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 Indias 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Outdated technology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

Production
(Rs. Crore)

% of total
sectoral
production

Cluster

Product

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
Cluster approach 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

1.

2.

3.

4.

Commercial
Benefits
Enhanced
chances of
securing
larger
contracts
Greater
bargaining
power with
customers
Greater
presence in
the market
place
Guidance
from
experienced
larger
companies
with shared
risks

1.

2.

3.

Economic
Benefits
Sharing &
Pooling of
resources
Sharing
Business
Development
& Operating
Costs
Access to
New
Technology

1.

2.

3.

Environmental
Benefits
Aids in
decongesting
units from
urban areas
Ensures that
environment
al safety
standards
are
maintained
Various
forms of
pollution
always under
check

Social
Benefits

1.

Employment
generation

2.

Compliance
to trade
related
barriers

3.

Ensures
enhanced
security
during the
start up
phase

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

Government

Banks/FIs
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

Cluster Parks
1. Focus on the enterprises
and their needs
2. Owned and managed by
user enterprises

Industrial Estates
1. Focus on real estate
2. No involvement of user
enterprises
3. Post marketed

3. Pre-marketed

4. Standard infrastructure

4. Customised infrastructure

5. Absence of collaborative

5. Homogeneous units with

behavior

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
Infrastructure

Finance
Finance

CapacityBuilding
Building
Capacity

Technology
Technology

MarketAccess
Access
Market

Leather

Artisan

CLUSTERS
Textiles

Agro

Pharma

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
(Induced)

Textiles

Leather

Existing clustersInfrastructure
improvement

Pharma

Skill Development
Agro Processing
Growth Poles
Artisan clusters

Policy Advisory

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 parksustainability

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

Gujarat

Maharashtra

Tamil Nadu

Rajasthan

Karnataka

Uttar Pradesh

West Bengal

Total

26

Our Footprint

Expected Techno-commercial impact due to

development of Textile Parks
No of
Parks

Aggregate
Investment
(Rs. crores)

Employment
(No of
Persons)

Annual
Production
(Rs. crores)

Weaving
Capacity
(No of shuttle
less looms)

Annual
Processing
Capacity
(Million
meters)

Annual
Garmenting
Capacity
(Million
Pieces)

Andhra
Pradesh

5512

124,000

7825

4788

1347.5

297.00

Gujarat

3164

73,500

5034

4106

1610.5

37.00

Maharashtra

2020

38,100

2550

6516

126.8

10.00

Tamil Nadu

1298

30,500

1895

2214

318

7.00

Rajasthan

650

17,000

1350

1260

0.5

2.5

Karnataka

132

2,000

350

704

Uttar Pradesh

210

3,500

225

600

12.5

2.25

West Bengal

140

30,000

300

30.00

26

13,126

500,400

19529

20,188*

3415.8**

386.00

State

Total

* 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

Chemical - 3

Fisheries- 1

Steel 2

Rubber-1

Pharma-1

Light engineering-1

Art Metal-ware -1

Foundry- 1

Stone Carving - 1

Leather-2

Zari -1

Chemical-1

Bamboo-1

Craft

Our Footprint

Project Development Process - A Snapshot

Identification
Identificationofofcluster
cluster
Interaction
Interactionwith
withindustry
industry
associations
associationsand
andother
other
representatives
representatives
Identification
Identificationofofpotential
potential
Entrepreneurs
Entrepreneurs

Need
Needassessment
assessmentand
and
capacity
building
capacity building

Identification
IdentificationofofLand
Land

Establishment
EstablishmentofofSPV
SPV
Procurement
ProcurementofofLand
Land

Detailed
DetailedEngineering
Engineering&&Procurement
Procurement
Award
Awardofofcontract
contract
Construction
Construction&&Supervision
Supervision
Operation
Operation&&Maintenance
Maintenance

Assessment
AssessmentofofCommon
Common
infrastructure,
amenities
infrastructure, amenities
&&factory
factorybuildings
buildingsfor
for
the
park
the park
Preliminary
Preliminarylayout
layoutplan
plan
Preliminary
PreliminaryCosting
Costing
Vetting
Vettingby
bySPV
SPV
Preparation
PreparationofofDPR
DPR
GoI
GoIApproval
Approval
Financial
Financialclosure
closure
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
Enterprises &
Clusters

Promotion
of
Potential Clusters

Capacity Building
Market
Skills
Business Dev Services
Technology
Prod. Infrastructure

Infrastructure and
Linkages (PURA)

Attracting
New
Investments
Factor Conditions
Policy Initiatives

PPP Institutional
Framework
Our Footprint

Existing and
Potential clusters

Market

STAGE I

Skills and Micro Finance

Production Inputs:
Technology and Design

Market Linkages

Inst.
Advisory
Group/
Project
Manager

PPP

Cluster / Sector Development

STAGE II
Technology Upgradation

Finance

Infrastructure and Linkages

SPVs

Private

Demand for employees and migrants

Social Infrastructure

Retail Services

Growth Pole

STAGE III
Housing

ULB

Our Footprint

Enabling Policy Framework

Organisations
(Formed with Common
Interest Groups/SHGs)

Capacity Building:

Business Development
Services

Public

Growth Pole: Evolution and Development

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

MoRD

APPTEX Manpower
Development Company
Limited (SPV)
Assistance towards
Equipment
Content development
Teaching aids
O&M expenses

Advisory
Committee

Provide equipment
Content development
Train the trainers
Certification
Placement Assistance

Training Partners

Training Centres
(Polytechnics/ ITIs/PSCs/
ATDCs/NGOs/ Private
Entrepreneurs
Provide Land & Building
Conduct programme
Placement

Trainee

Feedback

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
COO

SME
Policy Experts

Architects

Legal
Experts
Industry
Technical
Experts

Engineers
Project Finance
Experts

Project Management
Experts

Infrastructure
Planners

Environment
Engineering
Experts

Marketing
Experts

Cluster Capacity
Building Expert

Cluster Capacity
Building Expert

Cluster Capacity
Building Expert

Brand
Developers

Cluster Capacity
Building Expert

Organogram

With emphasis on adding value to our clients by

providing Multidisciplinary inputs

Project
Finance

Environment
Specialists

SPV
Capacity Building

Legal

Engineering

Domain
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 Indias 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