Evaluation Study MSE Cluster Development - Ministry of Micro ...

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Chapter No: 5– The Special Purpose Vehcile5.2 The Scope and Functions of the Special Purpose VehicleThe revised guidelines of the SICDP framed in March 2006, emphases the need forcreating a collective institution called the Special Purpose Vehicle, its very name ornomenclature reflects that it is a body specially setup for effectively undertaking certainspecial collective tasks on behalf of the individual cluster units. The guidelines state inPara 3.2 (please see Annexure 1 to Chapter I of this report) that there is a need forcreating an implementation agency which is “A clear legal entity with evidence of priorexperience of positive collaboration among its members, whether formally or other wise,as the applicant of the proposed cluster development initiative assures soundmanagement ideally, therefore, all proposals for cluster development seeking assistanceunder the SICDP must emanate from special purpose vehicles (SPV), consisting of theactual/likely cluster beneficiaries/enterprises organized in any legally recognized formlike a cooperative society, registered society, trust, company, etc.”The revised guidelines in Para 3.2.1 goes on to emphasize that “It will, however benecessary to constitute the SPV at the earliest possible, with clear indication of the timeframe for completion of this essential requirement while submitting the proposal forGovernment assistance.”It may be emphasized that the official definition of the SPV provided in the guidelinescan be interpreted and utilized in a manner that may dilute the sound intentions of themove as well as the very objectives of the SICDP. Nevertheless the intentions beingclear the definition of the SPV can be considerably improved to effectively optimize theintent.The formation of the SPV as stipulated in the present guidelines is justified as it enablesthe following:• Collective and democratic decision making and management• Accountability to funding and financing institutions.• Transfer of funds, procurement of credit and other financial assistance.• Equitable participation and the sharing of benefits, responsibilities, and risks.This legal/legitimate entity is then required to be registered with the appropriateregulatory and controlling agencies of the state, allowing it to function within thebounds/limits legally prescribed and stipulated.The SPV thus formed and registered enables the selection of projects that serve thecommon needs and requirements of the cluster as a whole, formulate the detailedproject report DPR, and obtain the required approvals and clearances, set up, manage,and operate the common facility for the mutual benefit of the concerned cluster and allits constituent units.92
Chapter No: 5– The Special Purpose Vehcile5.3 The Most Suitable Organizational and Legally RecognizedForm of the Special Purpose VehicleAs mentioned in the revised guidelines the SPV can be organized in several legallyrecognized forms such as a Cooperative Society, a Registered Society, a Trust, or aCompany. It is therefore essential to evolve a strong consensus among the clusteractors as to the organizational form most suitable for the specific cluster in conformitywith the nature and characteristics of the cluster. There is a fairly wide variation in thenature and characteristics of clusters. The varying nature of the clusters in terms ofproducts, scale of operations, technology and processes, as well as markets determinethe needs and priorities of commonly shared facilities. It is therefore extremelyimportant to arrive at a common consensus on the organizational form that should beadopted to serve these needs most effectively. The nature of the common facilitiesrequired may also vary from cluster to cluster. Some may require a developmentalfacility, or quasi-developmental common facility, while others may need a commonprocessing, or testing facility that can best be developed and sustained on purelycommercial lines to ensure viability and profitability.Cooperatives and Registered Societies appear to be more suitable for clusters, whichhave a large number of small and micro enterprises with a limited scale of operations, alimited product range and limited financial capacities. These units are likely to be morelabour intensive predominantly employing family labour and requiring common facilitiesthat ensure quality and standardization, marketing support, and the collectiveprocurement of raw materials and other inputs.On the other hand there are clusters where both the scale of operations and the productrange is large and diverse. The units may be relatively larger with higher financialcapacities. These units are also likely to be more capital intensive requiring commontesting and processing facilities. These common facilities may have to be run on purelycommercial lines and run like any other normal enterprise involving sharing of profits andreinvestment in expanding these facilities. The SPV in the case of such clusters may bebest organized as private limited companies though in these cases the number of shareholders/enterprises would be statutorily limited. However it may be emphasized that inthe case of an SPV being registered as a private limited company the extent of benefitsand collective participation by cluster actors in general is likely to be limited and thetendency of monopolizing the facility for the benefit of a few dominant cluster membersis most likely. However even in this case wider participation and sharing of benefits ispossible if shares are held by a group of individual cluster members/enterprises, in theform of a ‘holding company’.In principle as the objectives of Cluster Development aims to promote inclusiveness ofall cluster actors and the effective sharing of the benefits by the largest possible numberof cluster actors it is desirable to ensure that the organizational form adopted isconducive to the maximum participation. The size and capacity of the common facility isnormally proposed on the basis of the number of cluster members who are ‘likely’ toutilize the facility, however if the organizational form adopted restricts the participationin the SPV and furthermore discriminates against the utilization of the common facility bythe non SPV members of the cluster, then the facility created for the cluster may be93
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EVALUATION STUDY OF MICRO & SMALLEN
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2.12 PROGRESS AND PRESENT STATUS OF
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INDEX OF TABLESTable No.- 1.1: CLUS
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COMMONLY USED ABBREVIATIONSBDSBusin
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31 million persons spread over 12.8
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Nevertheless, it is expected that t
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4. Role of the schemes in bringing
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Table No. - 1.1 (contd.)East/ North
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ANNEXURE - 1.1 Guidelines for Clust
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• Approval of budget and leveragi
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14. Contribution of the Ministry of
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Chapter No:2 - The General Profile
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Evaluation Study MSE Cluster Development - Ministry of Micro ...

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