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

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