The Scheme of Funds for Regeneration of Traditional Industry or SFURTI is a scheme by the Ministry of Micro, Small and Medium Enterprise (MSME), Government of India, to support of SFURTI clusters of traditional industries.
The name of the scheme pretty much explains its general purpose, which aims to fund Traditional Industries. The funding is provided by the Government of India, especially by the Ministry of MSME.
Furthermore, the general nature of support by the government is for cluster development and a cluster under the scheme can be termed as SFURTI Cluster.
A cluster is made up of artisans and craftsmen along with the raw materials and machinery provided in it.
As of July 2022, the scheme has been a huge success and has 251 clusters running successfully all over India. These functioning clusters as of now have received funding of Rs. 57933.88 Lakh from the Government.
The scheme was first implemented in the year 2005 and is still going strong with several changes in the scheme guidelines.
In this article, we will understand the basic objective of the scheme, i.e. cluster development by using Government grants. We will explain the method of funding clusters and which agencies are involved in the process of funding the SFURTI cluster.
Also Read: All About SFURTI Scheme: Objective, Eligibility, Process, Benefits and More
- How does Disbursement of Funds Happen?
- How To Apply for Release of Funds?
- How does A Cluster Become Entitled to Funding?
- When And to What Extent the Funds Is Released?
- Some Specific Guidelines for Release of Funds To IA
- Terms & Conditions for The Release of Funds
How does Disbursement of Funds Happen?
It is the responsibility of the NA (Nodal Agency) for the timely disbursal of funds in a cluster and to make periodical payments to IA (Implementing Agency) on the recommendation of the Technical Agency.
The limit of financial assistance to a cluster is Rs 5 Crore maximum for each cluster.
The scheme terms funding of clusters as Grants-in-Aid, which are managed by NAs.
However, the extent of funding for a cluster has been classified on the basis of the number of artisans working in the cluster.
Following is the table of classification of clusters as per the number of artisans and the financial assistance provided by the Government.
|Type of Cluster||Per Cluster Budget Limit|
|Regular Cluster(where the number of artisans is upto 500||Rs. 2.50 Crores|
|Major Cluster (where artisans are more than 500)||Rs. 5.00 Crores|
To be identified as a cluster under the scheme, the number of artisans engaged in it should not go below 100.
How To Apply for Release of Funds?
To kickstart the funding of a cluster, the application is made by the IA (Implementing Agency) before the Ministry of MSME.
This funding is received based on a Project Report submitted by the Nodal Agency and approved by the Scheme Steering Committee (SSC).
You can read the complete details for the application and receipt of the first batch of funding under the scheme over here.
Also Read: Everything you need to know about Institution Building in SFURTI
How does A Cluster Become Entitled to Funding?
To avail a cluster with the necessary funding, the TA and IA play the necessary role in estimating the financial spending of a cluster. A TA assists by creating backwards and forward linkages for a cluster.
The TA with the aid of IA formulates a revenue model for a proposed cluster. Based on the revenue model, a business plan is made for the cluster.
Thereafter, a Detailed Project Report (DPR) is prepared by the Agencies, which is sent for approval before the Scheme Steering Committee (SSC).
A DPR will include the following necessary points:
- details of interventions for a cluster.
- cost estimates
- project timelines
- sustainability plan for the cluster.
On receiving approval of the DPR by the SSC, the cluster becomes entitled to grant or funding by the Government under the Scheme.
How Is Valuation of Grant-in-Aid Calculated?
The TA with the assistance of the IA determines the cost of a cluster. However, the scheme has different methods for determining the valuation of grants or funding for the SFURTI cluster.
For evaluating the costing of the project, the following method is applied:
Cost of Project = Cost of HI + Cost of SI + IA Fees + TA Fee
The Cost of the Project as per the SFURTI scheme is disbursed by the Nodal Agency (NA) after receiving funds from the Ministry.
In addition to the details mentioned above, any given service by an IA also includes a component of engaging the Cluster Development Executive (CDE).
Also Read: SF Consultant Chosen Among India’s Top 10 Emerging Consultancy Firms
Furthermore, the funding also includes methods of project interventions and the share of an IA which is explained in the table below:
|Project Intervention||Scheme Funding||Financial Limit||IA Share|
Maximum Rs.5 Crore per project (A+B+C)
|A1||Soft Interventions including skill training, capacity building, design development||100%||10% of the amount of Hard Intervention (HI) or Rs. 25 Lakh, whichever is less||Nil|
|A2||Hard Interventions (HI) including CFCs, RMBs, training centres, etc||90%||10% of Hard Intervention as its own contribution|
|B||Cost of TA||100%||8% of the amount of Hard Intervention (HI) or Rs. 30 Lakh, whichever is less.||Nil|
|C||Cost of IA/SPV including CDE||100%||8% of the amount of Hard Intervention (HI) or Rs. 20 Lakh, whichever is less||Nil|
The NA will seek the release of funds by submitting a proposal to the Ministry of MSME and the funding will be paid in the manner made in the Plan of Action (POA).
[Infographic content] Thereafter, the Ministry will release the fund to NA on receipt of the Utilization Certificate (UC) and Progress Report.
The NA shall then release the fund as per the Cluster Action Plan to the cluster.
The scheme also creates two heads under which the distribution of funds is made:
- SFURTI Administrative Fund– For meeting the expenses related to monitoring and management of the scheme by the cluster and to indulge in national-level activities.
- SFURTI Programme Fund– For meeting the other expenses of the cluster.
Also Read: Everything you should know about Special Purpose Vehicle (SPV) in SFURTI
When And to What Extent the Funds Is Released?
It is understood that the fund is released by the NA and the fund is kept under the two heads for meeting the Administrative and Programme level expenses.
The funds cannot be released in one go; rather, it is released on the basis of utilization and necessary compliance with the set goals for the creation of a cluster.
Therefore, the scheme designed a method for the quantum of the release of funds.
The initial amount of funds is released upon the approval of the project by the SSC as we have discussed above.
The initial amount of funds are released in the following manner on approval:
- 50% of the Soft Intervention
- 50% of the Hard Intervention.
- 50% of the Cost of the IA.
- 50% of the Cost of the TA.
Thereafter, the other half of the funds are released on production of the Utilization Certificate and utilization of 2/3rd of the amount of the initial funds.
Some Specific Guidelines for Release of Funds To IA
The scheme mentions specific guidelines for IAs. Under which, NA on obtaining final approval, issue a sanction order and gives 1st instalment of Hard Intervention to the IA.
The First instalment will be paid in an advance to the IA for arranging land. The Second instalment of the next 50% will be made after utilization of 2/3rd of the amount made in the First instalment.
In the case of Soft Intervention, the release of funds to IA is made on a need-basis.
Also Read: Hand-Holding as a Technical Agency
Terms & Conditions for The Release of Funds
The scheme has published specific terms & conditions for the release of funds in Annexure – 4 of the scheme.
These terms and conditions are specifically applicable to the Nodal Agencies which receive funds from the Government of India or the Ministry of MSME.
You can read the complete details of the terms and conditions for receiving grants-in-aid in another article.
The Regeneration of Traditional Industry is the primary objective of the SFURTI Scheme which is done by providing financial support for cluster development. The method of Hard Intervention and Soft Intervention classifies the flow of funds for any cluster and the development thereof.
SFURTI scheme funds a maximum of Rs.5 Crores for a cluster and therefore, it is designed to provide funds to each entity working under the scheme.
The outflow of the grants given by the Government flows in a top to bottom manner, i.e. from the Ministry to NA and then to IA
The scheme also features funding for achieving goals or utilization of the funds as the development of the cluster moves forward.