3. narsapur lace cluster140708-pk (Deepa)

BUSINESS PLAN FOR DEVELOPMENT OF NARASAPUR LACE CLUSTER

1. DIAGNOSTIC SURVEY:

1.0 INTRODUCTION:

Lace is a fabric woven in an intricate manner with a stainless steel crochet that gives a

special craft look. Most of the cases the women weave the laces in different manner with

cotton/ other fabric yarn and a needle. This is

an art of stitching lace threads to form door

mats, decorative articles, bags etc. This

traditional craft and has been practised in India

for the last three to four centuries. The oldest

centre, Jamnagar in Gujarat, has involved the

womenfolk in this craft since the time of the

Mughal Emperor Aurangzeb. This craft is also

prevalent in the delta of the Godavari River.

This forms the primary livelihood for poor rural

folk in Narsapur area of East Godavari district

of Andhra Pradesh. Many lace businessmen with business deals with Australia, UK &

US have origins in Narsapur.

The lace industry at Narsapur in Andhra Pradesh is famous world wide for over 300

kinds of designs which are made by the women of this region who are mainly from the

fishing community. Their familiarity with net-making helps them with the crochet work. It

was the Dutch and Portugese missionaries who introduced lace and crochet embroidery

in both Tamil Nadu and Kerala.

Final Report: Business Plan for Development of Narasapur Lace Cluster - 1 -

As of 2001 India census, Narsapur had a population of 58,508. Males constitute 49% of

the population and females 51%. Narsapur has an average literacy rate of 75%, higher

than the national average of 59.5%: male literacy is 78%, and female literacy is 71%. In

Narsapur, 11% of the population is under 6 years of age.

Narsapur is famous for the crochet lace products. The cluster is having around 50

exporters who are exporting to various countries. The cluster is having around 2 lakh

women artisans doing the lace work. The cluster is located in and around Narsapur,

Andhra Pradesh, India, in various villages like Sitarmpiuram, Palkol, Venkatrayapalem,

Antarvedi, Royapeta, Mogaltur, etc. The cluster is specialised in doing the lace works

like dollies, furnishings, garments, tablemats, etc.

The Crochet Lace cluster at Narsapur is an emerging cluster with good export potential

employing more than 2 lakh women artisans. Out of total production 80% of production

value is being exported, there is good potential to expand its market both overseas and

in domestic markets. With a mission to develop this cluster and help the women artisans,

Development Commisionarate, Small Scale Industries (DC-SSI), Ministry of SSI, Govt.

of India has assigned the cluster to National Resource center for Cluster Development

(NRCD) to develop this cluster in a holistic manner. NRCD helped units in forming a

marketing consortium called Narsapur Crochet Lace Consortium comprising of the lace

exporters, SSI units, NGO, SHG and Lace Park (DRDA) with an objective of enhancing

the exports and improve the domestic sales. Any order placed on the consortium will be

shared among the members of the consortium and utmost care will be taken in

executing the order to the best of quality and within the time schedule under the active

guidance and support of NRCD. The orders placed on the consortium are going to help

2,00,000 lakh women artisans in supporting their family and in the process elevate them

above poverty line.


1.1 ANALYSIS OF MACRO ENVIRONMENT OF THE CLUSTER:

The cluster is Located around 450 Kms. from Hyderabad Capital City of Andhra

Pradesh. It is well connected by train and Bus Services. The City was located on the

banks of Godavari. The city is on the banks of river Godavari and on Bay-of- Bengal

Cost at Narsapur River Godavari merges into Bay-of-Bengal. The city has Distinction of

being located on the banks of river Godavari and the cost of bay-of-Bengal

Narsapur is a

remote place in

West Godavari

District of Andhra

Pradesh, India. It is

famous for the

crochet lace

products. The

cluster is having

around 50 exporters

who are exporting to

various countries.

The cluster is

having around 2

lakh women

artisans doing the

lace work. The

cluster is located in

and around

Narsapur, Andhra

Pradesh, India, in

various villages like

Sitarmpiuram,

Palkol, Venkatrayapalem, Antarvedi, Royapeta, Mogaltur, etc. The cluster is specialised


in doing the lace works like dollies, furnishings, garments, tablemats, etc. The cluster is

168-year-old.

It all started by a Scottish lady by name Macrea who came here on missionaries of

Charity work in the year 1844 and taught the house wife’s the art of lace work by

needles and since that time it spread in the district and women took up the activity as a

source income. Most of the women do the lacing in there respective houses.

Traditionally the families are doing it since generations. In some places women gather at

a common place in the village and do it together.

The Hand Crochet Lace cluster of Narasapur, West Godavari, District, A.P. (Approx 600

km away from Hyderabad) is located around it within a radius of about 35 km. It has

about 0.98 Lakh Lace artisans (100% women) mainly located in rural areas (Total 480

villages), in about 22 Mandals of West Godavari District, A.P. The major Mandals of

West Godavari District, A.P with substantial lace Artisan concentration & population

include the following:

Narasapur

Elamanchilli

Mogalturu

Veeravasaram

Palakol

Achanta

Penugonda

Iragavaram

Bhimavaram

Peravali

Kalla

Poduru

Undrajavaram

Tanuku

Attili


Penumantra

Nidamarru

Narasapur Hand Crochet Lace Cluster is a traditional cluster with a history of more than

160 years. It is believed that Scottish Couple Mr. and Mrs. Macrae started this cluster in

1844 and taught this craft to the local women. Ever since this craft has seen mushroom

growth.

The estimated sales turnover of the Narasapur Lace cluster, West Godavari District in

the year 2007-08 is Rs. 40 crores with Exports accounting about 90 percent. Major

Domestic Markets for Laced products include Metros like Mumbai, Delhi etc. Major

International Markets include USA, Europe, Middle East etc.

The Lace Artisans are 100 percent Women and mainly belong to the Other Cast

Category – Kapu community (85 percent share) balance includes Backward class like

Khamma, Christians etc. The craft is dominated and practiced mainly by the Kapu

community as they are orthodox and do not let their women to go outside for work. The

women work on a part time basis, generally 4-5 hrs per day either from their residences

or common village level Production Centre(where ever present) in a group. Mostly the

Common Production Centre is at the residence of the Artisan Society President. The

Lace Artisans are mostly educated to a level of VII th grade and understand & speak

Telgu language only. The age group of the artisans is 20-60 years. Majority of the Lace

artisans have adopted the Lace work art/techniques from their mothers & grand mothers

in a traditional manner and have experience of about 15-20 years. In a Lace Artisan

family, typically the family consists of four members with an average monthly income of

Rs. 500 from Lace craft and Rs. 3000 from Agriculture (Total Rs. 3500 per month per

family). The girls of the family mostly adopt lace craft after finishing class 12th as they do

not have money to go for higher education. Majority of the Lace Artisans have not

obtained any formal training and follow traditional designs and lace products. The lace

Artisans execute work provided by the Exporters and Lace Park and rarely are engaged

in direct marketing of Lace products. The raw materials i.e. yarn, fabric, accessories are

provided to the Artisans along with Design Pattern/Sample by Exporters/Lace Park and


the Artisans are paid conversion charges, paid mostly based on ½ kg yarn conversion

for lace item.

1.2 MAPPING OF THE CLUSTER POTENTIAL

The lace cluster at Narsapur has tremendous business potential. It is being considered

as one of the mega clusters in the country where about one lakh artisans, all women,

live and depends for their livelihoods.

In addition to the Lace Artisans, the other major stakeholders of the Narasapur Lace

Cluster include the following:

1.2.1 Crochet Lace Park, Narasapur, W.G.District

Crochet Lace Park (The West Godavari District Alankriti Lace Manufacturing Women

Mutually Aided Cooperative Societies Federation) was established by Velegu-DRDA,

Andhra Pradesh in the year 2004 with a financial outlay of approx Rs. 3 crores received

as Grant over 3 years period from DRDA-Govt. of AP (under IIDF, SGSY Schemes) and

o/o the DC (Handicrafts), New Delhi under AHVY. The main functions of Lace Park are:

Organizing the Lace Artisans in the West Godavari District under the Federation in

order to provide them higher conversion charges, more work, skill

upgradation/training. In the year 2004, 51 Lace Artisan Societies were formed in 6

Mandals of W. Godavari District (Phase I) i.e. Narasapur, Mogalturu, Elamanchilli,

Palakol, Poduru, Veeravasaram comprising of 1489 Lace SHG and 13179 Lace

Artisans. In Phase II, Eight additional Mandals of W.G District are being added i.e.

Achanta, Penugonda, Peravali, Iragavaram, Tanuku, Bhimavaram, Kalla and

Undrajavaram consisting of 1630 Lace SHG and 11551 Artisans where Societies are

under formation. Thus with the completion of Phase II, Lace Park would have 3119

SHG and 24730 (about 25 percent of Lace Artisans in W.G. District) under its

Federation.

R&D and Design Development Wing of Lace Park has been established with a NIFT

graduate as its head and a core team of 20 members (skilled resident artisans) to

develop new Lace based products, Designs and so far it has a Design Bank

consisting of about 600 New Designs in Home Furnishings, Kids & Women Wear etc.


Imparting skill upgradation (Training) to Artisans in Design along with NIFT at Lace

Park and other techniques like stitching, Embroidery , Picoting etc. The Training

programs are completely residential and so far about 8000 Artisans of W.G. District

have been trained (Small Training of 15 days). There are 40 Juki-Automatic stitching

machines, 2 over-lock machines & 2 Picoting machines that have been installed for

training purposes.

The Common Facility set up at Lace Park which is being utilized by them for their

own production and could be utilized as well by other stakeholders particularly by

Exporters include the following:

Automatic Washing & bleaching Machines of 165 kg & 15 kg batch

capacities.

Tumble Dryers of 50 kg & 10 kg batch capacities.

Auxiliary equipments like Trolleys, Steam Boiler, Water Softner, Water

Treatment plant etc.

With the intervention of Lace Park, Common Production Centres have been

established at village level (About 150 operational at present) where Quality

production takes place in an organized manner under the supervision of an MLT

(Master Lace Trainer). So far (Year 2007-08) production worth Rs. 2.0 crores has

been achieved starting from the year 2004-05.

Procurement, stocking & distribution of Raw material (Yarn, fabric) of right quality,

appropriate price directly from the Manufacturers (Coats India, Ambasamudram; Sri

Umed Mills, Pali; Century Mills, Mumbai etc) and distributing them to Primary

Societies as per production plan. It has obtained Rs. 97 Lacs under AHVY from o/o

DC(H), New Delhi as non-recurring grant-in-aid as Margin Money for meeting the

Working Capital requirement of its Lace Artisan members.

Procuring & Distributing high quality needles (the prime tool for Hand Crochet)

among the artisans free of Cost and till date about 15000 Needles have been

distributed including Japanese needles good for fine weaving of Lace work and

handling of fine yarn.

Marketing Efforts to enhance Sales Turn over both in the International and Domestic

Markets by way of participation in Fairs (Dubai, Malaysia, ITPO etc); tied up with AP


Govt Lepakshi for exhibiting products at Delhi, Hyderabad; tied up with Tirpur &

Karur (TN) Agencies for International Marketing; established retail outlets at Eluru &

Page No. 6A

Narasapur and undertaking efforts at present to develop product catalogues, website

etc.

Carrying out Social Welfare activities for the Artisans like organizing Eye Camps in

association with SCOJO Foundation; Adult Education awareness camps with Sri

Y.N. College, Narasapur; Health Insurance of Artisans; issuing Photo identity cards

etc.

1.2.2 Exporters & Merchandisers

There are about 17 Major Direct Exporters of Laced products out of which 15 are

located at Narasapur (Seetharampuram) and balance 2 in Palakol, both in W.G.

District. A few major Exporters and their Annual Turnovers are provided below:

In addition there are about 3 Merchandisers who are manufacturing and supplying

laced products to other Exporters, Retail outlets based at Delhi & Mumbai and

prominent ones include M/s Sri Kanaka Durga Lace Industries, Narasapur; Fashion

Crochet Lace, Palakol.

The 20 Exporters and Merchandisers are registered as SSI Units with DIC, Elure and

subcontracting Lace Work to Artisans located in villages; bleaching & washing job to

job work units and are only carrying out finishing & packing jobs inhouse like

stitching, labeling, packing in polythene bags & Cardboard Cartons etc.


Exporter Annual Sales Turnover

M/s P. Venkanna & Co Pvt. Ltd, Palakol

Rs. 10.5 crores

M/s Ram Krishna Pramahansa & Co, Seetharampuram, Narasapur

Rs.4.0 Crores

M/s Sri J.J Lakshmi & Co, Seetharampuram

Rs.3.0 Crores

M/s P.Veeraiah. Co, Palakol Rs. 2.0 croresM/s Koteshwari Lace Industries, Seetharampuram, Narasapur

Rs. 2.0 Crores

All the above are members of All India Crochet Lace Exporters Association based at

Narasapur.

Page No. 6B

1.2.3 Lace Artisan Societies, SHG, NGO

Besides the 51 Lace Artisan Societies formed in 14 Mandals of W.G. District under

the Lace Park there are about 5 more Lace Artisan Societies and prominent among

them include:

Godavari Delta Women Lace Artisans Co-op Cottage Industrial Society Ltd,

Narasapur, W.G. District: The Society has about 600 Members and is engaged in

the manufacturing & export of Handmade Cotton Crochet Lace Goods & Cotton

madeps with an annual turnover of Rs. 60 Lacs.

Sree Adarsha Mutually Aided Thrift & Credit Society Ltd, Poduru, W.G. District:

The society has about 1500 Lace, Artisan Members and is engaged in skill

Development/Training activities of Artisans & production and Domestic Sales of

Lace Products with annual Turnover of Rs. 25 Lacs to Markets in Delhi, Mumbai.

It is estimated that there are at present about 3500 Lace Artisan SHG in the lace

cluster, Narasapur out of which 3119 are under the Lace park; 100 under Sree

Adarsha Mutually Aided Thrift & Credit Society Ltd and about 70 under Godavari

Delta Women Lace Artisans Co-op Cottage Industrial Society Ltd.

There is no specific NGO that is working in the Narasapur Lace Cluster exclusively

for the benefit of Hand Crochet lace Artisans, although there are several NGO’s

(estimated 800 Nos) working in rural areas addressing issues related to Housing,

Education, Health , Fishery, Agriculture etc. World Vision (Godavari ADP) is one

NGO that has spent around Rs. 6 Lacs in Training of Lace Artisans at Lace park and

towards free distribution of yarn to lace Artisans at Small level.

1.2.4 Job Work Units

There are about 15 tiny scale units that are offering Coning facility (Conversion of

yarn Hanks into ½ kg Cones) to Exporters out of which 10 are located in Palakol and


5 at Narsapur. A few prominent names include Sega Venkata Ramayya, Narasapur;

Kasa Veerauna, Digamaru Village, Palakol; Vasa Ramalingeswara Rao,

Bagheswaram village, Palakol. The average Coning Charges are Rs. 2 per ½ kg

yarn cone. Page No.- 6C-

There are about 5 Hand dyeing, bleaching, washing tiny units located at Narasapur &

Palakol who are offering crude/primitive process & facilities to Exporters (for

bleaching & washing only). A few prominent names include Nagamullika Dyeing

Works, Narasapur; Samathavam Mullikarjunniah, Narasapur. The average bleaching

charges are Rs. 20/kg of Product.

1.2.5 Raw Material Suppliers

There are about 5 major wholesale suppliers of raw material (Yarn, Fabric) in the

Narasapur Lace cluster mainly located at Palakol and prominent ones are:

M/s K.S. Naidu & Co, Palakol: Yarn, Annual Sales: Rs. 1 Crore

M/s P. Veeraiah. Co, Palakol: Yarn, Annul Sales: Rs. 75 Lacs

M/s P. Gopi & Co, Palakol : Yarn, Annual Sales: Rs. 50 Lacs

M/s Champalal & Co, Palakol: Cotton Fabric Annual Sales : Rs. 50 Lacs

In addition to these raw material suppliers the Exporters\ Lace Park are also directly

buying Cotton yarn and Cotton Fabric from Mills located at Pali, Rajasthan; Coimbatore,

Tirpur etc.

1.2.6 Financial Institutions

There are several Banks located in the Narasapur Lace Cluster that are extending Loans

to the SHG & its members under Micro Credit plan/Scheme. Prominent Banks include:

Andhra Bank, Narasapur (supported 79 SHG) : Loan outstanding Rs.54 Lacs

SBI, Narasapur (Supported 35 SHG) : Loan outstanding Rs.1.75 Crores


State Bank of Hyderabad, Narasapur

SBI, Seetharampuram & Magulturu

Godavari Bank, Madpadu & Kallipatnam

1.3 RAW MATERIAL

The main raw material being used by the Narsapur Lace cluster is 100 percent Cotton

yarn (2 ply, 10 Count) of offwhite colour (acrobase) mostly procured from Mills in Pali,

Rajasthan. At present of the total yarn used 95 percent is of off-white colour or white

colour due to absence of sophisticated common dyeing facility in the cluster and high

cost of dyed yarn obtained from Madura Coats, Vardhman etc.

The Raw Material in the lace cluster is cotton fabrics converted into cones. Manly off-

white and white threads are used in lace making. Raw material (yarn in ½ kg Cone form)

is provided to the Lace Artisans who under the guidance & supervision of MLT produce

the Crochet Lace work as per desired Quality & Design.

The price of yarn varies according to Grade, Source & form and is:

Rs. 45 for ½ kg (2/10 offwhite Cotton yarn) in cone form obtained from Mills of Pali

Rajasthan .i.e. Umed, Rajasthan Spinning Mills etc.

Rs. 65 for 1 kg (2/10, off-white Cotton yarn) in Hank form.

Rs. 460 for ½ kg (3/5000m length, off-white or coloured Cotton yarn) in Cone form

obtained from Madura Coats, Coimbatore.

Rs. 250 for 400 g (4 balls of yarn each of 100g weight packed, off-white/coloured

cotton yarn) from Madura Coats.

The other major Raw material besides yarn/thread used is 100% Cotton Fabric

which is priced at Rs. 45-65/sqm in off-white colour or organic dyed (200gsm)

mostly obtained from Mills located at Kalamkari (Krishna District, AP), Tirpur (Tamil

Nadu) or Mangalagiri near Vijawada.


If yarn/fabric needs quality dyeing it is sent to Erode, Tirpur (Tamil Nadu) and Cost is

approx Rs. 20 per ½ /kg yarn.

Page No. 8- 8


2. OBJECTIVES FOR CLUSTER BUSINESS PLAN

2.0 OBJECTIVES OF BUSINESS PLAN:

To enhance the Sales Turnover (Exports/Domestic Sales) of the cluster to a level of

Aprox Rs. 160 Cr. (Yr. 2012-13) from a present level of Rs. 40 Cr.

To organize additional 50,000 Lace Artisans so that their economic development

could take place.

To empower the Lace Artisans, convert them into producer group directly selling their

products in the Market.

To set up additional critical facilities at cluster level like Automatic Bleaching,

Automatic Dyeing etc so that the cluster operations become economical & self-

sustainable; product quality & range improves.


3. MANUFACTURING PROCESS

3.0 MANUFACTURING PROCESS:

The Manufacturing Process widely being adopted in Narasapur Lace Cluster, Raw

Materials & Tools utilized for production of Laced products include:

a. The Buyer provides the Product Design pattern (Drawing on paper, photograph) or

actual product Sample to be manufactured, specifications of yarn & fabric to be used,

quality Tests to be carried if any etc. to the Lace Park/Exporter (Supplier). \

b. The Supplier provides the Product Design pattern/Sample to the Master Lace

Trainers/Liners who in-turn educate/train the group of artisans at Common

Production Centre at village level.

c. The Raw Material (yarn in ½ kg Cone form) is provided to the Lace Artisans who

under the guidance & supervision of MLT produce the Crochet Lace work as per

desired Quality & Design.

d. The word Crochet is derived from Middle French word Croc or Croche meaning a

hook. It is a process of creating/weaving a fabric from a length of yarn/thread with a

hooked Needle. The Crocheted fabric is begun by placing a thread loop on the hook,

pulling another loop through the first loop and so on to create a chain. The chain is

either turned and worked in rows, or joined end-to-end and worked in rounds.

Stitches are made by pulling one or more loops through each loop of the chain.

Mostly Single hook Needles of Six inch long and made from cycle spoke are being

used by Artisans with a thermocole piece (stopper) placed on the top of the Needle

to provide better control while weaving. Usually it takes a week’s time for an

individual Lace artisan working 5 hrs / day to weave ½ kg of yarn which fetches them

roughly Rs. 90-100.

e. The main raw material being used by the Narasapur Lace cluster is 100 percent

Cotton yarn (2 ply, 10 Count) of off-white colour ( acrobase) mostly procured from

Mills in Pali, Rajasthan. At present of the total yarn used 95 percent is of off-white


colour or white colour due to absence of sophisticated common dyeing facility in the

cluster and high cost of dyed yarn obtained from Madura Coats, Vardhman etc. The

price of yarn varies according to Grade, Source & form and is :

Rs. 45 for ½ kg (2/10 offwhite Cotton yarn) in cone form obtained from Mills of Pali Rajasthan .i.e. Umed, Rajasthan Spinning Mills etc.

Rs. 65 for 1 kg (2/10, offwhite Cotton yarn) in Hank form Rs. 460 for ½ kg (3/5000m length, offwhite or coloured Cotton yarn) in Cone form

obtained from Madura Coats, Coimbatore. Rs. 250 for 400 g (4 balls of yarn each of 100g weight packed, offwhite/coloured

cotton yarn) from Madura Coats.

f. The other major Raw material besides yarn/thread used is 100% Cotton Fabric

which is priced at Rs. 45-65/sqm in offwhite colour or organic dyed (200gsm) mostly

obtained from Mills located at Kalamkari (Krishna District, AP), Tirpur (Tamil Nadu)

or Mangalagiri near Vijawada.

g. If yarn/fabric needs quality dyeing it is sent to Erode, Tirpur (Tamil Nadu) and Cost is

approx Rs. 20 per ½ /kg yarn.

h. The Exporter/Lace Park finishes the product by stitching Lace Panel & Fabric,

interlocking, picoting, adding accessories, packing etc.

i. Since the product requires bleaching & washing it is sent to Job work unit in the

cluster for the same, the charges being Rs.20/kg of material.

j. If specified by the Foreign Buyer, on random sampling basis, the finished product is

tested for various tests like Optical Brighter test; Azo free dye test etc and for this the

Samples (4-5 Nos) are sent by the Exporter/Lace Park to Testign Labs at Chennai

(SGS), Thane etc. for which total typical charges are Rs. 12000 per testing.

k. The Terrecota Lables of the Buyer are prepared by Screen/offset Printing & Bar

coding using Software by Printers located at cluster level that are also stiched by the

Exporters to the finished products. These are then packed in polyethylene bags

(transparent) and finally packed in Cardbaord Cartons with total weight of approx 10

kg per Carton. The Consignment is sent to Chennai by Exporters/Lace Park and the

Shipping/Custom House Agents get it inspected & certified by Export Inspection

Agency (Cotton Textile Export Promotion Council) and from there it is exported.


Manufacturing Process-Flowchart for production of Lace products adopted at Lace cluster, Narasapur.

Product Design Pattern a) Design

& other details b) Raw Material (Yarn)

c) Needles

MLT (Supervision, QC)

Lace Panel Inspection, Finishing

With Fabric

Bleached & Washed

Products

Labeling, Bar-coding, Ironing

Packing


Buyer Exporter/Lace Park (Supplier)

Group of Lace Artisans

Exporter/ Lace ParkBleaching & Washing at Job Work Unit

Product Testing, Certification & Shipment from Chennai

4. VALUE CHAIN ANALYSIS FOR LACE PRODUCTS:

4.0 The Value Chain:

The value chain Analysis for 100% Cotton Yarn (2/10 Count Pali) based Laced products,

bleached in white colour are provided below:

i). Cushion Cover (20 inch x 20 inch size)

A) Cost of production per piece Cost of Yarn (70g@Rs. 90 per kg) : Rs. 6.30 Cost of Lace Panel (Conversion) : Rs 13.00 Cost of Fabric (20s, 160 [email protected] sqm @ Rs.

30.50 per sqm: Rs. 10.70

Accessories (Zipper, Sliders, Sewing Thread, packing material)

: Rs. 1.35

Cost of stitching, cloth cutting : Rs. 2.00 Cost of Bleaching, others Adm & Sales overheads : Rs. 3.00

Total Cost : Rs 36.35

B) Selling price per piece : Rs. 42

C) Profit per piece : Rs. 5.65 (13.5 % of S.P)

ii) Bedsheet (Laced) of Size 6’ x 6’

A) Cost of production/piece Yarn Cost (2/10 Count, 2.5 kg@ Rs. 90/kg) : Rs. 225 Lacing charges : Rs.450 Othere overheads including Bleaching, Washing,

Packing, Adm & Sales overheads etc.: Rs.100

Total : Rs.775B) Selling price/piece : Rs. 950C) Profit : Rs. 175 (18% of S.P)


As sited above the two products – the bed sheet and the cushion cover, in both the cases the

profit is 13.5 % to 18 %. If we assume that the artisans get only 5 percent of the total profit that

makes Rs 20,00,000.00 annually for about 35000 women artisans.

Again it is observed that major profit can be made in larger products like bed sheet, dress

materials etc. while the sale of the smaller products can be higher. If raw material costs can be

cut down, the smaller products can be profitable too, as these products take less time for

making and sales are almost immediate. There will be no back log of stock, which may on the

other hand does not block seed money and can be used for further procuring of new stock of

raw materials.


5. SWOT ANALYSIS

5.1 STRENGTHS

The women artisan skill level in the cluster is natural and traditional (Mostly without any formal training) and they are highly adaptive to the latest Product & Design trends.

Abundant, skilled & cheap Labour hence can compete on price.

Low capital investment and high ratio of value addition

Wide variety of products which are unique.

100 percent Cotton (Natural Fiber) based products generally preferred by users.

CFC at Lace Park, Narasapuram has excellent facilities for Automatic washing, Bleaching, Drying, Stitching etc that can be gainfully utilized by cluster members for manufacture of high quality products.

Strong Institutional Framework( Federation, Society, Artisans) established by Lace Park in 6 Mandals of W.G. District being extended to another 8 Mandals (Total 14 Mandals)

There is good demand for the Handmade products both nationally and internationally.

The cluster is having sufficient capacity to execute any amount of orders.


There is a close network among the skill work force of the cluster.

Good support from Government and various other agencies.

Low level of migration to other professions. (As 85% Women Artisans belong to Kapu Community in which women do not go out to work).

5.2 WEAKNESS

The women Artisans consider Lace Work as part time work hence professionalism is

lacking

As the job is done mostly at the residential places of Artisan, the quality is not up to

the international standards.

Very little cooperation & coordination between major cluster stakeholders i.e.

Exporters & Lace Park which leads to under utilization of Common Facilities set up

at Lace Park.

As the cluster is dominated by semi-educated and un-educated, they don’t have

much of the exposure to the Intentional markets, emerging trends & Quality

Standards.


The bleaching practices adopted by the Job work units in the cluster are primitive

(manual, done by hand & using inferior quality chemicals) that lead to inferior quality

product.

The Absence of quality yarn/fabric dyeing facilities in the cluster leads to lot of

inconvenience & expenses for Exporters/Lace Park as the products have to be sent

to Erode, Tirpur. This inturn also discourages them to take up coloured jobs.

The cluster Artisans follow/are trained in the traditional age-old design patterns and

need to be up graded according to the latest trends in the fashion world.\

The artisans lace the traditional products (mostly in coarse thread of 2/10 count

Cotton) and there is need for development of newer product range/product

diversification and training to weave in fine count thread (Complex Work).

Inadequate Market Study/Intelligence w.r.t International & Domestic Markets for Lace

products, new products, Design trends.

The Lace Park (Artisan Federation) although has been able to organize about 25000

Lace Artisans in W.G. District, majority of the Artisans (75%) in the District are still

unorganized.

The Lace Park is unable to provide continuous work to their Artisan members (they

utilize only 50 percent of their available time) due to inadequate direct export orders


and there is no Marketing Set up at Lace Park to procure orders. This also leads to

lower income levels of Artisans.

The cluster Artisans are heavily dependent on Job Work from Exporters who have

direct orders hence they are paid lower Conversion Charges (almost 30% lower) as

compared to Lace Park. The Artisans do not have the capability & capacity of direct

marketing.

The Exporters/Lace Park are unable to participate extensively in International Trade

Fair/Exhibitions for Handicrafts/Textiles due to their limited resources and inadequate

MDA assistance offered by Ministry of Commerce & Industry.

The Lace Artisans are based deep inside the villages which have Kuchha roads. This

creates a lot of problem for the movement of the material & artisan as well.

5.3 OPPORTUNITIES

The Domestic Demand for Laced products is growing at a fast pace in Delhi,

Mumbai, Hyderabad, etc which is untapped presently.

Products made of coloured yarn & fabric; fine count yarn; other type of materials e.g.

Nylon, Acrylic etc specially for Ladies & children wear provide vast market potential

(International & Domestic Markets).


Scope for developing new product range & Designs.

Highly adaptive nature of the artisans can easily be trained.

Easy availability of highly skilled work force.

The women Lace Artisans could be trained to adopt other value added skills besides

Lace work e.g. Hand/Machine Embroidery; Machine stitching, Interlocking, Picoting

etc which will provide them more work and higher revenue.

5.4 THREATS

Competition from Chinese market(Lower price, better product quality)

Machine lacing (Lower product cost)

Rise in Price of textile yarn, leads to higher product cost

Change in the Government Policies (i.e. reduction of Customs Duty Draw back etc)


6 ISSUES FOR DEVELOPMENT OF BUSINESS PLAN IN TERMS OF DEVELOPMENTAL SCHEME OF O/O DC (H)

6.0 ISSUES

The Issues to be tackled for developing the business plan for Narsapur lace cluster are

as follows –

Inadequate coordination among the stakeholders particularly Lace park and

exporters which leads to disharmony and under utilization of facilities of Lace Park

Lack of quality dyeing of yarn and fabric and exporters and Lace Park have to send

the material in Tamil nadu which is not cost effective and also time consuming.

Marketing set up of Lace Park is deficient, leads to low sales turnover and non-

continuous work for the artisans

Lack of working capital

Product diversification is not available

Export market for lace is stagnant and domestic market remains un-tapped

The production facilities at Lace park is inadequate

Majority of the Lace workers are still out of any kind of federation or group


The issues given above are further explained below and the proposed intervention to

address the issue together with the time frame is also given.

6.1 INADEQUATE COORDINATION AMONG THE STAKEHOLDERS PARTICULARLY

LACE PARK AND EXPORTERS WHICH LEADS TO DISHARMONY AND UNDER

UTILIZATION OF FACILITIES OF LACE PARK

6.1.1 Issue:

It was observed that there is very little coordination amongst the stakeholders – mainly

the exporters and the lace park. The Lace Park does not coordinate with the leading

exporters for the sale of their products. Similarly, the exporters do not know the actual

volume produced in the Park. In most of the cases, there are failed promises about the

quantity to be supplied and the time of delivery of the product. In some cases, quality of

the product also differs. The Lace Park members also are not aware of the quality output

the exporters need.

The Lace Park officials do not have a database which can furnish the data on raw

material supply and the value chain, potential buyers, centres for further embellishment

etc. For these reasons, the facilities available in the Lace park are under utilized.

The above situation leads to inadequate co-ordination and disharmony between the

various stakeholders. While we propose various steps to develop the cluster, it is

necessary to resolve this issue of co-ordination.

6.2 PROPOSED INTERVENTION

6.2.1 Formation of a Cluster Development Coordination Committee (CDCC)

The CDCC will be an apex body in nature and will be chaired by DC (H) and officiated by

(Ex-officio Secretary) the DM of West Godavari district (as the head of the DRDA). Other

Central Govt. representatives will be officials from Export Promotion Council for

Handicraft. The state government agencies which will be representing the body are DC

(W.G. District), Velugu-DRDA, Director of State Handicrafts, Secretary for State Finance

and Industry and Commerce Departments. Representatives from the local Community


Based Organisations, Non Government Organisations, SHG Federation, Lace Artisans

Federation (Lace Park) and local designers and Exporters Association.

6.2.2 Main Function of CDCC:

CDCC would have regular Meetings, at Cluster level & Steer the process of

implementation of Business Plan with the assistance of the Cluster Management and

Technical Agency (CMTA) duly appointed by Ministry of Textiles, Govt. of India for

Narasapur Lace Cluster.

The CMTA Shall have proven capability in terms of technical, managerial financial

infrastructure and capacity building expertise that are required to design and execute

cluster oriented interpenetrations.

CMTA apart from assisting the Ministry of Textile in designing and monitoring of the

project, will proactively work with the cluster stakeholders and the SPVs in

implementation of the interventions. The responsibilities CMTA are given below:

Conducting diagnostic study at cluster level

Preparing DPR for the Project

Sensitizing and mobilizing the stakeholders to be part of the proposed

project.

Establishment and structuring of the SPVs.

Assisting the Ministry of Textiles/SPVs in releasing/mobilizing funds for the

project. Such mobilization would involve preparation of proposals under

relevant schemes of the Government apart from tying up loans from the

banks.

Assisting the SPVs in obtaining requisite statutory approvals/clearance.

Assisting the SPVs in identification and engagement of service

providers/consultants for various services related to specific handicrafts

technology, processing designing, skill development, marketing engineering,

financing etc, for implementation/execution of the interventions outlined in the

DPR.


Providing interfacing support and linkage between the SPVs and various

other stakeholders, particularly the Government Organizations, buyers and

financial institutions.

Providing periodical progress reports to the Ministry of Textiles with respect to

achievements of the stated outcomes is another deliverable of the CDCC.

6.2.3 Time Frame : Within 2 months

6.2.4 Approximate Budget

Approximate budget for formation of

CAG, Selection & appointment of CMTA,

carrying out Diagnostic Survey at Lace

Cluster level; preparation of Project DPR ,

Project Performance Assessment(@5% of

total estimated project cost of Rs. 90

Crore)

6.2.5 Expected Outcome /Benefits

Better harmony among the major stakeholders of the cluster

6.2.6 Proposed Agencies for Implementation

DC ( WG District)

DRDA-AP


: Rs. 450 Lacs

DC (H) Office

6.3 LACK OF QUALITY DYEING OF YARN AND FABRIC AND EXPORTERS AND LACE

PARK HAVE TO SEND THE MATERIAL IN TAMIL NADU WHICH IS NOT COST

EFFECTIVE AND ALSO TIME CONSUMING.

6.3.1 Issues:

Narsapur is a big cluster and about one lakh women artisans are attached to this craft.

The annual turnover is Rs 40 crore. But in most of the cases the artisans do not have

basic facilities like lack of Common facility centre, bleaching centre, dyeing hank yarns

etc. Presently there are about 20 units which are catering to the need of the local

artisans. The Tirpur Dyeing unit in Tamil nadu does not entertain small quantities for

development of samples, only bulk orders are entertained. The Bleaching facilities for

finished products at the cluster are primitive and inadequate (Hand Bleaching).

About 15 units offering coning facility located in Palakkol and Narsapur. These units only

undertake some first level job works. Due to lack of quality dyeing units, the local

products are very coarse and sometimes they are incapable to compete in the export

market. It is to be noted that about 90 % sale of Lace products is through exports.

6.3.2 Proposed Intervention

6.3.2.1 Setting up Common Facility Centres

a. Setting up of total 5 CFC'S at various locations within the cluster, each having the

following facilities:


Automatic Yarn Hank & Fabric dyeing plant with Jiggers with a capacity of 200

kg per batch, to run for 3 batches/day or total capacity of 600 kg/day

Automatic Bleaching Plant with a capacity of 200 kg per batch, to run for 3

batches/day or total capacity of 600 kg/day.

Hydro Extractors of 100 kg capacity (2Nos)

Tumble Dryers of 100 kg capacity (2Nos)

Steam Boiler of 1000 kg/hr capacity with Water Softener

Wet Linen Trolleys (10 Nos)

Six Spindle Yarn Hank to Cone conversion m/c (10 Nos)

Goods Career Vehicle

Building 3000 sqft

6.3.2.2 Time Frame

5 CFC'S to be installed over a 4 yrs period at the following locations:

Narasapur

Elamanchili

Tanuku

Poduru

Bheemavaram

6.3.2.3 Approximate Budget : Rs 6 Crore

6.3.2.4 Expected outcome/Benefit

Ease of Operation for the Stakeholders

Availability of Quality dyed yarn in half kg Cones/fabric in the cluster at economical prices.

The cluster Turnover would increase due to inclusion of coloured products in product range. (Presently restricted mostly to off-white/white only)


The quality of Coloured products would be able to match the International Quality standards

Easy viability of off-white yarn in half kg cones at economical prices

6.4 MARKETING SET UP OF LACE PARK IS DEFICIENT, LEADS TO LOW SALES

TURNOVER AND NON-CONTINUOUS WORK FOR THE ARTISANS

6.4.1 Issue:

Lace Park was established as a Co-operative/Corporate set up with Public/Private

Participation by roping in entrepreneurs interested to participate in this activity. But

slowly this concept has lost one basic thing, the possibility of marketing the products.

Today's pressing need is to reach as close to the customer as possible. To this end,

these operations would be extended right up to the consumers' doorsteps. But the

marketing set up of the Lace Park is deficient of catering the marketing aspects for the

cluster. This defunct marketing system affects into low sales and which further regulate

the volume of job for the artisans. Low turnover inflicts loss of job for the artisans.

6.4.2 Proposed Interventions:

Recruitment & Training of 1 Marketing Manager & 1 Field officer to tap International

& Domestic Markets

Appointing Distributors in major cities i.e. Delhi, Mumbai etc.

For Display & Sales of Laced products, tying up with major Retail

outlets( Furnishings, Ladies & Kids Garments) in Delhi, Mumbai etc like Jagidsh

Stores, BigJos, Globus, Ebony, HomeSaz, Shoppers Stop, Reliance Trends,

Koutons Retail, Spencers Retail etc.

6.4.3 Time frame


Recruitment of Marketing Manager and The Field Officer will be immediate, while for

activities b) and c) the time frame is gradually over 3 years period.

6.4.4 Expected Outcome/ Benefits

There will be enhanced marketing exposure for the lace products and a global brand

building initiative will be undertaken through this activity.

6.5 LACK OF WORKING CAPITAL

6.5.1 Issue:

The artisans are mostly poor and they are attached to a unit. The raw materials i.e. yarn,

fabric, accessories are provided to the Artisans along with Design Pattern/Sample by

Exporters/Lace Park and the Artisans are paid conversion charges, paid mostly based

on ½ kg yarn conversion for lace item. They spend 4-5 hours per day apart from their

household chores. These artisans do not have any working capital for purchasing the

raw materials, mainly the yarns. Again, the drying, dyeing coning and bleaching of the

yarns needs money. Local units charge Rs 4 per kg for conversion of yarn into cone.

Bleaching units at Palakkal charges Rs 20 per kg. There a fair amount of cash is

involved. But it is reported that the women from poor households can not afford the seed

money for procuring raw materials. This hampers the production possibilities of the

artisans.

6.5.2 Proposed Intervention/s:

Working Capital needs to be provided for purchasing raw material, paying wages etc (@ Rs. 2000 per Artisan and 1 lac Artisans)


6.5.3 Time frame Over 4 Years

6.5.4 Approximate budget Rs 20 Crore

6.5.5 Expected Outcome/ Benefits a) A cluster level T.O of Rs. 160 Cr. Per

year could be achieved in

4 years


SPV and Lace Artisans; Association will be implementing agencies for the above-

mentioned activities.

6.6 PRODUCT DIVERSIFICATION IS NOT AVAILABLE

6.6.1 Issue:

The major Lace based products being manufactured in the Narsapur Lace Cluster and

their approximate selling prices are given below:

Product Approx Selling / Export Price

a) Furnishings

Cushion cover ( 20 inch x 20 inch) Rs. 42/ piece

Pillow Cover ( 20 inch x 12 inch) Rs. 40/Piece

Double Bed Sheet/Cover (6ft x 6 ft) Rs. 950/piece

b) Dollies (12 inch in diameter) Rs. 30/piece

c) Table Mat (14 inch x 36 inch ) Rs. 35/piece


d) Ladies & Children Garments

Front Top Rs. 750/piece

Skirt Rs. 750/piece

Middies Rs. 800/piece

But it is seen mostly table mats, dollies, pillow covers and cushion covers are sold,

therefore, major production is undertaken in these few products only. Product variation is

not available. Sometimes the buyer provides the Product Design pattern (Drawing on

paper, photograph) or actual product Sample to be manufactured, specifications of yarn

& fabric to be used, quality Tests to be carried if any etc. to the Lace Park/Exporter

(Supplier). But, most of the cases traditional works are undertaken by the workers.

The Knowledge & skill of Lace cluster Artisans is traditional, Old & is lacking w.r.t:

New products/diversification

Latest Fashion Designs

High value art like M/c or hand stitching, interlocking, picoting, Embroidery, beadwork

Fine Thread intricate Lace Work etc.

6.6.2 Proposed Intervention/s:

Organizing Mandal level Design & Technical Development Workshops for Lace

Artisans at Mini CFC'S w.r.t. New Laced Products, Latest Fashion Design (Each of

15 days duration, 50 Artisans per batch, Expenditure @ Rs. 1.80 Lac per workshop)


Organizing Mandal level Skill upgradation programs for Lace Artisans at Mini CFC'S

w.r.t other High Value Arts (Each of 4 months duration, 30 Artisans per batch,

expenditure @ Rs. 2.7 Lacs per program)

Undertaking Integrated Design & Technical Development Projects for Development

of New Prototypes/Products based on Lace & Different varieties of fabrics, Test

marketing etc. at Lace Park (Each project will be a residential program, of 6 months

duration, 50 Artisans per batch, 40 prototypes to be developed, expenditure @ Rs.

10 Lacs per project)

6.6.3 Time frame

Every month 2 such workshops would be organised or a total of 120 workshops in 4

years covering about 13 Major Lace Artisan Mandals of W.G. District.

Every year 12 such programs would be organised (one in each major Mandal) or a

total of 60 programs in 4 years

Every year 2 such projects would be undertaken at Lace Park or a Total of 10

projects in 4 years

6.6.4 Approximate budget Rs. 4.78 crore


About 6000 MLT will be trained in new Laced based products & latest Designs &

they inturn would train other Artisans at village level in the proposed Mini CFC'S

(Trainer-trainee program)

Due to skill upgradation the trained Artisans would be able to perform High value

added work/job which would provide them more work and higher conversion

charges.


About 1800 Master Stitching & Embroidery (MSE) Trainers would be trained in High

value Arts like M/c or Hand stitching , interlocking, Picoting, Embroidery etc & they

inturn would train other Artisans at village level in proposed Mini CFC'S. (Trainer -

Trainee Program)



charges.

About 500 MLT will be trained in new Lace & garment based products & latest

Designs & they inturn would train other Artisans at village level in the proposed Mini

CFC'S (Trainer-trainee program)



charges.


SPVs, Lace Park & other Societies, NIFT/NID and Mini CFCs will implement the

activities

6.7 EXPORT MARKET FOR LACE IS STAGNANT AND DOMESTIC MARKET

REMAINS UN-TAPPED

6.7.1 Issue:

It is observed that the export market for the lace cluster is 90 percent and the domestic

market is only 10 percent. Still, the export market is not fully tapped. Only Rs 36 crores

is the export market and exported only in UK, Middle East and USA. The possibilities of

tapping the other countries like major European countries, Japan, Indonesia, Malaysia

etc and the business can be explored to many folds.


Again, domestic market is not at all tapped. For reference, it is understood by the sales

figure of the lace products that only 10 percent of the total sales, ie. Rs 4 crores is the

domestic sales, which is very small an amount for such a quality product. Presently,

places like Delhi, Mumbai, Hyderabad and Bangalore are only buyers. This needs to be

improved.


A Detailed Market Survey & Laced Products Assessment Survey needs to be carried

out at International & National level

Marketing Support/Assistance for Larger Participation in International & National

Handicrafts & Gifts Fairs, Textiles Fairs, Exhibitions held at Delhi Hat, New Delhi &

showcasing of Lace based products at Leepakshi Showrooms of AP Handicrafts

Development Corporation at New Delhi, Hyderabad, Vijaywara etc. by Exporters,

Lace Park, other Societies

6.7.3 Time frame Every year for 4 years

6.7.4 Approximate budget Rs 11 crore for 4 years


The Sales Turnover of the Cluster would reach a level of approx Rs. 160 Cr. By 2012-13



EPCH (Space booking)

Proposed cluster level SPV


6.8 THE PRODUCTION FACILITIES AT LACE PARK IS INADEQUATE

6.8.1 Issue:

Crochet Lace Park (The West Godavari District Alankriti Lace Manufacturing Women

Mutually Aided Cooperative Societies Federation) was established by Velegu-DRDA,

Andhra Pradesh in the year 2004 with a financial outlay of approx Rs. 3 crores received

as Grant over 3 years period from DRDA-Govt. of AP (under IIDF, SGSY Schemes) and

office of the DC (Handicrafts), New Delhi under AHVY. Lace Park was established as a

Co-operative/Corporate set up with Public/Private Participation by roping in

entrepreneurs interested to participate in this activity. The Lace Self Help Groups at

Village level shall be converted to village level Co-operative Societies. All these village

cooperative society would be pooled together into a Federal and an apex Society at the

District Level with head quarters at Narasapur housed in the lace park. The activity

would be organized such that the profits of the apex body would be passed down to the

grass root level Lace workers in addition to the wages to their work.

The Common Facility set up at Lace Park which is being utilized by them for their own

production and could be utilized as well by other stakeholders particularly by Exporters

include the following:

Automatic Washing & bleaching Machines of 165 kg & 15 kg batch capacities.

Tumble Dryers of 50 kg & 10 kg batch capacities.

Auxiliary equipments like Trolleys, Steam Boiler, Water Softner, Water Treatment

plant etc.

With the intervention of Lace Park, Common Production Centres have been established

at village level (About 150 operational at present) where Quality production takes place


in an organized manner under the supervision of an MLT (Master Lace Trainer). So far

(Year 2007-08) production worth Rs. 2.0 crores has been achieved starting from the

year 2004-05.

Procurement, stocking & distribution of Raw material (Yarn, fabric) of right quality,

appropriate price directly from the Manufacturers (Coats India, Ambasamudram; Sri

Umed Mills, Pali; Century Mills, Mumbai etc) and distributing them to Primary Societies

as per production plan. It has obtained Rs. 97 Lacs under AHVY from o/o DC(H), New

Delhi as non-recurring grant-in-aid as Margin Money for meeting the Working Capital

requirement of its Lace Artisan members.

Procuring & Distributing high quality needles (the prime tool for Hand Crochet) among

the artisans free of Cost and till date about 15000 Needles have been distributed

including Japanese needles good for fine weaving of Lace work and handling of fine

yarn.

Marketing Efforts to enhance Sales Turn over both in the International and Domestic

Markets by way of participation in Fairs (Dubai, Malaysia, ITPO etc); tied up with AP

Govt Lepakshi for exhibiting products at Delhi, Hyderabad; tied up with Tirpur & Karur

(TN) Agencies for International Marketing; established retail outlets at Eluru & Narasapur

and undertaking efforts at present to develop product catalogues, website etc.

But, the Lace Park has inadequate infrastructure to handle a large volume of job work.

Most of the cases, when the volume is high and for procuring a bulk work, the artisans

have to depend on Tirupur and Karur. Again, marketing wing is established in the Lace

Park, but the wing do not explore too much. They are only satisfied with the present


status. Unless there will be huge production and profit as well, artisans will not pocket a

good earnings.


Up-gradation of the following facilities at Lace Park

Steam Ironing m/c ( 4 Nos)

Straight Knife Fabric Cutting m/c (1 Nos)

Goods Carrier Vehicle (1 Nos)

Mini Van for Artisan Movement ( 1Nos)

D.G. Set for power back up (1 Nos.)

Construction of warehouse for Raw Material & Finished goods storage (1000 sqft)

6.8.3 Time frame 6 months

6.8.4 Approximate budget Rs 0.25 Crore


The productivity, operations, product finish at Lace Park would improve.


SPV

Lace Park (DRDA)

Machine Manufacturers & Suppliers

Civil Construction Agencies


6.9 MAJORITY OF THE LACE WORKERS ARE STILL OUT OF ANY KIND OF

FEDERATION OR GROUP

6.9.1 Issue:

It is understood during the diagnostic study of the cluster at Narsapur, that majority of

the artisans are still non members of any federation, SHG or cluster groups made by any

agency. It is estimated that there are at present about 3500 Lace Artisan SHG in the

lace cluster, Narasapur, out of which 3119 are under the Lace Park; 100 under Sree

Adarsha Mutually Aided Thrift & Credit Society Ltd and about 70 under Godavari Delta

Women Lace Artisans Co-op Cottage Industrial Society Ltd. Besides the 51 Lace Artisan

Societies formed in 14 Mandals of W.G. District under the Lace Park there are about 5

more Lace Artisan Societies.

6.9.2 Proposed Intervention/s

Mini Common Facility Centres suitable to accommodate about 100 Artisans need to be

set up at various locations throughout the Lace Cluster consisting of the following:

2000 sqft working shed & R.M. Storage,

10 Automatic stitching m/c,

Automatic Embroidery m/c with 6 heads,

overlocking m/c,

2 Picoting m/c,

1 no Straight Knife Fabric Cutting m/c,

D.G. Set for Power Back up,

Goods Carrier Vehicle

Mini Van for Artisan Movement

Total Cost @ Rs. 25 Lacs per centre


6.9.3 Time frame

Every year 12 Mini CFC'S would be set up or 60 in 4 years time covering selected

major Artisan Mandals.

6.9.4 Approximate budget Rs. 21 Crore


a) Mini CFC'S will provide excellent working condition and result in enhanced

quality & quantity of village level laced products manufacture under supervision

of MLT/MS & ET

b) The Cluster turnover would increase substantially


SPV

M/c Suppliers

Civil Suppliers

Civil Construction Agencies


7 DEVELOPMENT PLAN FOR NARASAPUR LACE CLUSTER

7.1 SUMMARY OF ISSUES

From the foregoing, it is clear that the business plan for development of the Narasapur

lace cluster has to deal with the following major issues:

Both export and domestic marketing needs to be given a thrust

In order to diversify the production base, development of new designs based on

market feedback and based on an analysis of market trends needs to given a priority

The quality of products needs to be improved, and emphasis needs to be placed on

production of fine lace which has a higher value

Bleaching and dyeing facilities need to be provided to increase the range of products

Artisans need equipment and facilities for producing better quality products and for

improving productivity

The following sections outline our approach to tackle the abovementioned issues:

7.2 APPROACH

The overall approach to development of the cluster is through the formation of three

separate SPVs each having a well defined focus and a well defined business plan. This

approach ensures that all of the required interventions get equal priority. Equity in the

SPVs is to be held among the stakeholders of the SPVs.


However, since the success of the development plan will depend largely on the manner

in which all the three SPVs interact and support each other, a degree of trust and co-

ordination is a must for the success of the plan.

Hence, the business model approach for Narsapur cluster is to form a Cluster

Development Coordination Committee (CDCC), headed by DC (H) which will coordinate

and monitor closely the activities of the business model to be implemented at Narsapur.

This CDCC will also mange inter-allia conflicts and improve coordination among the

stakeholders. Details of the functions and objectives of the CDCC hav already been

outlined in chapter 6.1 above.

A Project Management Cell is also proposed to be established, who will be a

consultancy firm to give project management support to the SPVs under the guidance of

the CDCC. They will also conduct the third party monitoring of the activities and help in

mid-term correction of the project activities.

7.3 PROPOSED INTERVENTIONS:

Agencies/ SPVs Proposed:

Five different agencies are proposed for the comprehensive development of the lace

cluster at Narasapur. These are as follows –

Formation of Cluster Development Coordination Committee (CDCC)

Formation of a Project Management Cell (PMC)

Formation of SPV – I, which will be a Public Ltd company for Marketing explorations,

design development and technical support in marketing

Formation of SPV – II, which will be again a Public Ltd Company and responsible for

management and operations of 5 CFCs to be set up for dyeing, bleaching and drying

facilities in the block/ mandal level


Formation of SPV – III, which will be a producer company (581 B company) under

Part IX A of Companies Act and owned by the artisans, who are the primary

producers of the cluster.


INTERVENTION – I FORMATION OF A MARKETING SPV

7.3.1 Major Issues/Needs to be Addressed

The Marketing Set-Up/Infrastructure at Lace Cluster is deficient, leads to low Sales

Turnover and non-continuous work to Artisans.

The exports are falling & Domestic Market Demand remains untapped.

7.3.2 Proposed Interventions

Formation of SPV-1 (Public Ltd Co) for Market & Product Development at cluster

level

Main Functions of the Marketing SPV

a) Explore & Procure Export-orders

b) Procure Domestic orders

c) Participate in Major International & National Textiles, Handicrafts & Gifts Fairs

d) Development of New Designs & Product diversification (Design Bank)

e) Execute orders under its ‘Brand’ with the assistance of Member Exporters, Lace

Park, Artisan SPV-3.

f) Development of Marketing Channels/ avenues like Web Portal; Product & Design

Catalogues; appointing Dealers & Distributors; tying up with major Retail outlets

located in India & Abroad etc.


7.3.3 Time Frame : 4 months for formation of the SPV

7.3.4 Project Cost (For Establishment of Marketing & Product Design Development Centre)

The Marketing SPV will establish a marketing and product design and development

centre with a design office, conference room, display room, and fixed assets like

communication system and computers etc.

S. No.

Particulars Amount

(Rs. Lacs)

a) Land & Site Development (1 acre @ Rs. 15 Lacs per acre)

15.0

b) Building & Civil Works(Approx 1000 sqm @ Rs.

10,000 per Sqm) comprising of:

- Administrative office

- Marketing office

- Product Design Development office

- Showroom

- Conference room etc

100.0

c) Fixed Assets like office Communication system,

Conference room equipment, furniture & fixture, D.G.

Set, Computers & Printers (CAD) etc

25.0

d) Preliminary & Pre-operative Expenses 20.0

e) Contingencies (10% of a, b , c & d) 15.0

Total 175.0


7.3.5 Means of Finance of Project Cost

a) SPV-1 Stakeholders Equity (25% of total Project Cost) Rs. Lacs

(i) Lace Park (25%) 11

(ii) Exporters (About 15 Nos) (50%) 22

(iii) Artisan SPV-3 (25%) 11

Total Equity 44

% of equity contribution 25%

b) GoI Grant (75% of total project cost) under CCDS 131

Total 175

7.4 PROJECT COST (MARKETING/PROMOTIONAL MEASURES)

Besides the abovementioned investment in a Marketing and design centre, this SPV will

undertake promotion of exports and also increase domestic market. For this purpose the

SPV will undertake intensive participation in overseas fairs and exhibitions, and

undertake one-to-one buyer seller meets. It will also advertise its products to the major

buyers. In addition the SPV will undertake development of domestic market which has

not been tapped to any substantial extent, but which holds great potential. Steps like

appointment of distributors and wholesalers in the major markets, taking part in

exhibitions and advertising are some of the steps to be taken. Details have been given in

chapter 6 above.


7.4.1 Project Cost for Marketing & Promotional Measures

S.

No.

Particulars Amount(Rs. Lacs)

a. Printing of Product/Design Catalogues (20,000 Nos @ Rs.

150/Catalogue)

30.00

b. Printing of Product Brochures (10,000 Nos @ Rs.

80/Brochure)

8.00

c. Design Development/Uploading of Web Portal 8.00

d. Brand Design & Promotion 5.00

e. Advertising through Media 25.00

f. Participation in International & Domestic Exhibitions/Fairs;

Marketing Tie-ups etc.

1000.00

Total 1076.00

7.4.2Means of Finance

a. SPV-1 Stakeholders contribution (25%)

(i) Lace Park (25%) 67.25

(ii) Exporters (50%) 134.50

(iii) Artisans SPV-3 (25%) 67.25

Total equity by stakeholders 269.50

b. GoI Grant under CCDS (75%) 807.00

Total 1076.00


7.5 VIABILITY OF THE MARKETING SPV

In accordance with the current practices; the marketing SPV not only obtains orders for

execution, but also provides the designs and also obtains the raw materials. It then

arranges for the yarn to be bleached or dyed as the case may be and then give it to

artisans to convert the raw material into the finished product on a conversion charge

basis. Thus the cost of raw material, the conversion cost etc. has to be accounted for

while calculating the profitability of the SPV.

7.5.1 Raw Material Requirement

The table below gives the yarn and fabric requirement and the cost thereof, which is used

for all subsequent calculations of profitability of all the SPVs.

Estimated Consumption/requirement of Yarn & Fabric in Lace Cluster- Narasapur

SL. NO Particulars Year 2008-09 2009-10 2010-11 2011-12

1

Anticipated total Sales T.O of Cluster (50:50, Yarn & Fabric based product) in Rs. Lacs 5000 8000 11000 16000

2Estimated Cost of Yarn & Fabric (35% of T.O in Rs Lacs) 1750 2800 3850 5600

3Estimated Cost of Yarn ( @40% of (2) in Rs. Lacs 700 1120 1540 2240

4Estimated Quantity of Yarn ( 2/10 Count, price @ Rs. 100/kg offwhite) in Tonnes 700 1120 1540 2240

5Estimated Cost of Fabric (@ 60% of (2) in Rs. Lacs 1050 1680 2310 3360

6Estimated Quantity of Fabric (20 s, 160 gsm, price @ Rs. 30/sqm) in Tonnes 560 896 1232 1792

7Total estimated quantity of Yarn & Fabric to be consumed in cluster (Tonnes) 1260 2016 2772 4032

8Estimated Yarn & Fabric neading Bleaching (25 % of 7) in Tonnes 315 504 693 1008

9Estimated Yarn & Fabric neading colouring (% of 7) 5 10 15 25

10Estimated Yarn & Fabric needing coloring (Tonnes) 63 201.6 415.8 1008


7.5.2 Profitability of the Marketing SPV

The table below shows the viability of the SPV. Assuming that the Marketing SPV is able

to cater to 50% of the cluster’s turnover, the SPV would have a turnover of Rs 25 cr p.a.

rising fourfold in four years to Rs 80 cr.

The SPV would purchase the raw materials, have them bleached and dyed using the

facilities of the CFC SPV and give them for conversion to artisans. The calculations show that

the SPV will be viable from the first year itself with a Profit before Tax of Rs 3.7 cr p.a. rising

to Rs 12 cr over a four year period.

SPV-1 Profitability Statement (Rs. Lacs)

Year

S. No. Particulars 2008-09 2009-10 2010-11 2011-12

1Anticipated Total Sales Turnover of the Lace Cluster 5000 8000 11000 16000

2Anticipated Sales Turnover of SPV-1 (50% of 1) 2500 4000 5500 8000

3 Cost of Operations

(i) Raw Materials & Consumables (Yarn, fabric, accessories @35% of 2) 875 1400 1925 2800

(ii) Conversion charges paid to Artisans Federations, SPV 3 etc @40% of (2) 1000 1600 2200 3200

(iii) Salaries, Admin Expense @2.5% of (2) 62.5 100 137.5 200

(iv) Other Expenses like utilities, O&M, Bleaching Dyeing, Ironing charges, packing, shipment etc (@7.5% of (2) 187.5 300.0 412.5 600.0

(v) Depreciation 2.8 3.8 5.7 9.3

Total of (3) 2127.8 3403.8 4680.7 6809.3

4 Profit Before Tax (2-3) 372.2 596.2 819.3 1190.7

5 PBT as % on Sales T.O (4/2*100) 14.9 14.9 14.9 14.9


7.5.3 Expected Outcome /Benefits

a) The Sales Turnover of the Lace Cluster would reach a level of approximately Rs.

160 Cr./yr in 4 yrs from Rs.40 cr at present. This will be four folds of the total

present sales figure of the Lace cluster.

b) Full employment to about 100,000 Lace Artisans in the cluster in 4 Yrs period, their

higher income & economic development. Presently about 50,000 artisans are

involved in the Lace Park and having almost regular job. 50,000 artisans are not

associated with any of the societies or organisations and their livelihood is at stake.

This project will provide additional employment for the rest 50,000 lace artisans

and include them within the organisation.


a) Cluster Advisory Group (CAG)

b) Cluster Management & Technical Agency (CMTA)

c) Proposed SPV-1 (Project Execution)

INTERVENTION – II – FORMATION OF CFC SPV

7.6 MAJOR ISSUES / NEEDS TO BE ADDRESSED

a) For Quality dyeing of yarn & fabric the Exporters, Lace Park, other Societies have

to send the material to Tirupur, Erode in TN which is expensive & time consuming

and many times not practical.

b) The Tirupur Dyeing units do not entertain small quantities for development of

samples, only Bulk orders.

c) The Bleaching facilities for finished products at the cluster are Primitive and

inadequate (Hand Bleaching).



Formation of SPV-2 (Public Ltd Co) for setting up and managing common conversion

facilities (CFCs) to provide the abovementioned facilities at the door steps of the users.

Since the Narasapur cluster is spread over a radius of nearly 40 Kms, it is not practical

to have all the facilities located at only one centre. Hence it is proposed that five CFCs

be set up over the period of four years to meet the requirements of concentrated artisans

in five mandals viz. at (1) Narasapur, (2) Ellamanchilli, (3) Tanuku, (4) Poduru and (5)

Bheemavaram.

7.6.2 Main functions of the SPV

The proposed SPV will provide the following services to the stakeholders on a service

charge basis:

a) Automatic Yarn hank and fabric dyeing facilities.

b) Automatic Bleaching facilities.

c) High Speed Yarn hank to cone conversion facilities.

These facilities would be available not only to the stakeholders but also to any other

businessmen as well i.e. some exporters who may be operating independently or even

some small factories who may like to take advantage of high quality facilities being set

up.

7.6.3 Time Frame : 4 years (1 CFC every year for first 3 years & 2 CFC’s in 4th yr)


7.6.4 Project Cost

a) Project Cost for each CFC’s (in Rs Lakhs)

b) Thus the total project cost for 5 CFC’s would be Rs 118 lakhsx5=Rs. 590 Lacs


S.No. Particulars Amount

a) Land & Site Development (1/2 acre @ Rs. 15 Lacs per acre)

7.50

b) Building & Civil Works(Approx 1000 sqm @ Rs. 4,000 per Sqm) comprising of:- Office- Production Hall - Raw Material and Product Storage - Electrical & DG Set room etc.

40.00

c) Plant and Machinery comprising of the following :i) Automatic Yarn Hank & Fabric dyeing plant with

Jiggers with a capacity of 200 kg per batch, to run for 3 batches/day or total capacity of 600 kg/day

ii) Automatic Bleaching Plant with a capacity of 200 kg per batch, to run for 3 batches/day or total capacity of 600 kg/day.

iii) Hydro Extractors of 100 kg capacity (2Nos)iv) Tumble Dryers of 100 kg capacity (2Nos)v) Steam Boiler of 1000 kg/hr capacity with Water

Softenervi) Wet Linen Trolleys (10 Nos)vii) Six Spindle Yarn Hank to Cone conversion m/c (10

Nos)

30.00

d) Misc. Fixed Assets like office equipment, furniture & fixture, D.G. Set, Small Goods Career Vehicle etc

15.0

e) Preliminary & Pre-operative Expenses 15.0

f) Contingencies (10% of a, b , c, d & e) 10.5

Total 118.0

7.6.5 Means of Finance – Project Cost for 5 CFC’s

a) SPV-2 Stakeholder Equity (25% of Total Project

Cost)

Rs. Lacs

(i) Lace Park (25%) 37.00

(ii) Exporters (50%) 74.00

(iii) Artisan SPV & Other Societies (25%) 37.00

Total Equity 148

b) Govt. of India Grant under CCDS (75% of Total

Project Cost)

442.00

Total 590.00

7.6.6 Viability of the CFC (Common Facility Center) SPV

As explained earlier, the CFC SPV will be carrying out job works on conversion charges

basis. The viability calculations assumes that the CFCs will get about 60% of the dyeing

and bleaching business of the cluster in the first year itself and as its credibility gets

established and costs become more competitive, the capacity utilization will rise to 90%.

The total installed capacity per CFC will be 770 MT p.a.

The income of the SPV is estimated at Rs 87 lakhs in the first year, rising to Rs 649

lakhs by the fourth year. After accounting for the cost of materials and cost of operations,

the CFC SPV will make a profit of Rs 14s in the first year rising to Rs 112 lakhs by the

fourth year. The PBT as a % of sales at 16-17% is reasonable.


SPV-2 Profitability Statement

Yearn

S. No. Particulars 2008-09 2009-10 2010-11 2011-12

1 Installed Plant Capacities

a) Automatic Yarn & Fabric Dyeing (TPA) 210 420 630 1050

b) Automatic Bleaching & Washing(TPA) 210 420 630 1050

c) Yarn Hank to Cone Conversion (TPA) 350 700 1050 1750

2 Plant Capacity Utilization (%) 60 70 80 90

3 Income from Operations/Services

a)Yarn & Fabric dyed (@Rs. 40 per kg charges) in Rs. Lacs

50 118 202 378

b)Product Bleaching & washing (@Rs. 22 per kg) in Rs. Lacs

28 65 111 208

c)1/2 kg Cone Conversion (@ Rs. 4 per kg) in Rs. Lacs

8 20 34 63

Total (3) 87 202 346 649

4 Cost of Operations (Rs. Lacs)

a) Raw Materials & Consumables (Dyes, Hydrogen Peroxide bleach, Plastic cones etc) @ 30% of (3)

26.0 60.6 103.8 194.7

b)Wages & Salaries @30% of (3)

26.0 60.6 103.8 194.7

c)Adm & Marketing Expenses (5% of 3)

4.3 10.1 17.3 32.4

d)Utilities (Power, Fuel & Water)@10% of (3)

8.7 20.2 34.6 64.9

e) Repair & Maintenance and other overheads (@5% of (3)

4.3 10.1 17.3 32.4

f)Depreciation

3.3 6.5 11.2 17.4

Total (4)73 168 288 536

5 Profit Before Tax (Rs. Lacs) 14 34 58 112

6 PBT as % on Sales T.O (5/3*100) 16 17 17 17


7.6.7 Expected Outcome / Benefits

a) Ease of Operation for the Stakeholders

b) Availability of Quality dyed yarn in half kg Cones/fabric in the cluster at economical

prices.

c) The cluster Turnover would increase due to inclusion of coloured products in product

range. (Presently restricted mostly to offwhite/white only)

d) The quality of Coloured products would be able to match the International Quality

standards

e) Easy availability of off white yarn in half kg cones at economical prices

7.6.8 Proposed Agencies For Implementation

a) Cluster Advisory Group (CAG)

b) Cluster Management & Technical Agency (CMTA)

c) Proposed SPV-II (Project Execution)


INTERVENTION – III – FORMATION OF ARTISAN SPV

7.7 MAJOR ISSUES/ NEEDS TO BE ADDRESSED

a) The Knowledge & skill of Lace cluster Artisans is traditional, outdated & is lacking

w.r.t:

New products/diversification

Latest Fashion Designs

High value art like M/c or hand stitching, interlocking, picoting, Embroidery,

beadwork.

Fine Thread intricate Lace Work etc.

b) Common Production /Facility Centres at village level for Lace Artisans are non

existent in majority of the villages of the cluster & those present are temporary at the

residence of the Society President.

c) Despite the efforts of Lace Park & Few other Societies, majority of the Lace Artisans

(Approx 100000) are unorganized and working in isolation in W.G. District.

d) The health of the women lace artisans is not good and they suffer from poor eye

sight due to fine weaving work and are also highly anemic (Hemoglobin @ 6).


Formation of SPV-3 (Producer Company) for the Lace Artisans at Cluster level with

Mini CFCs/Work sheds to be set up near a cluster of villages. A total of 50

worksheds are proposed to be set up during the 4 yr period.


7.7.2 Main Functions of the SPV:

Domestic Marketing

Direct Domestic Marketing of Lace Artisan products & procuring orders from SPV 1

and other exporters.

Managing Artisan Mini CFC’s

Managing the operations of 50 Artisan Mini CFC’s (to be set up in 4 years in 12

major Artisan Mandals) which would offer sophisticated common production

facilities to the Lace Artisans and getting quality work executed from Artisans.

Capacity Building/Skill Up gradation of Artisans

Organizing Mandal Level Design & Technical Development Workshops for Lace

Artisans at proposed mini CFC’s w.r.t. New Lace Products, Latest Fashion

Designs etc.

Organizing Mandal level Skill upgradation programs for Lace Artisans at Mini

CFC'S w.r.t other High value art like M/c or hand stitching, interlocking, picoting,

Embroidery, beadwork, Fine Thread intricate Lace Work etc.

Undertaking Integrated Design & Technical Development Projects for

Development of New Prototypes/Products based on Lace & Different varieties of

fabrics, Test marketing etc.

Organizing approximately 75,000 Artisans presently unorganized in the lace

cluster.

Social Welfare Activities for Artisans

Organizing Health Camps in about 12 Major Mandals of West Godavari District for

Lace Artisans w.r.t Eye, Health, Gynae & Orthopaedic ailments, check up and

distribution of necessary medicines, eye glasses etc.

Providing Health Insurance Cover to Lace Artisans will provide social security to the

lace artisans which on the other hand give full-day employment for the artisans.


7.7.3 Time Frame

In the first 3 yrs, every year 10 Mini CFC’s would be setup and in the 4 th yr 20 Mini

CFC’s would be set up.

7.7.4 Project Cost (Artisan Mini CFC’s)

a) Project Cost for each Artisan Mini CFC’s (in Rs Lakhs)

Particulars Amount

a) Land & Site Development (1/4 acre @ Rs. 15

Lacs per acre)

3.75

b) Building & Civil Works(Approx 250 sqm @ Rs.

4,000 per Sqm) comprising of:

- Office- Production Hall - Raw Material and Product Storage - Electrical & DG Set room etc.

10.0

c) Plant and Machinery comprising of the following :

- 10 Automatic stitching m/c, - 2 Automatic Embroidery m/c with 6 heads, - 2 overlocking m/c, - 2 Picoting m/c, - 1 No. Straight Knife Fabric Cutting m/c

10.0

d) Misc. Fixed Assets like office equipment, furniture

& fixture, D.G. Set, Goods Career Vehicle etc

10.0

e) Preliminary & Pre-operative Expenses 5.0

f) Contingencies (10% of a, b , c, d & e) 3.75

Total 42.50


b) Thus the total project cost for setting up 50 Artisan Mini CFC’s over 4

year period would be Rs. 2125 Lacs.

7.7.5 Means of Finance for Project Cost for 50 Artisan Mini CFC’s (Work-sheds)

Rs. Lacs

a) Artisan SPV-3 Equity (Federation, Societies) (25%) 531.00

b) GoI CCDS (75%) 1594.00

Total 2125.00


7.7.6 Project Cost (Domestic Market Development, Artisan Capacity Building, Skill-Upgradation & Social Welfare Activities)

S. No. Particulars Amount(Rs. Lacs)

a) C apacity Building

(i) Organizing Mandal Level Design & Technical Development

Workshops for Artisans at Mini CFC’s each of 15 days duration,

50 Artisans per batch (Total 120 Workshops in 4 Yrs in 12 Major

Mandals @ Rs. 1.80 Lacs/Workshop)

216

(ii) Organizing Mandal level Skill Upgradation Program for

Artisans at Mini CFC’s, each of 4 Months duration, 30 Artisans

per batch (Total 60 programs in 4 Yrs in 12 Major Mandals @ Rs.

2.70 Lacs per program)

162

(iii) Undertaking Integrated Design & Technical Development

Projects for new prototypes at Lacepark (Total 10 projects in 4

Yrs @ Rs. 10 Lacs per project)

100

Total (a) 478b) Domestic Market Development

(i) Development & Printing of Lace Product Brochures 20,000

Nos @ Rs. 80/Brochure

16

(ii) Organizing Craft Bazars in Major cities of India i.e. Delhi,

Mumbai, Hyderabad, Bangalore, Chennai etc (Total 25 Nos in 4

Yrs, each with 150 Artisans stalls 10 days duration @ Rs. 13.50

Lacs / Bazar)

338

(iii) Participation in major Domestic Textiles, Handicrafts & Gifts

Fairs organized by ITPO, EPCH etc

100

Total (b) 454


S. No. Particulars Amount(Rs. Lacs)

c) Social Welfare Activities

(i) Organizing 60 Health Camps at Mandal level, in major

Mandals in 4 Yrs @ Rs. 2 Lacs/Camp

120

(ii) Providing Health Insurance cover to about 100,000 Artisans

over 4 Yrs period or about 50000 Artisans families based on the

following plan:

1st Year : 20,000 Artisan Families @Rs. 900 per family

2nd Year : 30,000 Artisan Families @Rs. 900 per family

3rd Year : 40,000 Artisan Families @Rs. 900 per family

4th Year : 50,000 Artisan Families @Rs. 900 per family

1260

Total (c) 1380

d) Organizing of 75,000 Lace Artisans

Identification of unorganized Artisans village wise, issuing ID

Cards, formation of SHG, Societies etc ( in the first year about

15,000 Artisans would be organized then 20,000 every

subsequent year thereby forming a total of 300 additional

Societies) @ Rs. 400 per Artisan

300

Grand Total (a+b+c+d) 2612

7.7.7 Means of Finance

(i) Artisan SPV-3 Contribution (about 300 Societies) (25%) 653

(ii) GoI Grant –CCDS (75%) 1959

TOTAL 2612


7.7.8 Viability of the Artisan SPV (Producer Company)

The artisan SPV will undertake job work from the Export SPV and will also develop

some domestic sales of its own, in which case it will also directly execute such domestic

orders.

The viability calculations assume on a conservative basis, that the domestic sales will

form only a small % of the overall activities of the SPV. The turnover of the Producer

Company is expected to be Rs 14.50 cr in the first year rising to Rs Rs 54.10 cr by the

end of fourth year. After accounting for the cost of conversion etc. it is found that the

Profit Before Tax is Rs 1.96 cr in the 1st yr rising to about Rs 7.5 cr by the end of fourth

year.

As a producer company, the profits will be divided between the members partly as bonus

and partly in the ratio of use of its facilities by the members of the artisan company.

SPV-3 Profitability Statement (Rs. Lacs )

S. No Particulars Year

2008-09 2009-10 2010-11 2011-12

1 Estimated Total Sales T.O. of Lace Cluster

5000 8000 11000 16000

2 Estimated Conversion Charges Paid to Lace Park, SPV-3 etc(40% of (1)

2000 3200 4400 6400

3 Estimated T.O of SPV-3 from Operations:

a) Direct domestic marketing 150.00 350.00 600.00 1250.00


S. No Particulars Year

2008-09 2009-10 2010-11 2011-12

b) Job Work from Exporters, SPV-1 (65% of (2)

1300.00 2080.00 2860.00 4160.00

Total (3) 1450.00 2430.00 3460.00 5410.00

4 Cost of Operations:

a) Raw Materials & Consumables (Yarn, Fabric & Accessories @ 35% of 3 (a)

52.50 122.50 210.00 437.50

b) Conversion Charges paid to Member Artisans for :

i) Own product manufactured (@35% of 3(a)

52.50 122.50 210.00 437.50

ii) Job Work (@80% of 3(b) 1040.00 1664.00 2288.00 3328.00

Total (b) 1092.50 1786.50 2498.00 3765.50

c) Salaries, Adm, R& M expenses (@3% of 3)

43.50 72.90 103.80 162.30

d) Utilities (Power, Fuel @ 3% of 3) 43.50 72.90 103.80 162.30

e) Bleaching, Dyeing, Ironing, Packing Cost @5% of 3(a)

7.50 17.50 30.00 62.50

f) Depreciation (SLM) 13.98 27.24 48.11 73.60

Total (4) 1253.48 2099.54 2993.71 4663.70

5 Profit Before Tax (3-4) 196.52 330.46 466.29 746.30

6 PBT as % of T.O (5/3 *100) 13.55 13.60 13.48 13.79


7.7.9 Expected Outcome / Benefits (4Yrs Period)

About 6000 MLT will be trained in new Laced based products & latest Designs &

they inturn would train other Artisans at village level in the proposed Mini CFC'S

(Trainer-trainee program)

About 1800 Master Stitching & Embroidery (MSE) Trainers would be trained in High

value Arts like M/c or Hand stitching , interlocking, Picoting, Embroidery etc & they in

turn would train other Artisans at village level in proposed Mini CFC'S. (Trainer -

Trainee Program)

About 500 MLT will be trained in new Lace & garment based products & latest

Designs & they inturn would train other Artisans at village level in the proposed Mini

CFC'S (Trainer-trainee program)



charges.

Mini CFC'S will provide excellent working condition and result in enhanced quality &

quantity of village level laced products manufacture under supervision of MLT/MS &

ET


Cluster Advisory Group (CAG)

Cluster Management & Technical Agency (CMTA)

Proposed SPV-III (Project Execution)

Design Institutes like NIFT/NID to provide Designers


INTERVENTION – IV – PROVIDING MARGIN MONEY SUPPORT

7.8 MAJOR ISSUES/ NEEDS TO BE ADDRESSED

To provide margin money Working Capital Support to about 100,000 lace artisans in 4

yrs, starting with 25,000 artisans in 1st year.

7.8.1 Budget / Requirement

Budget requirement would be Rs 500 lakhs in the 1st year, going up to Rs 2000 lakhs in

the fourth year based on a budget of about Rs 2000 per artisan.


SPV-I Export SPV

SPV-III Artisan SPV

Lace Park etc.


8ESTIMATED COST AND SOURCE OF FUNDS

As can be seen from the list of interventions outlined in chapter 7 above, the funding for

the development plan of Narasapur cluster is proposed from two sources i.e. from the

equity contribution by the stakeholders and by way of grant from the Mega Cluster

Scheme of GoI.

8.1 PROJECT COST AND SOURCE OF FUNDS:

The table below gives the summary of the fund requirement for various interventions and

their source of funds. In overall terms, the project cost for development of Narasapur

cluster is estimated at Rs 90.28 crores to be spent over a period of four years. The stake

holder’s participation will be by way of equity in the SPVs to be formed to the extent of

25% , and the balance Rs 73.83 cr will be by way of grant from GoI. Provision has been

made for grant by way of working capital margin money of Rs 20 cr as part of this

scheme. The equity contribution expected from the stakeholders is reasonable and

realistic as can be seen from the subsequent table in section 8.2 below:


Summary of Project Cost & Source of Funds (In Rs. Lakhs)

S. No.

Activity

Total Funds Required

Source of Fund

GoI CCDS

Stakeholder Equity

% of Equity

1 Formation of CAG, CMTA, carrying out Diagnostic Survey of Lace Cluster ; DPR preparation, Project Performance Assessment

450 450 0 0

2 Formation of SPV 1 & Setting up of Market & Product Development Centre

175 131 44 25

3 Market Development Activities by SPV 1 1076 807 269 25

4 Formation of SPV-2 & Setting up of 5 CFCs for offering Bleaching, Dyeing, Cone Conversion facilities

590 442 148 25

5 Formation of Artisan SPV - 3 & Setting up of 50 Artisan Mini CFC's

2125 1594 531 25

6 Capacity Building of Artisans by SPV 3 (Organisation of 120 Workshops, 60 Skill Upgradation Programs & Undertaking 10 Nos Integrated Design & Technical Development Projects )

478 359 119 25

7 Domestic Market Development by SPV-3 454 341 113 25

8 Organizing 60 Health Camps by SPV-3 at Mandal level in the Cluster

120 90 30 25

9 Providing Health Insurance cover to about 1 Lac Lace Artisans over 4 Yrs period or about 50,000 Artisans families by SPV 3

1260 945 315 25

10 Organizing about 75,000 Lace Artisans i.e. identification of unorganized Artisans, issuing ID Cards, formation of SHG, Societies etc by SPV 3

300 225 75 25

11 Margin Money Support for Working Capital to meet the requirements of Artisans at Cluster level

2000 2000 0 0

Total 9028 7383 1645 18


The phasing of the requirement of funds and their source is given in the enclosed chart

marked Annexure-I

8.2 EQUITY CONTRIBUTION BY STAKEHOLDERS:

As explained above the total equity contribution is to come from three major stake

holders viz.:

(i) the federations formed by the artisans of the lace park

(ii) Exporters and

(iii) artisans (around 75000 in nos.) who are to be federated into the Producer Company

sought to be formed as SPV-III.

The equity of the stakeholders is to be spread over four years as the project is

implemented and funds are required. The table below indicates that the expected

contribution by the lace park federation is at the rate of Rs 115 per annum, whereas the

artisans forming the producer companies are being asked to contribute about Rs 433

p.a. i.e. about Rs 35 p.m. considering that the artisans are likely to gain the most format

eh interventions, it should be possible for them to contribute this amount. If the

federations / SHGs so desire and decide, they may also use part of the margin money to

contribute towards equity. The contribution of exporters is Rs 3.84 lakhs per exporters

which is also reasonable.


Equity Contribution by Stakeholders (RS. In Lakhs)S. No.

Activity

Total Equity

Equity Contribution of Different Stakeholders (Rs. In Lakhs)

Lace Pak

Fund

Exporters Artisans

1 Formation of CAG, CMTA, carrying out Diagnostic Survey of Lace Cluster ; DPR preparation, Project Performance Assessment

0 0 0 0

2 Formation of SPV 1 & Setting up of Market & Product Development Centre

44 11 22 11

3 Maket Development Activities by SPV 1 269 67 134 67

4 Formation of SPV-2 & Setting up of 5 CFCs for offering Bleaching, Dyeing, Cone Conversion facilities

148 37 74 37

5 Formation of Artisan SPV - 3 & Setting up of 50 Artisan Mini CFC's

531 0 0 531

6 Capacity Building of Artisans by SPV 3 (Organization of 120 Workshops, 60 Skill Up gradation Programs & Undertaking 10 Nos Integrated Design & Technical Development Projects )

119 0 0 120

7 Domestic Market Development by SPV-3 113 0 0 114

8 Organizing 60 Health Camps by SPV-3 at Mandal level in the Cluster

30 0 0 30

9 Providing Health Insurance cover to about 1 Lac Lace Artisans over 4 Yrs period or about 50,000 Artisans families by SPV 3

315 0 0 315

10 Organizing about 75,000 Lace Artisans i.e. identification of unorganized Artisans, issuing ID Cards, formation of SHG, Societies etc by SPV 3

75 0 0 75

11 Margin Money Support for Working Capital to meet the requirements of Artisans at Cluster level

0 0 0 0

Total 1645 115 230 1299

No. of Stakeholders 25000 15 75000

Contribution / Stakeholder/Year in Rs. 115 384000 433


9 EXPECTED OUTCOMES / DELIVERABLES

One of the major out come of the cluster development programme by developing the

business plan is to ameliorate the socio-economic condition of the one lakh lace artisans

whose present income is around Rs 500 per month. This project not only coordinates

and collaborate all activities and stakeholders but will also converge all funds and efforts

made by different organisations. The stakeholders in this programme will be trained in

different capacities to deliver accordingly. The major deliverables are given below:

There will be a substantial growth in the Lace Cluster in an organized manner and

the cluster sales turnover (Exports, Domestic Market) is expected to increase from

the current level of approx Rs. 40 Crore to Rs. 160 Crore in the IVth year (2011-12).

Higher Foreign exchange earning by exports, to rise from current level of approx Rs.

36 Cr/yr to about Rs. 80 Cr/yr in the 4th year (2011-12).

During the next 4 Yrs (2008-09 to 2011-12) additional 75,000 Lace Artisans would be

organized in the Lace cluster leading to their empowerment & Socio-economic

development.

The average Lace Artisan Income would increase from the current level of about Rs.

500/Month to about Rs. 1500/Month (Increase 3 folds) leading to better living

standards.

The operations of Lace Cluster would become economic & self reliable with the

improvement of infrastructure i.e. setting up 5 CFC’s for providing Automatic Yarn

hank & fabric dyeing; product bleaching & washing; Yarn Hank to cone conversion

for Artisans (1/2 Kg small cones) facilities and 50 Mini CFC’s for Lace Artisans at

village level.


The Lace products range would broaden with the addition of Coloured products &

blended products like fabric & lace and products quality would improve which in turn

would provide the Lace Cluster ample opportunities to compete in the Export Market

with China and to tap the vast Domestic Market.

The operations of the Lace Cluster as a whole would become highly economical and

viable thereby leading to economic benefit for all stakeholders.

The Lace Artisans families would be provided the much needed Health Insurance

Cover and the Health & Productivity of the Lace Artisans would improve through

periodic Health Check-up camps.

With the up gradation of Lace Artisans skills, they would be able to fetch higher

wages for their art i.e. Rs. 90/1/2 Kg cone conversion for coarse Lace Work at

present to about Rs. 200/1/2 Kg cone conversion for fine, intricate Lace work &

blended products like Lace & fabric products.

9.1 SUSTAINABILITY OF THE PROGRAMME:

This project is viable because all the stakeholders have their own stake in the project,

including the exporters, Lace Park society, artisans and the Government. Lace Park is

sharing 1.27 percent of the project cost, Exporters are sharing 2.54 percent of the

project cost, Artisans SPVs (Three different SPVs) will share 14.3 percent of the project

cost and the government stake will be 82 percent.


Gradually the project cost will be shifted to the SPVs and exporters for the maintenance

and running of the cluster. The artisans will be given capacity building training for design

development and skill development. The exporters and societies will be provided with

marketing assistance and the margin money will be provided for further business.

This project is highly sustainable as par artisans will have to share Rs 400 for the project

which is too small an amount. And after four years time the benefit they will reap will be

a monthly earning of Rs 5000 on a regular basis. The exporters, who are investing Rs 15

lakh par head, will reap the benefit of about ten times of what they invested. Therefore,

the stakeholders for their own benefit will run the SPVs and the project in long run.

The success of the project will depend upon the ability of the various stakeholders to

work together in a united manner and not be suspicious of each other, especially the

exporters and the artisans. The role of the Cluster Advisory Group to be formed and

headed by the District Collector will therefore be most crucial.

Although in the present proposal, we have not assumed any equity contribution by the

State Government, we very much wish that the State Government takes a minority

shareholding in the equity of the SPVS, so that they can be represented on the boards of

the SPV and provide the much needed elder hand and patronage that the SPVs are

bound to need in the initial phase.


Documents

3. narsapur lace cluster140708-pk (Deepa)