas respectively (ii) Cost of land is not included in the Grant
now it has been changed to one individual Basic Infrastructure, Non- subject to a ceiling of R. 50 crores component.
also) crore Infrastructures.
Establishment of 30-35 (iii) 50% of the total project cost should
processing units in each park constitute of core processing facilities
Direct and Indirect
employment creation of upto (iv) An integrative approach which envisages
30,000 to connect farms with processors through
creation of Primary Processing Centers
and Central Processing Centers
6 Scheme for Cold Chain, Individuals, Private Enterprises, Self Help The interventions will comprise of the The financial assistance will be 50% of the (i) Scheme under Ministry of Food
Value Addition and Groups, NGOs, Public Sector Units, following for components: total cost of Plant and Machinery and Processing Industries
Preservation Farmer Producer Organizations etc a. Farm level processing Technical civil works in general areas and
Infrastructure centers, 75% in case of NE states and hilly areas, with (ii) Out of component (a), (b) and (c) any two
b. Pre-cooling vans and reefer a limit of Rs 10 crores. has to be put up the promoters on their
vans, own to be eligible for financial assistance.
c. Distribution hubs and
d. Irradiation facility (iii) Component (d) is eligible to considered as
a separate project for availing the grant.
7 Comprehensive SPV preferably a Company with the The interventions will be in the The GOI assistance is designed as follows: (i) Scheme under Ministry of Textiles
Handicraft Cluster participation of related stakeholders, following areas:
Development Scheme particularly the leading manufacturers, Common facility centers; Soft skills such as skill development (ii) The SPV can also finance their
suppliers, buyers, and artisan CAD Centres; Training, Product Development requirement by dovetailing into other state
federations/SHGs. Communication Network; workshop, etc: and central government schemes
Design Banks; Rs 10 crores/ project
Establishment of Resource (iii) The funding categories can be broadly
Centers for major crafts; Common production related divided into the following three types:
Building Marketing Infrastructure which are artisan centric First type could be a project in
Infrastructure; such as CFC, Work shed, etc: which specific scheme of Govt.
Creation of Raw Material Banks. Rs 20 crores/ project of India exists
Second type could be those
Other commercial infrastructure – such specific interventions, which
Gas pipe line, etc: are required for growth of the
Rs 20 crores/ project Handicrafts cluster and are
covered as a part of scheme of
Facility Centers for the Office of the Development
Exporters/entrepreneurs: Commissioner [Handicrafts].
Rs. 2 crores/ facility Third type of intervention
centre/Entrepreneur relate to missing gaps, not
covered under the scheme of
Central or State Government
188
8 Mega Leather Cluster SPV formed by private companies The primary interventions are as follows: The GOI assistance can be 50% of the total (i) Scheme under Ministry of Commerce &
engaged in leather industry value Core Infrastructure project cost. Industries, Department of Industrial Policy
chain, industry organizations Social Infrastructure and Promotion
registered under Societies Act, Production Infrastructure The GOI assistance is subject to the
financial institutions, R&D Human Resource following limitations: (ii) Land development is a major component
institutions, State or Local Development of this scheme. Although there is no direct
governments or their agencies and Research and Development 20-60 acres land(without assistance in land procurement, financial
units within the Leather Industry. Infrastructure tanneries): Upto Rs. 50 crore assistance is linked proportionately with
Export related infrastructure 40-60 acres land(with tanneries): the land size.
Upto Rs. 50 crores
61-100 acres land: Upto Rs 70
crore
101-150 acres land: Upto Rs. 105
crore
More than 150 acres land: Upto
125 crore
9 Plastic Parks SPV formed by the consortium of Support to be provided for the following: The GOI assistance will be 50% of the total (i) Scheme under Ministry of Chemicals and
the following: Infrastructure to support project cost with a limit of Rs. 40 crore per Fertlizers
production units project.
User enterprises representing the Buildings for support (ii) Usage of the financial assistance has to be
manufacturing value chain Buildings and equipment / in the following way:
Mother/ anchor enterprise machinery for common facilities 25% for common enabling
representing the plastic facilities
sector/sub sector together with The scheme shall also support initiatives 5% for administrative and
ancillary enterprises which are soft in nature to ensure that the management support
A large infrastructure developer/ capacity of the beneficiary SPV and 5% for civil works
financial investor in association member enterprises is suitably
with user enterprises strengthened in order to absorb,
representing the plastic sector / implement and sustain the proposed
sub sector initiatives. These illustratively could
Any Central/ State Government include surveys /studies, sensitization
agency in association with user /awareness generation, skill development
enterprises representing the / training at various levels, exposure
plastic sector/ sub sector. visits etc.
10 Electronic and Manufacturing SPV formed by private enterprises. The scheme has to two parts: For Greenfield EMCs, the assistance (i) Scheme under Ministry of
Clusters Scheme Industry associations, R&D Brownfield EMCs, Greenfield will be 50% of the total project cost Communications and IT
Institutions, State or Local EMCs. with a limitation of Rs 50 crores for
Institutions every 100 acres of land. For larger sized (ii) The scheme is participatory in nature. In
Interventions will mainly focus on cluster, the limit would be decided by case of Brownfield EMCs, of the
the following: R&D center, tool pro-rata basis remaining project cost (after deduction of
rooms, training center and captive the GOI assistance) a minimum of 25%
power generation. For Brownfield EMCs, the assistance has to be financed by the units in the
will be 75% of the total project cost EMC. Similarly for Greenfield EMCs,
with a maximum limit of Rs. 50 crore. 15% of the remaining project cost has to
be financed by the unit.
189

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Final

IQF Individual Quick Freezing

SLBC State Level Bankers’ Committee

I. Recommendations for Restructuring of Schemes and Programmes

1200 Total 2000000

Market Value of Fixed Assets (in Crore)

Annual report 2012-13, Ministry of Micro Small, Medium Enterprises

Classification Manufacturing Sector Services Enterprises

Percentage Distribution of Area wise share (in %)

In most sectors, MSMEs are an integral part of large

The number of registered MSMEs in India has shown

Annual Growth Rate (in %)

Annual report 2012-13, Ministry of Micro Small, Medium Enterprise

(I) Rationale for Common Industrial Infrastructure/ Facilities for MSMEs

(1) Common Industrial Infrastructure/ Facilities

(2) Ownership and Management Structure

CODISSIA INDUSTRIAL PARK – Enabling Local

in India, have decided to come together to develop

Means of Finance Rs Crore Rs Crore

Envisaged Impact of the Project

for movement of construction material Role of IL&FS Clusters

(I) Scheme for Integrated Textile Parks (SITP), Ministry of Textiles

(2) Funding Pattern

(II) Micro and Small Enterprises–Cluster Development Programme

The admissible activities under this scheme are as follows:

other need based infrastructural facilities in new industrial (multi- product)

(4) Implementing Agencies

(5) Funding Pattern

(III) Modified Industrial Infrastructure Upgradation Scheme (MIIUS),

investments. Further, the Scheme also aims to upgrade infrastructure in Industrial

(1) Funding Pattern

(IV) Mega Food Parks Scheme (MFPS), Ministry of Food Processing

(1) Salient Features of Mega Food Parks

(3) Program Management Agency (PMA)

The Ministry appoints a Program Management Agency (PMA) to assist it in implementation

(4) Project Management Consultant (PMC)

(5) Funding Pattern

(V) Scheme for Cold Chain, Value Addition and Preservation

(2) Components of the Scheme

The eligible components under the Scheme are as follows:

(3) Funding Pattern

(4) Implementing Agencies

Any business entity including individuals (proprietorship concerns), groups of entrepreneurs,

(5) Selection Process

An Ideal Cold Chain project at Rai Food Park in Sonepat,

Sl No Major Cold Chain Components Capacity

(VI) Comprehensive Handicrafts Cluster Development Scheme (CHCDS),

• Moradabad Brass Mega cluster

The broad objectives of the scheme are as follows:

• To enhance the competitiveness of selected cluster in terms of increased market share

2. To provide requisite support/ linkages in terms of adequate infrastructure,

(2) Project Components

(3) Eligible Agencies

• Established NGOs, Artisan federations and SHG groups

• National Level institutions (both Private and Government owned) such as

(4) Implementing Agencies (IA) / Special Purpose Vehicle (SPV)

(5) Funding Pattern

(VII) Scheme for Development of AYUSH Clusters, Department of

An SPV should represent a cluster as a whole and should have a minimum of 15

(3) Pattern of Assistance

(4) Project Management Consultant (PMC)

(VIII) Mega Leather Cluster, a Sub-Scheme of Indian Leather Development

The major objective of developing Mega Leather Clusters is to create world-class