Micro, Small and Medium Enterprises (MSMEs) often face challenges such as lack of modern infrastructure, outdated technology, limited access to finance, and high production costs. To address these issues collectively, the Government of India launched the Micro & Small Enterprises Cluster Development Programme (MSE-CDP Scheme) under the Ministry of MSME.
This scheme focuses on developing MSME clusters across India to enhance productivity, competitiveness, and sustainability.
If you are an MSME owner looking to scale operations, reduce costs, or upgrade technology, this guide will help you understand how MSE-CDP can support your business.
What is MSE-CDP Scheme?
The Micro & Small Enterprises Cluster Development Programme (MSE-CDP) is a central government scheme designed to:
- Develop industrial clusters
- Improve common infrastructure
- Set up Common Facility Centres (CFCs)
- Promote technology upgradation
- Strengthen collective efficiency of MSMEs
Instead of supporting individual enterprises, the scheme supports a group of MSMEs operating in the same industry and geographical area.
What is an MSME Cluster?
A cluster refers to a group of enterprises producing similar products or services located in close proximity. Examples include:
- Textile clusters
- Auto component clusters
- Handicraft clusters
- Food processing clusters
- Engineering clusters
Clusters allow MSMEs to share infrastructure, machinery, training facilities, testing labs, and marketing support.
Key Components of MSE-CDP Scheme
1️⃣ Common Facility Centre (CFC)
CFCs provide shared facilities such as:
- Testing labs
- Design centres
- R&D support
- Tool rooms
- Advanced machinery
This reduces capital burden on individual MSMEs.
Funding Pattern (General Category States):
- Government of India: Up to 70%
- State Government: 10%
- Cluster Members/SPV: 20%
(Special category states may receive higher central assistance.)
2️⃣ Infrastructure Development (ID)
Under this component, the scheme supports:
- Industrial roads
- Power supply systems
- Water facilities
- Drainage
- Industrial estates development
This improves the overall ecosystem of the cluster.
3️⃣ Soft Interventions
Before infrastructure support, clusters undergo:
- Diagnostic studies
- Trust building workshops
- Skill development programs
- Exposure visits
- Marketing initiatives
These activities strengthen cooperation among MSMEs.
Benefits of MSE-CDP Scheme for MSMEs
✔ Reduced production costs through shared facilities
✔ Access to advanced technology
✔ Better quality control & certification support
✔ Increased export competitiveness
✔ Improved access to financial institutions
✔ Enhanced branding and marketing
For MSMEs competing in domestic and global markets, cluster-based growth is more sustainable than isolated expansion.
Who Can Apply under MSE-CDP Scheme?
Eligible entities include:
- Special Purpose Vehicle (SPV) formed by cluster units
- State Governments
- Industry Associations
- Cooperatives
- NGOs (in specific cases)
The cluster must primarily consist of Micro and Small Enterprises.
How to Apply under MSE-CDP Scheme: A Step-by-Step Path
- Form an SPV: To apply for a CFC, a group of at least 20 MSEs must form a Special Purpose Vehicle (SPV), like a private limited company or a society.
- Submit a Proposal: Create a Detailed Project Report (DPR) highlighting the cluster’s needs and the potential impact of the project.
- Online Portal: Applications are typically processed through the official MSME cluster.msme.gov.in portal.
- State Approval: The proposal is first vetted by the State Level Steering Committee before moving to the Ministry of MSME for final approval.
Real-World Impact of MSE-CDP Scheme
Across India, several clusters in sectors like textiles, foundry, pharma, handicrafts, and engineering have benefited from improved infrastructure and CFC facilities under MSE-CDP. These clusters have reported:
- Higher productivity
- Reduced wastage
- Improved exports
- Better employment generation
Micro & Small Enterprises Cluster Development Programme (MSE-CDP Scheme): FAQ
1️⃣ What is the Micro & Small Enterprises Cluster Development Programme?
The Micro & Small Enterprises Cluster Development Programme (MSE-CDP) is a Government of India scheme that supports groups of Micro and Small Enterprises by developing common infrastructure, shared facilities, and technology centers to improve competitiveness and reduce costs.
2️⃣ Who is eligible for MSE-CDP?
Micro and Small Enterprises that operate in the same industry and geographic area can form a cluster and apply through a Special Purpose Vehicle (SPV), industry association, or state government agency.
3️⃣ What is a Common Facility Centre under MSE-CDP?
A Common Facility Centre (CFC) is a shared infrastructure setup that provides services like testing labs, advanced machinery, design centers, tool rooms, or R&D support to cluster members, reducing the need for individual investment.
4️⃣ How much financial assistance is provided under MSE-CDP?
Under MSE-CDP, the Government of India provides up to 70% of the project cost for Common Facility Centres in general category states. Special category states may receive higher central assistance.
5️⃣ What are the main benefits of MSE-CDP for MSMEs?
MSE-CDP helps MSMEs reduce production costs, upgrade technology, improve product quality, increase export competitiveness, and access better infrastructure through collective development.
6️⃣ How can MSMEs apply for MSE-CDP?
MSMEs must first form a cluster group, conduct a diagnostic study, create a Special Purpose Vehicle (SPV), prepare a Detailed Project Report (DPR), and submit it to the Ministry of MSME through the appropriate state nodal agency.
7️⃣ Is MSE-CDP only for manufacturing businesses?
No, while manufacturing clusters benefit significantly, service sector clusters can also apply if they meet eligibility criteria under the scheme guidelines.
8️⃣ What is the minimum number of units required to form a cluster?
Typically, a viable cluster should have a significant number of Micro and Small Enterprises operating in the same sector within a defined geographic area. The exact number depends on sector feasibility and government guidelines.
9️⃣ Can individual MSMEs apply directly for MSE-CDP?
No, individual MSMEs cannot apply alone. The scheme is designed for cluster-based development, meaning a group of enterprises must apply collectively.
🔟 Why is cluster development important for MSMEs in India?
Cluster development helps MSMEs achieve economies of scale, share resources, reduce capital expenditure, adopt new technology faster, and compete better in domestic and global markets.