IndiaFilings » Learn » Mega Leather, Footwear and Accessories Cluster

Mega Leather, Footwear and Accessories Cluster

Mega Leather, Footwear and Accessories Cluster

Mega Leather, Footwear and Accessories Cluster

Creating infrastructure facilities and integrating production chains for leather and footwear industries has always been the primary objectives of the Mega Leather, Footwear and Accessories Cluster (MLFAC). India is a country housing over 20 percent of the total cattle population of the world and over 11 percent of the total sheep population. Hence, it is bestowed with an abundant supply of raw materials for use in the leather and footwear industry.

Objectives of the Scheme

The basic strategy behind the scheme is to set up production units for all the segments including leather, footwear, as well as their accessories and components along with various leather goods, leather garments, saddlery and other leather items of the potential harness.

Benefits of the Scheme

The scheme has been set up to boost productivity in the leather industry and to cater to the need for leather products both in state level and across India. The cluster also helps create employment opportunities in both the leather and footwear industries, which have been ever booming sectors in the country. Furthermore, the cluster would be part of the new Enterprise Promotion Policy, offering huge incentives to entrepreneurs who work towards setting up such manufacturing units in their respective states.

Besides this, the cluster would also have an integrated production centre as part of the scheme with all the required facilities including common facility centre, testing centre, design studios, factory sheds which are ready to use. About 150 to 200 such units would be set up at the MLFAC cluster, where the production and manufacture of fresh leather products which include footwear, garments, bags and other accessories would take place.

The cluster also offers training and skill up-gradation programs for youth. Thus creating a wide array of employment opportunities for them.

Components of the Scheme

The Empowered Committee that has been set up to oversee the diverse projects coming under the scheme should ensure minimum facilities are provided as per the guidelines of the cluster. These facilities include:

  • Land Development Cost

The costs involved in the development of land include the costs for constructing a compound wall, the wire fence, and the development of the site.

  • Infrastructure Costs

Core infrastructure facilities like roads, power supply, water supply, water storage along with rainwater harvesting facilities, stormwater drainage, and sewage lines, secured compound walls along with wire fences, solid waste disposal plant, signages, landscaping, as well as entry and exit gates and parking facilities.

Social infrastructure facilities must have common facility centres like warehouses, trade/display/exhibition/convention/information centre, design centre, craft-based resources centre, hostel and/or dormitory facilities, raw material bank and other common facilities like communication networks, administration buildings, firefighting stations, centres for environmental protection, post offices, healthcare centres and primary schools among others.

Research and Development Infrastructure facilities that should have product design and development support centre, testing laboratories, quality benchmark centres, material research centres, basic product technology research centres, pre-competitive collaborative research centres, and market research centres.

The infrastructure facilities should also contain numerous export services, including hiring clearing agents and customs/central excise/service taxes officers as well as DGFT liaison officers.

Capacity Building

Capacity-building should be aimed at improvising on the capacity of the units at the clusters including upgrading common marketing efforts, branding, sourcing of technologies required for the projects, skill development, quality, and environmental certification and ensuring the following of best practices which are following the highest international standards.

Engagement of SPV Consultants

If required, the SPV which is concerned with implementing the project can appoint contractors/consultants having good experience in setting up at least three infrastructure projects of similar nature and those who can help design and develop the projects coming under the scheme. The cost of engaging such consultants should only be 3% of the total cost involved in developing the infrastructure and should be funded from the project implementation cost as per the guidelines of the scheme.

Other Expenditure

Any additional expenditures like pre-operative expenses on the diagnosis of the project as well as other statutory expenses involved in incorporating the SPV.

Procedure to Avail Funds

The state governments are required to appoint an Empowered Committee having notable people from all the concerned Ministries and other Departments, as well as stakeholders to represent and approve the various projects coming under the scheme. The approval process for the scheme consists of the following steps:

Step 1: In-principle Approval

In this step, the preliminary proposal (PP) is submitted by the various promoters of the scheme. This preliminary proposal (PP) covers all the major features of the projects under the scheme. The PP will include the scope of the project for the different industries, allocation, and availability of land for the same, and finance the projects that come under the scheme.

Step 2: Preparation of DPR (Detailed Project Planning)

The DPR (Detailed Project Planning) is then put forth after diagnosing the facilities and common infrastructure requirements in the specific locations after considering their demand and potential. The details of the DPR would be provided in the guidelines set by the Department of Expenditure.

Step 3: Appraisal of the DPR

The DPR laid out is then subject to appraisal by the PMC and any amendments if required, would be incorporated before submitting the final copy of the DPR. The DPR must meet the following criteria before it can be approved.

  • It must have been incorporated and established an SPV specific to the project undertaken.
  • Land required by the SPV must be possessed prior to the project undertaking.
  • The shareholders‘ agreement and other agreements must be executed and approved between the SPV and all the other members before the start of any project under this scheme.
  • The SPV would have prescribed a set of guidelines or regulations which it must strictly adhere to.

Step 4: Final Approval

The Empowered Committee which has been appointed by the various state governments will then give the final approval to proceed with the execution of the projects coming under the scheme. The final approval is subject to the findings of the diagnosis of the DPR.

Allocation of Funds for the Scheme

Total funds of INR 600 Crores have been allocated for the scheme by the Central Government as well as by the various state governments. The scheme would predominantly be implemented in those states which have a higher concentration of leather units, as well as more potential for the growth and upcoming of the leather industry. A minimum area of 40 acres would be allocated for the clusters as proposed in the scheme. The production units would be equipped with various infrastructure facilities including core infrastructure, social infrastructure, production infrastructure, building capacity and more.

The leather industry has been identified as one of the premier sectors to focus on, coming under the Make in India initiative put forth by the present Government of India. The main objective behind this scheme is the development of various infrastructure facilities for the leather industry by making enhancements to the production, addressing the different environmental concerns that are part and parcel of the leather industry, drive extra investments for the same and create employment opportunities for the unemployed youth of the country as well as for women and the economically backward classes.

Pattern of Assistance

The total cost of the projects coming under the said scheme consists of components like the cost of development of land, infrastructure costs, costs involved in capacity building as well as costs for engagement of consultants by the SPV. The Government of India can provide assistance up to 50% of the total cost of the projects coming under the scheme. The coverage of such costs is subject to the following conditions:

  • For the land of areas up to 60 acres, the Government can provide financial assistance of INR 50 crores.
  • For the land of the area up to 100 acres, the Government of India assistance is up to INR 70 crores.
  • For 150-acres of land, the Government can assist by providing up to INR 105 crores.
  • And for areas of land which exceed 150-acres, it can provide financial assistance by up to INR 125 crores.