MSE-CDP

GUIDELINES FOR MICRO AND SMALL ENTERPRISES – CLUSTER DEVELOPMENT PROGRAMME (MSE-CDP)

Effective from 24 May 2022
1. Purpose and Policy Context
The Micro and Small Enterprises – Cluster Development Programme (MSE-CDP) is a long-standing Ministry of MSME scheme. The former Small Industries Cluster Development Programme was renamed MSE-CDP in October 2007, and the Integrated Infrastructural Development Scheme was subsumed within it. The revised guidelines supersede earlier provisions and apply prospectively from their date of issue.
The revision responds to post-COVID requirements, Atma Nirbhar Bharat, “Vocal for Local to Global,” “Zero Effect to Zero Defect,” Udyam-based cluster identification, process simplification, stronger State participation, and end-to-end digitisation. The programme is intended to align with SFURTI and leverage MSME Technology Centres for advanced common facilities, technology support and skilling.
2. Core Objectives
Improve the sustainability, competitiveness and growth of micro and small enterprises through better technology, skills, quality and market access.
Build the collective capacity of MSEs and start-ups through SPVs, self-help groups, consortia, industry associations and other collaborative structures.
Create or upgrade infrastructure in new and existing industrial areas and clusters.
Establish Common Facility Centres (CFCs) for testing, training, raw materials, effluent treatment and shared production processes.
Promote green, resource-efficient and sustainable manufacturing technologies.
3. Cluster and Scheme Components
A cluster is a geographically identifiable group or value chain of enterprises producing similar, complementary products or services and sharing common infrastructure needs, technologies, markets, skills, risks or opportunities.
Component
Purpose
Typical Coverage
Common Facility Centre (CFC)
Creation of shared tangible assets in an industrial estate
Production, testing, design, training, recycling, logistics, raw material, renewable energy and other common facilities
Infrastructure Development (ID)
Development or upgradation of notified industrial infrastructure
Roads, water, drainage, power, common utilities, effluent treatment, renewable energy, storage and safety systems

4. Guiding Principles
Projects should solve clearly demonstrated common constraints and create measurable cluster-wide benefits.
DPRs must be supported by credible market, demand, technical, financial and implementation analysis.
Projects should promote inclusion, professional management, transparent procurement, digital monitoring and long-term operational sustainability.

5. Funding Pattern and Project Cost
Project Category
Eligible Project Cost
GoI
State
SPV
CFC
₹5–10 crore
70%
20%
10%
CFC
₹10–30 crore
60%
20%
20%
New ID
₹5–15 crore
60%
40%
—
Upgrade existing ID
₹5–10 crore
50%
50%
—


Special-category locations: For Aspirational Districts, the North Eastern Region, Hill States and Islands, the corresponding patterns are 80:15:5 and 70:15:15 for CFCs, 70:30 for new ID, and 60:40 for existing-ID upgradation.

Projects above the stated ceilings may be considered, but central assistance is calculated only up to the applicable maximum eligible cost. Projects below ₹5 crore are normally expected under SFURTI, except eligible rural-industry or FPO-focused interventions considered under the guidelines.
6. Eligible Cost and Financing Conditions
CFC project cost may include land, subject to a maximum of 25% of project cost, building, machinery and equipment, fixed assets, utilities, preliminary and pre-operative expenditure, and margin money for working capital.
Preliminary and pre-operative expenditure is capped at 2% of project cost. Working-capital margin is based on actual need but must remain below 25% of first-year working-capital requirements.
GoI does not separately fund DPR preparation. Up to 4% of project cost, capped at ₹50 lakh, may count as State/SPV or eligible contributor support for DPR preparation, consultancy, PMU support and operational handholding, subject to SLSC approval.
Medium or large anchor firms, government bodies, buyers, machinery or raw-material suppliers and business-development providers may contribute toward the State share. Their SPV equity is limited to 26%, with only one representative.
No duplicate grant may be taken from another GoI scheme for the same project. Preference is given to projects with a bank-loan component of at least 10% of project cost.

7. Land, Building and Ownership
CFCs should ordinarily operate from land/buildings owned by the SPV. Leased premises must be legally valid and long-term. Building leases should be at least 15 years, while leased land should ordinarily be for at least 25 years.
Leases from individual members or their family members are not permitted. ID land must be held by the State or State implementing agency with clear title, zoning compliance and required land-use conversion.
Plant and machinery procured with public support remains vested in the State Government or designated Ministry institution, while the SPV has custody and operational use.

8. SPV Requirements and Governance
CFC projects require a Section 8 company as SPV, except specified alternatives for Sikkim. Eligible FPOs/FPCs may also act as SPVs.
Minimum membership: 20 units for CFCs above ₹10 crore and 10 units for CFCs below ₹10 crore. Members should contribute through equity; additional contribution may be unsecured, interest-free loans.
Member contribution is normally 10% below ₹10 crore and 20% above ₹10 crore, with lower NER limits of 5% and 15% respectively.
The Board should comprise industry-related member directors and at least one experienced professional. A full-time operations head must be identified before disbursement. Performance and financial audits apply.

9. DPR, Appraisal and Approval Process
The SPV or State Government is responsible for preparing the DPR. It must establish the need for the facility, expected competitiveness gains, demand and capacity utilisation, technical design, environmental and statutory compliance, project cost, financing, management, implementation schedule, risks and measurable outcomes.
Stage
Key Responsibility / Requirement
Preparation and appraisal
DPR prepared by SPV/qualified agency; appraisal by SIDBI or a commercial bank; techno-economic feasibility report required.
Parallel submission
DPR submitted to the State-level committee and concerned MSME-DI to reduce processing time.
SLSC review
State Level Steering Committee examines, recommends, monitors and may act as a single window for clearances. If no decision is made within the prescribed time, deemed recommendation may apply, subject to the guidelines.
NPAC approval
Projects recommended by SLSC are considered by the National Project Approval Committee, which is to meet at least once every two months. There is no separate in-principle approval.
Approval package
DPR, appraisal report, land records, geo-tagging, statutory compliances, SLSC recommendation/minutes and GFR/CVC compliance certificate; CFCs also require SPV incorporation, MoA and AoA.

10. Institutional Structure
The SLSC is chaired by the State’s senior Industries/MSME authority and includes the Industries Directorate, implementing agency, Finance Department, MSME-DI, District Industries Centre, technical institutions/Technology Centres and special invitees. The NPAC is chaired by the Secretary (MSME) and includes senior MSME officials and representatives from NITI Aayog, SIDBI, CSIR, NSIC/KVIC, relevant ministries, the concerned MSME-DI, State Government and industry/financial institutions.
11. Implementing Agencies and Procurement
CFCs may be implemented through Ministry institutions, State organisations, national/international institutions engaged in MSE development, or other agencies approved by the Ministry.
ID projects are implemented by State/UT Governments through appropriate industrial-development agencies.
Procurement of plant and machinery must follow transparent e-tendering through GeM or the Central Public Procurement Portal and comply with GFR/CVC requirements.
Where the SPV fully funds construction, it may construct the building against an approved plan, with quality and valuation certified by a Chartered Civil Engineer, PWD or CPWD.
A main CFC may have up to four local branches where dispersed users justify the arrangement; GoI assistance remains subject to the ₹30 crore eligible-cost ceiling.
12. Completion Period and Extensions
Projects are to be completed within 18 months from NPAC approval. Extensions may be granted sequentially: three months by the State Government, the next three months by AS&DC (MSME), the next 12 months by NPAC, and any further extension by the Minister/Minister-in-charge on the prescribed recommendation. After three years, delay attributable to the SPV may lead to reduction of the GoI share by up to 10%, to be met by the SPV.

13. Fund Release and Financial Controls
GoI grant is released to the implementing agency in three instalments in the ratio 50:40:10, linked to physical progress, expenditure and fund need. The final 10% is reimbursable after completion. Funds must flow through a project-specific bank account; interest earned on the GoI grant must be returned or adjusted as instructed.
Instalment
Core Conditions / Documents
First: up to 50%
Substantial building readiness, upfront SPV share, proportionate State/eligible contributor share, procurement finalisation, tripartite agreement, purchase-committee records, joint verification, pre-receipt/undertaking, CA-certified expenditure statement and compliance certificate.
Second: up to 40%
Utilisation Certificate for the first instalment, evidence of State/SPV contribution utilisation, procurement and progress verification, pre-receipt/undertaking and updated CA-certified expenditure.
Final: 10% reimbursement
Completion report, Utilisation Certificate, confirmation of complete State contribution, joint inspection/installation verification, interest details, pre-receipt/undertaking, CA-certified component-wise expenditure and MSME-DI completion report.

For bank-financed projects, a sanction letter and proportionate release commitment are required. SPV borrowing may not exceed 50% of its total project contribution, and CFC land, building, plant and machinery cannot be mortgaged or hypothecated for such borrowing.
14. Completion, Monitoring and Evaluation
Within two months of completion, the SPV/IA must upload the final completion report, output and outcome data, photographs, evidence of deliverables, payment records and audited final accounts.
All CFC and ID projects require geo-tagging. The digital portal is intended to cover the entire workflow, publish project information and support transparency.
Changes in project scope or increased public funding are not ordinarily entertained. Item-level expenditure deviation below 10% does not require prior approval; increased own contribution and early completion also do not require approval.
New projects may not be considered for a State where 25% or more of earlier projects are delayed by at least 24 months beyond the original period.
After completion, the SPV/IA must submit annual activity, benefit, income-deployment and audited-account information. MSME-DI must visit and upload its assessment. A third-party evaluation is undertaken after three years.
15. Performance Framework
Area
Illustrative Measures
CFC outcomes
Number of MSE users; increase in production, sales, employment and income; reduction in cost, wastage and rejection.
ID outcomes
Plots developed/allotted; roads; substations; water harvesting; effluent treatment; green energy and other common utilities.
Outputs
CFCs commissioned; plant and machinery operational; ID projects completed; final GoI instalments released through PFMS.

16. Key Compliance Checklist
Clear land title or compliant long-term lease; statutory approvals and land-use conversion.
Eligible SPV, minimum membership and contribution; professional governance and operations plan.
Bank-appraised DPR with demand, feasibility, financial viability, PERT schedule and measurable results.
SLSC recommendation, NPAC approval, tripartite agreement and project-specific bank account.
GFR/CVC-compliant e-procurement, joint verification, UCs, CA-certified expenditure and timely reporting.

17. Annexures: Consolidated Summary
Annexure
Purpose and Key Contents
1 – CFC admissible items
Shared production/processing, recycling, Industry 4.0, additive manufacturing, design/incubation, testing, packaging, training, R&D, effluent treatment, waste-to-energy, logistics, raw materials, plug-and-play, renewable energy, safety, value-addition linkages, export/FPO and service-sector facilities, and greenfield CFCs.
2 – ID admissible items
Boundary walls, roads, water supply/harvesting, drainage, power and street lighting, sanitation, flatted factories, common effluent treatment, renewable energy, common utilities, storage, water recovery, safety cells, technology services and greenfield industrial infrastructure.
3 – DPR format for CFC
Applicant and location; cluster profile; SPV and promoter details; eligibility; implementation; governance; technology, utilities and manpower; schedule/PERT; project cost and financing; utilisation and pricing; five-year projections; outcomes; approvals; SWOT, risk, DSCR, break-even, ROCE, NPV/IRR and conclusion.
4 – Tripartite agreement
Binding obligations of GoI, State/IA and SPV covering contributions, project completion, CFC operation, asset ownership, insurance, utilisation, audit, default, recovery, arbitration and management intervention.
5 – State certificate
Certification that the State will comply with GFR and relevant CVC guidelines while forwarding and implementing the project.
6 – Timelines
Milestones for DPR examination, SLSC recommendation, submission to DC-MSME, NPAC consideration, final approval, building construction, machinery procurement/installation, grant instalments, operationalisation, market linkages and model-CFC initiatives.
7 – CFC completion formats
Completion certificate, handover details, project and fund-release records, joint inspection, benefit comparison, audited component-wise expenditure and certification of satisfactory functioning.
8 – ID completion formats
Completion report, fund releases, implementation dates, UCs, plot development/allotment, employment, audited expenditure and joint verification of executed works.
9 – Pre-receipts and undertakings
Standard formats for CFC and ID grants acknowledging instalment receipt, acceptance of grant conditions and confirmation that duplicate grant support has not been sought.
10 – GFR 12-C
Utilisation Certificate for State Governments, including sanctioned amount, prior unspent balance, amount utilised, balance surrendered/adjusted and checks exercised.
11 – MSME-DI completion report
Confirmation of satisfaction with the completion report, achievement of targets and treatment of interest earned on released grant.

18. How to apply :

The Special Purpose Vehicle (SPV) shall submit the online application through the designated portal at http://cluster.dcmsme.gov.in.
After successful online submission, the SPV shall forward the duly signed hard copy of the application, along with all supporting documents, through the State Government, its authorized autonomous body, or the concerned MSME Development Institute (MSME-DI) under the Ministry of MSME, Government of India.MSME-DI) under the Ministry of MSME, Government of India.