Cluster

_Development
__ Initiative

December 2006

www.ilfsindia.com
Index

 IL&FS-Cluster Development Initiative

 The Need
 Vision
 Approach & Methodology
 Bouquet of Services
 Our Footprint
 The Organogram
 Our Team
 Why Us?
Index

 IL&FS-Cluster Development Initiative

 The Need
 Vision
 Approach & Methodology
 Bouquet of Services
 Our Footprint
 The Organogram
 Our Team
 Why Us?
MSMEs: Integral Part of India’s Growth Strategy

 Significant contributor to Indian economy

 Employs more than 28 million people and accounts
for over
 40% of gross industrial value addition
 35% of direct exports
 15% of indirect exports

“Ensuring the competitiveness of small scale sector is important

as it would help in overall growth of Manufacturing Sector as also
the National Economy” - NMCC

The Need
Sub-Sector Engagement Is the Key for MSMEs
Development Programme

“Certain sectors emerge in the forefront of

growth and employment because of the unique
opportunities they enjoy at the present time.

Textiles & Garments,Leather & Leather

products, Food Processing, Auto components
and Drugs & Pharmaceuticals, select them
selves at this point in time”-NMCC

The Need
Textiles : Emerging Growth Story

Value in USD Billions

Burgeoning domestic markets and favourable international trade climate

in the post quota regime offer significant opportunities for the Indian
textile industry to grow rapidly
The Need
Increasing Market Share of Indian Clothing in US
Market

Before Quotas Post Quotas

The Need
Leather & Leather Products:significant Turnaround
and Growth

Value in USD Billions

The Need
Agro & Food Processing: …….

Value in USD billion

Emergence of organized retail chains in India and increasingly urbanizing lifestyles offer a strong
opportunity for SMEs to participate in supply chain as well as food processing segments

The Need
Auto Components……..

Value in USD Billions

The Need
Handicrafts: Growing Market for Ethnic Products

Value in USD Billions

The Need
Exploiting the Emerging Market Opportunities
Challenges & Constraints

 Global free trade regime - survival of the fittest

 Policy and fiscal rationalization within the country -

lower protection and increased competition

 Increasing technology benchmarks

 Lower turnaround time

 Compliances - trade and legal

 Lowering cost of manufacture and improving quality

The Need
 ……..Challenges

 Factors adversely affecting competitiveness of

MSMEs
 Limited size and scale
 Outdated technology
 Non-availability of finance
 Traditional marketing systems
 Inability to meet environmental compliances
 Poor infrastructure

The Need
MSMEs & Clusters

 Most of the MSMEs are located in 388 industrial

clusters across the country
 490,000 firms
 75,00,000 employed
 Rs 157,000 crores of annual output

The Need
….Some of the Prominent Clusters

Cluster Product Production % of total sectoral

(Rs. Crore) production

Ludhiana Woolen knitwear 5500 90

Panipat & Karur Home furnishings 5000 60
Tirupur Cotton knitwear 6500 60 (80% of exports)
Surat Synthetic textiles 7000 80
Jalandhar Sports goods 400 65
Jamnagar Brass parts 1000 70
Ludhiana Sewing machines 750 70
Ambur, Agra,Kanpur Leather 3500 80
Chennai & Gurgaon Auto components 6000 60
Badohi & Jaipur Carpets 3500 70
Alleppy Coir products 600 80
Rajkot & Coimbatore Diesel engines 3500 80
Cochin & Veraval Sea-food processing 3000 80
The Need
Cluster: Definition & Principle

Definition:
Geographical concentration of units producing
similar products and facing similar threats and
opportunities

Principle:
Collaborating while competing

The Need
Why Cluster Based Approach?

 Offers critical mass for customization of interventions

 Economies of scale in operation
 Better access to technology, information
 Greater access to customers, channels
 Cheaper access to inputs, raw materials

“Clusterapproach should be the preferred route for improving

the manufacturing competitiveness. New and innovative
approaches to cluster development should be adopted”- NMCC

The Need
Some Benefits of Clustering

1 2 3 4
Commercial Economic Environmental Social
Benefits Benefits Benefits Benefits

1. Enhanced 1. Sharing & 1. Aids in 1. Employment

chances of Pooling of decongesting generation
securing resources units from
2. Compliance
larger urban areas
2. Sharing to trade
contracts
Business 2. Ensures that related
2. Greater Development environment barriers
bargaining & Operating al safety
3. Ensures
power with Costs standards
enhanced
customers are
3. Access to security
maintained
3. Greater New during the
presence in Technology 3. Various start up
the market forms of phase
place pollution
always under
4. Guidance
check
from
experienced
larger
companies
with shared
risks The Need
Index

 IL&FS-Cluster Development Initiative

 The Need
 Vision
 Approach & Methodology
 Bouquet of Services
 Our Footprint
 The Organogram
 Our Team
 Why Us?
IL&FS Cluster Development Initiative
Vision , Goals and Objectives

Vision
IL&FS would be the preferred service provider to
MSMEs and the Government for developing clusters
across the country
Approach
PPP driven & ‘Concept to Commissioning’
Development Goal
Contributing to creation of 1 million jobs by 2010
Commercial objective
Rs 1 billion annual revenues by 2010
Index

 IL&FS-Cluster Development Initiative

 The Need
 Vision
 Approach & Methodology
 Bouquet of Services
 Our Footprint
 The Organogram
 Our Team
 Why Us?
Our development approach in addressing critical
gaps to enhance sustainability

Not for profit Commercial

Critical Infrastructure
Soft Inputs
Marketing, Credit

Association SPV (Company)

Approach & Methodology

Cluster based PPP Model where we play a pivotal role in
bringing the stakeholders together

SMEs

Banks/FIs
Government Other
Institutions

Approach & Methodology

Methodology entails handholding the stake holders
from “concept to commissioning”

Concept Need Assessment

Capacity Building

Project Development

Project Financing

Commissioning Project Execution

Approach & Methodology

With specific focus on Common Infrastructure in
the Cluster

Cluster Common Infrastructure

Physical Infrastructure Technology Infrastructure Marketing Infrastructure

CETP CFC Display centres

Power Supply Design Studio e-commerce

Water Supply Testing Centre Exhibitions

Approach & Methodology

Not forgetting the Social Capital which is a
prerequisite for SME common infrastructure

 Awareness creation
 Sensitization
 Trust
 Organization
 Capacity building
 Competitive reliance on one another

Approach & Methodology

Why are Cluster Parks different - A comparative
analogy

1 2

Cluster Parks Industrial Estates

1. Focus on the enterprises 1. Focus on real estate

and their needs 2. No involvement of user
2. Owned and managed by enterprises

user enterprises 3. Post marketed

3. Pre-marketed 4. Standard infrastructure

4. Customised infrastructure 5. Absence of collaborative

behavior
5. Homogeneous units with
strong linkages and
collaborative behavior
Approach & Methodology
Index

 IL&FS-Cluster Development Initiative

 The Need
 Vision
 Approach & Methodology
 Bouquet of Services
 Our Footprint
 The Organogram
 Our Team
 Why Us?
Bouquet of Services

CDI

Infrastructure Finance Capacity Building Technology Market Access

CLUSTERS

Textiles Agro Pharma Leather Artisan

Bouquet of Services
 Our Services are encompassing

1. Structuring of the Special Purpose Vehicle (SPV)

2. Proposal Preparation for funding from Central/State Govt

3. Financial Closure through syndication of debt funding requirements

4. Detailed Engineering/Procurement process including

a) Layout, design, detailed engineering

b) Preparation of cost estimates of the infrastructure facilities

c) Preparation of bid documents

d) Selection and appointment of contractors/consulting firms

5. Monitoring and supervision of implementation

6. Assistance in establishing systems and contractual structures for O&M

Bouquet of Services
 With Value Added propositions such as :

1. Capacity building of the SPV/members

2. Assistance in selection of appropriate technology/
machinery
3. Facilitating marketing tie-ups
4. Creating Brand concepts
5. Facilitating compliances:
a) Corporate Governance
b) Legal compliance
c) Social compliance
d) Environmental compliance

Bouquet of Services
Index

 IL&FS-Cluster Development Initiative

 The Need
 Vision
 Approach & Methodology
 Bouquet of Services
 Our Footprint
 The Organogram
 Our Team
 Why Us?
Focus Areas and Current Mandates

Focus Areas and Current

Mandates
New Industrial Clusters
Existing clusters-
(Induced)
Infrastructure
improvement

Textiles Leather Pharma

Skill Development

Agro Processing

Growth Poles Policy Advisory

Artisan clusters
Our Footprint
Commencing with formulation of the Scheme for Integrated
Textile Parks (SITP)

 Addresses infrastructure constraints of textile industry on cluster basis-

sectoral and cluster approach
 Targets growth potential clusters- 26 parks, Rs.13,126 Cr investment,
Rs.19,529 Cr Annual production, 5 Lakh employment
 Critical mass of entrepreneurs- cluster
 SPV led by entrepreneurs to own, develop & manage park-
sustainability
 GoI as facilitator – 40% of project cost not exceeding Rs. 40Cr as
grant/equity- improving viability and need based
 IL&FS as Programme Manager – for handholding support from
“concept to commissioning”-proactive project development

Our Footprint
Small footsteps has resulted in 26 Park Projects
being approved so far under SITP

State No of
Parks
Andhra Pradesh 4
Gujarat 6
Maharashtra 6
Tamil Nadu 5
Rajasthan 2
Karnataka 1
Uttar Pradesh 1
West Bengal 1
Total 26

Our Footprint
Expected Techno-commercial impact due to
development of Textile Parks
State No of Aggregate Employment Annual Weaving Annual Annual
Parks Investment (No of Persons) Production Capacity Processing Garmenting
(Rs. crores) (Rs. crores) (No of shuttle Capacity Capacity
less looms) (Million (Million
meters) Pieces)

Andhra Pradesh 4 5512 124,000 7825 4788 1347.5 297.00

Gujarat 6 3164 73,500 5034 4106 1610.5 37.00

Maharashtra 6 2020 38,100 2550 6516 126.8 10.00

Tamil Nadu 5 1298 30,500 1895 2214 318 7.00

Rajasthan 2 650 17,000 1350 1260 0.5 2.5
Karnataka 1 132 2,000 350 704 - -
Uttar Pradesh 1 210 3,500 225 600 12.5 2.25
West Bengal 1 140 30,000 300 - - 30.00
Total 26 13,126 500,400 19529 20,188* 3415.8** 386.00

* The number of shuttle-less looms (20,188) out of this initiative will be 2/3rd of the existing
shuttle-less weaving capacity (32,000) in the decentralized sector

** Includes yarn processing, fabric processing as well as texturizing, converted into million
meters

** The modern processing capacity (3416 million meter) out of this initiative will be 35% of
the existing modern processing capacity (6,000 million meter)
Our Footprint
Our footprint has been covering more sectors ever
since - > 40 clusters

 Industrial  Agro
 Textiles – 26
 Bamboo - 1
 Fisheries- 1
 Chemical - 3
 Rubber-1
 Steel – 2
 Pharma-1  Craft
 Light engineering-1
 Art Metal-ware -1
 Stone Carving - 1
 Foundry- 1
 Zari -1
 Leather-2
 Bamboo-1
 Chemical-1

Our Footprint
Project Development Process - A Snapshot

Identification of cluster
Interaction with industry
associations and other
representatives
Identification of potential Need assessment and Assessment of Common
Entrepreneurs capacity building infrastructure, amenities
& factory buildings for
Identification of Land Establishment
Establishment of
of SPV
SPV
the park
Procurement
Procurement of
of Land
Land Preliminary layout plan
Preliminary Costing
Vetting by SPV
Detailed Engineering & Procurement
Preparation of DPR
Award of contract
GoI Approval
Construction & Supervision
Financial closure
Operation & Maintenance
Our Footprint
Growth Pole Projects

 Integrated development of a sub-district (about 1000

sq kms) with economic potential that would become
growth engine with in the region
 Cluster of clusters
 Enterprise development with PURA (infrastructure and
linkages)
 Projects are being formulated by GoI (SSI) through
National Commission for Enterprises in Unorganised
Sector (NCEUS)
 IL&FS has been mandated to prepare the DPRs to
begin with
Our Footprint
The Growth Pole Concept

Eco – System For

Sustainable Employment and Incomes

Existing Promotion Attracting

Enterprises & of New
Clusters Potential Clusters Investments

Capacity Building Market Factor Conditions

Skills Business Dev Services Policy Initiatives
Technology Prod. Infrastructure

Infrastructure and PPP Institutional

Linkages (PURA) Framework
Our Footprint
Growth Pole: Evolution and Development
STAGE I
Public

Existing and Capacity Building:

Potential clusters

Business Development
Skills and Micro Finance

Inst.

Services
Organisations Production Inputs:
(Formed with Common
Interest Groups/SHGs) Technology and Design Advisory

Enabling Policy Framework

Group/
Project
Market Linkages Manager
Market

Cluster / Sector Development

PPP

STAGE II
Finance Infrastructure and Linkages SPVs
Technology Upgradation

Demand for employees and migrants

Private

STAGE III ULB

Social Infrastructure Retail Services Housing

Growth Pole Our Footprint

Skill Development – a precursor to industrial growth

“If Indian manufacturing sector has to grow at

a rate of 12% per annum, it will be necessary
for the education and training system to
produce at least 1.5 million technically skilled
people every year” - NMCC

Our Footprint
Manpower Development for Apparel Industry

 Apparel – fastest growing segment in the textile value

chain
 In need of skilled manpower at various levels
 Lack of trained manpower has been adversely affecting
volumes, quality and productivity
 Demand-supply gap of 1.9 Million persons by 2010
 Limitations of the present initiatives:
 Current training capacity (govt & private) is only 40,000 per
year
 Quality of training does not match with the industry
requirement
Our Footprint
 The Strategy

 Demand driven and placement assured programme

 To train 1 million persons over a period of six years
 Leverage the infrastructure of existing institutions like
ITIs, PSCs, ATDCs, and private/NGO vocational
institutions.
 Bring in innovative multi-media based teaching
methodology and market oriented curriculum
 Driven by SPV with industry participation
 Government to provide one-time capital support
Our Footprint
The Approach

APPTEX Manpower Advisory

MoRD Development Company Committee
Limited (SPV)
Assistance towards • Provide equipment
• Equipment • Content development
• Content development • Train the trainers
• Teaching aids • Certification
• O&M expenses • Placement Assistance

Training Partners

Training Centres
(Polytechnics/ ITIs/PSCs/
ATDCs/NGOs/ Private
Entrepreneurs

• Provide Land & Building

• Conduct programme
• Placement Feedback
Trainee
Our Footprint
The Process flow

Identification of Prospective Employer

Assessment of manpower requirement

Identification of Potential catchment area

Identification of BPL trainees as per GoI Norms

Screening by SPV representative with respect to

suitability for training

Selection of trainees
Sending the trainees to nearest training centre by
SPV

Training by the SPV through training partner

Examination & Certification by training partner
under supervision of SPV

Placement by SPV
Our Footprint
IL&FS Anchoring the Initiative

 Concept developed and presented to major

stakeholders
 SPV has been incorporated
 Content development is in progress
 Training partners have been identified
 Ministries of Rural Development and Textiles have
agreed, in principle, to support the programme
 Industry has agreed to be part of SPV and the
programme
 To be launched by Feb 2007
Our Footprint
Index

 IL&FS-Cluster Development Initiative

 The Need
 Vision
 Approach & Methodology
 Bouquet of Services
 Our Footprint
 The Organogram
 Our Team
 Why Us?
 Our operating framework :

CEO

SME COO
Policy Experts
Architects
Legal
Experts
Engineers
Industry
Technical Project Finance Infrastructure Environment
Project Management
Experts Experts Planners Engineering
Experts
Experts
Brand
Marketing
Developers
Experts

Cluster Capacity Cluster Capacity Cluster Capacity Cluster Capacity

Building Expert Building Expert Building Expert Building Expert

Organogram
With emphasis on adding value to our clients by
providing Multidisciplinary inputs

Project SPV Engineering

Finance Capacity Building

Environment Legal Domain

Specialists Expert

Organogram
Index

 IL&FS-Cluster Development Initiative

 The Need
 Vision
 Approach & Methodology
 Bouquet of Services
 Our Footprint
 The Organogram
 Our Team
 Why Us?
 Skill Sets residing in-house:

 Given the breadth and depth of services provided by our team across
projects, an in-house cross-functional team with following skill sets has
been put in place
 Industrial Domain Experts to assist in defining technical contours of the
projects and providing SMEs access to technology and best practices
 Technical Experts to oversight physical project development
 Capacity Building Experts to develop SMEs’ capacity to move up the value
chain
 Project Development Experts to interface with sponsors, State Governments,
external technical consultants and other stakeholders on all aspects of project
development
 Project Financing team to structure projects and raise external financing
 Legal, Accounting and Secretarial expertise from within IL&FS’ and outside
Our Team
Our geographic presence helps us cater to the needs
of our clients in the North, South, East or West

Delhi
Jaipur

Ahmedabad

Kolkata
Mumbai

Hyderabad
Bangalore Chennai
Palladam

Our Team
Index

 IL&FS-Cluster Development Initiative

 The Need
 Vision
 Approach & Methodology
 Bouquet of Services
 Our Footprint
 The Organogram
 Our Team
 Why Us?
We believe in…

…………handholding India’s industrial growth through

considerable contribution from the MSMEs, by
providing them with strong infrastructure enablers
through a collaborative approach, thereby ensuring
trade related compliances and creating a conducive
framework for MSMEs to move up the value chain
efficiently and expeditiously
Thank you, and looking forward to work
with you soon

www.ilfsindia.com
You could reach us at: Sanjay Sethi

IL&FS
India Habitat Centre, 4th Floor
Lodhi Road, East Court,
Zone VI,
New Delhi - 110003
Tel: 91-11-24682060 to 63
Fax: 91-11-24682070 to 71

Email: sanjay.sethi@ilfsindia.com

Ravi Raman

The IL&FS Financial Centre, 3rd Floor

Bandra-Kurla Complex, Bandra (E)
Mumbai - 400 051
Tel: 91-22-66947682
Fax: 91-22-66947700
Email: ravi.raman@ilfsindia.com

www.ilfsindia.com