Scheme of Funds for Regeneration of Traditional Industry (SFURTI) is a scheme launched by the Ministry of Micro, Small and Medium Enterprise, Government of India.
The scheme envisions the creation of traditional industry clusters, which include products manufactured in handloom and handicraft as well.
A cluster is a group of artisans and craftsmen, working in synergy in the manufacturing of products. It is also well equipped with modern tools and machinery for efficient manufacturing and has the availability of raw materials.
The responsibility of establishing a cluster rest on the Implementing agency, Technical Agency and Nodal Agency mentioned in the scheme guidelines.
The objective of the scheme is to establish an infrastructure for artisans to the promotion of rural entrepreneurship and bring market-fit products.
The scheme is a part of an initiative of the Government of India in making Atmanirbhar Bharat (self-sustainable India).
In this article, we will discuss how SFURTI Scheme guidelines make arrangements to make a cluster sustainable and self-sufficient after its implementation is successfully complete.
Table of content
- Exit Strategy of Agencies, First Step Towards Self-Sustainability?
- Responsibility of Working Committee in an SPV.
- Acquiring Private Investment Via Convergence
Exit Strategy of Agencies, First Step Towards Self-Sustainability?
A proposal for establishing a cluster of artisans is made on the proposal of the IA along with NA before the Screen Steering Committee.
The Scheme Steering Committee on evaluation of the proposal documents such as the Detail Project Report (DPR) provide sanction and funds to the NA for establishing the cluster.
For establishing a cluster, the scheme provides levels of interventions, and it is the duty of the agencies to implement the objectives of the DPR.
After attaining all intervention objectives, which usually takes around 12-18 months in execution, the agencies on completion of the cluster project, trigger an Exit Strategy.
Upon exit of the Implementation Agency and Technical Agency, the cluster ownership and all its responsibilities are transferred to a Special Purpose Vehicle made by IA.
Responsibility of Working Committee in an SPV
A Special Purpose Vehicle (SPV) has the ownership of the cluster, which is established by the Implementing Agency.
However, to optimum use of the facilities and infrastructure created using the levels of interventions, IA constitutes a Working Committee for each cluster in the interest of artisans.
The Working Committee will have the following members:
- Chief functionary of the IA- Convener.
- Representative of Nationalized bank operating in the area.
- Three artisans nominated by the IA (including at least one woman) on an annual rotation basis, re-nomination may not be allowed in five years.
- Representative of the NA; and
- GM, DIC or their representative.
The working committee will meet for at least a month to review the operational and maintenance aspect of the CFC.
For proper implementation of the decision made by the Working Committee, the SPV will establish a separate corpus fund for the maintenance of the CFC. The SPV on the recommendation of the Working Committee may incur expenditure towards maintenance and augmentation of the CFC.
The IA will arrange, the credit requirements or the working capital for the activities in the cluster. It will also pass credit to individual groups for supplying raw materials on credit.
Also Read: How Funding of an SFURTI Cluster Works?
Acquiring Private Investment Via Convergence
For the greater goal of sustainability, investments are sought for strengthening the clusters. In order to maximize sustainability, a convergence model of bringing together different sources of private incentives and government schemes is brought together.
The scheme features the following modes of convergence sources to financially equip a cluster:
- Private sector participation: The scheme envisions the participation of private sector retailers. Retailers specializing in the sale of traditional industry products are also allowed to become a TA or IA and can contribute at least 50% of the cost of the project excluding the cost of the land.
- Corporate Social Responsibility: SFURTI scheme allows corporates of public or private enterprises in providing additional financial support and professional operations & management support to the cluster project as a part of their Corporate Social Responsibility (CSR). Such CSR foundations are also allowed to participate as IA or TA, who have experience in managing MSME cluster projects.
- Participation by Private Equity (PE)/ Impact Funds: Financial institutions are also allowed to float their funds to support clusters that are in nature of social investments. These institutions are encouraged to participate by acquiring a shareholding in the SPV provided that, it shall not exceed 50% of the total equity. SPV can also receive debt support, provided that patient capital should have condition of extensive moratorium, at a low rate of interest and should have a flexible repayment option.
- Other Schemes of State and Central Government: IAs are allowed to dovetail funds from other various state and central government schemes, which can be in addition to the funds sanctioned under SFURTI scheme. Provided that, there is no duplication of a specific project component being funded from one source.
- Funds from Multi-lateral Development Banks (MDBs): The funding for the scheme can be leveraged by securing additional funds from MDBs to make the cluster more sustainable and competitive.
However, for any such participation by private entities as mentioned above it must be specifically described in the DPR and is subject to approval by SSC.
TAs and NAs are required to place convergence into the implementation framework right from the stage of project design.
A Convergence with private sector buyers in the value chain and other key stakeholders must be built into the project design.
SFURTI scheme aims at creating a robust model of business for the traditional industry and acquiring a considerable market share.
From the inception of the project, it secures ways and means of financial assistance and resources in the nature of creating a self-sustained model of a cluster.
A Convergence plan under the project makes sure the participation of private and corporate enterprises in securing funds. The private entities are also allowed to acquire a shareholding in the Special Purpose Vehicle established for the cluster.
Thus, an exit strategy is prepared and executed for a self-sustained model of cluster competition of project intervention.