Narsapur Lace Cluster140708-Pk (Deepa)

BUSINESS PLAN FOR DEVELOPMENT OF
NARASAPUR LACE CLUSTER
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:
Exporter Annual Sales

Turnover
M/s P. Venkanna & Co Pvt. Ltd, Rs. 10.5 crores
Palakol
M/s Ram Krishna Pramahansa & Co, Rs.4.0 Crores
Seetharampuram, Narasapur
M/s Sri J.J Lakshmi & Co, Rs.3.0 Crores
Seetharampuram
M/s P.Veeraiah. Co, Palakol Rs. 2.0 crores
M/s Koteshwari Lace Industries, Rs. 2.0 Crores
Seetharampuram, Narasapur
 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.
 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.
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.
1.2.4 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.
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:
Final Report: Business Plan for Development of Narasapur Lace Cluster - 10 -

 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

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.
MANUFACTURING PROCESS
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

Buyer Exporter/Lace Group of Lace
& other details Park (Supplier) b) Raw Material (Yarn) Artisans
c) Needles
MLT
(Supervision, QC)
Lace Panel Inspection, Finishing Bleaching &

Exporter/ Lace Park Washing at
With Fabric Job Work Unit
Bleached & Washed

Products
Labeling, Bar-coding, Ironing Product Testing, Certification &

Shipment from Chennai
Packing

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 gsm@0.35 sqm @ Rs. : Rs. 10.70
30.50 per sqm
 Accessories (Zipper, Sliders, Sewing Thread, : Rs. 1.35
packing material)
 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, : Rs.100
Packing, Adm & Sales overheads etc.
Total : Rs.775
B) Selling price/piece : Rs. 950
C) 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.

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)

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
: Rs. 450 Lacs

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
 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

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. Particulars Amount
No.
(Rs. Lacs)
a) Land & Site Development (1 acre @ Rs. 15 Lacs per 15.0

acre)
b) Building & Civil Works(Approx 1000 sqm @ Rs. 100.0

10,000 per Sqm) comprising of:
- Administrative office
- Marketing office
- Product Design Development office
- Showroom
- Conference room etc
c) Fixed Assets like office Communication system, 25.0

Conference room equipment, furniture & fixture, D.G.
Set, Computers & Printers (CAD) etc
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. Particulars Amount
(Rs. Lacs)
No.
a. Printing of Product/Design Catalogues (20,000 Nos @ Rs. 30.00

150/Catalogue)
b. Printing of Product Brochures (10,000 Nos @ Rs. 8.00

80/Brochure)
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; 1000.00

Marketing Tie-ups etc.
Total 1076.00
7 Means of Finance
.
4
.
2
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
Anticipated total Sales T.O of Cluster
(50:50, Yarn & Fabric based product) in
1 Rs. Lacs 5000 8000 11000 16000
Estimated Cost of Yarn & Fabric (35% of
2 T.O in Rs Lacs) 1750 2800 3850 5600
Estimated Cost of Yarn ( @40% of (2) in
3 Rs. Lacs 700 1120 1540 2240
Estimated Quantity of Yarn ( 2/10 Count,
4 price @ Rs. 100/kg offwhite) in Tonnes 700 1120 1540 2240
Estimated Cost of Fabric (@ 60% of (2) in
5 Rs. Lacs 1050 1680 2310 3360
Estimated Quantity of Fabric (20 s, 160
6 gsm, price @ Rs. 30/sqm) in Tonnes 560 896 1232 1792
Total estimated quantity of Yarn & Fabric
7 to be consumed in cluster (Tonnes) 1260 2016 2772 4032
Estimated Yarn & Fabric neading
8 Bleaching (25 % of 7) in Tonnes 315 504 693 1008
Estimated Yarn & Fabric neading
9 colouring (% of 7) 5 10 15 25
Estimated Yarn & Fabric needing coloring
10 (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
Anticipated Total Sales Turnover of the

1 Lace Cluster 5000 8000 11000 16000
Anticipated Sales Turnover of SPV-1

2 (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 4 th
yr)
7.6.4 Project Cost
a) Project Cost for each CFC’s (in Rs Lakhs)

S.No. Particulars Amount
a) Land & Site Development (1/2 acre @ Rs. 15 Lacs per 7.50
acre)
b) Building & Civil Works(Approx 1000 sqm @ Rs. 4,000 per 40.00
Sqm) comprising of:
- Office
- Production Hall
- Raw Material and Product Storage
- Electrical & DG Set room etc.
c) Plant and Machinery comprising of the following : 30.00
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
Softener
vi) Wet Linen Trolleys (10 Nos)
vii) Six Spindle Yarn Hank to Cone conversion m/c (10
Nos)
d) Misc. Fixed Assets like office equipment, furniture & fixture, 15.0
D.G. Set, Small Goods Career Vehicle etc
e) Preliminary & Pre-operative Expenses 15.0
f) Contingencies (10% of a, b , c, d & e) 10.5
Total 118.0
b) Thus the total project cost for 5 CFC’s would be Rs 118 lakhsx5=Rs. 590 Lacs
7.6.5 Means of Finance – Project Cost for 5 CFC’s
a) SPV-2 Stakeholder Equity (25% of Total Project Rs. Lacs

Cost)

(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 442.00

Project Cost)
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

Yarn & Fabric dyed (@Rs. 40 per kg
a) charges) in Rs. Lacs 50 118 202 378
Product Bleaching & washing (@Rs. 22 per
b) kg) in Rs. Lacs 28 65 111 208
1/2 kg Cone Conversion (@ Rs. 4 per kg) in
c) 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 4th 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 3.75
Lacs per acre)
b) Building & Civil Works(Approx 250 sqm @ Rs. 10.0

4,000 per Sqm) comprising of:
- Office
- Production Hall
- Raw Material and Product Storage
- Electrical & DG Set room etc.
c) Plant and Machinery comprising of the following : 10.0

- 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
d) Misc. Fixed Assets like office equipment, furniture 10.0

& fixture, D.G. Set, Goods Career Vehicle etc
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) Capacity Building
(i) Organizing Mandal Level Design & Technical Development 216

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)
(ii) Organizing Mandal level Skill Upgradation Program for 162
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)
(iii) Undertaking Integrated Design & Technical Development 100

Projects for new prototypes at Lacepark (Total 10 projects in 4
Yrs @ Rs. 10 Lacs per project)
Total (a) 478
b) Domestic Market Development
(i) Development & Printing of Lace Product Brochures 20,000 16

Nos @ Rs. 80/Brochure
(ii) Organizing Craft Bazars in Major cities of India i.e. Delhi, 338
Mumbai, Hyderabad, Bangalore, Chennai etc (Total 25 Nos in 4
Yrs, each with 150 Artisans stalls 10 days duration @ Rs. 13.50
Lacs / Bazar)
(iii) Participation in major Domestic Textiles, Handicrafts & Gifts 100
Fairs organized by ITPO, EPCH etc
Total (b) 454
S. No. Particulars Amount

(Rs. Lacs)
c) Social Welfare Activities

(i) Organizing 60 Health Camps at Mandal level, in major 120
Mandals in 4 Yrs @ Rs. 2 Lacs/Camp
(ii) Providing Health Insurance cover to about 100,000 Artisans
over 4 Yrs period or about 50000 Artisans families based on the
following plan:
1260
 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
Total (c) 1380
d) Organizing of 75,000 Lace Artisans
Identification of unorganized Artisans village wise, issuing ID 300

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
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 5000 8000 11000 16000

Cluster
2 Estimated Conversion Charges 2000 3200 4400 6400

Paid to Lace Park, SPV-3 etc(40%
of (1)
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 1300.00 2080.00 2860.00 4160.00

(65% of (2)
Total (3) 1450.00 2430.00 3460.00 5410.00
4 Cost of Operations:
a) Raw Materials & Consumables (Yarn, 52.50 122.50 210.00 437.50
Fabric & Accessories @ 35% of 3 (a)
b) Conversion Charges paid to Member

Artisans for :
i) Own product manufactured (@35% of 52.50 122.50 210.00 437.50

3(a)
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% 43.50 72.90 103.80 162.30

of 3)
d) Utilities (Power, Fuel @ 3% of 3) 43.50 72.90 103.80 162.30
e) Bleaching, Dyeing, Ironing, Packing 7.50 17.50 30.00 62.50

Cost @5% of 3(a)
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.

ESTIMATED 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.
7.9 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. Activity Total Source of Fund
No. Funds
Required GoI Stakeholder % of
CCDS Equity Equity
1 Formation of CAG, CMTA, carrying out 450 450 0 0
Diagnostic Survey of Lace Cluster ; DPR
preparation, Project Performance
Assessment
2 Formation of SPV 1 & Setting up of Market 175 131 44 25
& Product Development Centre
3 Market Development Activities by SPV 1 1076 807 269 25
4 Formation of SPV-2 & Setting up of 5 590 442 148 25

CFCs for offering Bleaching, Dyeing, Cone
Conversion facilities
5 Formation of Artisan SPV - 3 & Setting up 2125 1594 531 25
of 50 Artisan Mini CFC's
6 Capacity Building of Artisans by SPV 3 478 359 119 25
(Organisation of 120 Workshops, 60 Skill
Upgradation Programs & Undertaking 10
Nos Integrated Design & Technical
Development Projects )
7 Domestic Market Development by SPV-3 454 341 113 25
8 Organizing 60 Health Camps by SPV-3 at 120 90 30 25

Mandal level in the Cluster
9 Providing Health Insurance cover to about 1260 945 315 25

1 Lac Lace Artisans over 4 Yrs period or
about 50,000 Artisans families by SPV 3
10 Organizing about 75,000 Lace Artisans i.e. 300 225 75 25
identification of unorganized Artisans,
issuing ID Cards, formation of SHG,
Societies etc by SPV 3
11 Margin Money Support for Working Capital 2000 2000 0 0
to meet the requirements of Artisans at
Cluster level
Total 9028 7383 1645 18

The phasing of the requirement of funds and their source is given in the enclosed chart
marked Annexure-I
7.10 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. Activity Total Equity Contribution of Different
No. Equity Stakeholders (Rs. In Lakhs)
Lace Exporters Artisans

Pak
Fund
1 Formation of CAG, CMTA, carrying out 0 0 0 0
Diagnostic Survey of Lace Cluster ; DPR
preparation, Project Performance
Assessment
2 Formation of SPV 1 & Setting up of Market 44 11 22 11
& Product Development Centre
3 Maket Development Activities by SPV 1 269 67 134 67
4 Formation of SPV-2 & Setting up of 5 148 37 74 37
CFCs for offering Bleaching, Dyeing, Cone
Conversion facilities
5 Formation of Artisan SPV - 3 & Setting up 531 0 0 531
of 50 Artisan Mini CFC's
6 Capacity Building of Artisans by SPV 3 119 0 0 120
(Organization of 120 Workshops, 60 Skill
Up gradation Programs & Undertaking 10
Nos Integrated Design & Technical
Development Projects )
7 Domestic Market Development by SPV-3 113 0 0 114
8 Organizing 60 Health Camps by SPV-3 at 30 0 0 30
Mandal level in the Cluster
9 Providing Health Insurance cover to about 315 0 0 315
1 Lac Lace Artisans over 4 Yrs period or
about 50,000 Artisans families by SPV 3
10 Organizing about 75,000 Lace Artisans i.e. 75 0 0 75

identification of unorganized Artisans,
issuing ID Cards, formation of SHG,
Societies etc by SPV 3
11 Margin Money Support for Working Capital 0 0 0 0
to meet the requirements of Artisans at
Cluster level
Total 1645 115 230 1299
No. of Stakeholders 25000 15 75000
Contribution / Stakeholder/Year in Rs. 115 384000 433

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.
7.11 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.

Narsapur Lace Cluster140708-Pk (Deepa)

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BUSINESS PLAN FOR DEVELOPMENT OF

NARASAPUR LACE CLUSTER

1.2 MAPPING OF THE CLUSTER POTENTIAL

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

Exporter Annual Sales

1.2.3 Lace Artisan Societies, SHG, NGO

1.2.4 Raw Material Suppliers

Final Report: Business Plan for Development of Narasapur Lace Cluster - 10 -

 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

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

Final Report: Business Plan for Development of Narasapur Lace Cluster - 11 -

Final Report: Business Plan for Development of Narasapur Lace Cluster - 12 -

2.0 OBJECTIVES OF BUSINESS PLAN:

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

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

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

Final Report: Business Plan for Development of Narasapur Lace Cluster - 14 -

Final Report: Business Plan for Development of Narasapur Lace Cluster - 15 -

Product Design Pattern a) Design

Lace Panel Inspection, Finishing Bleaching &

Bleached & Washed

Labeling, Bar-coding, Ironing Product Testing, Certification &

Final Report: Business Plan for Development of Narasapur Lace Cluster - 16 -

4.0 The Value Chain:

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

A) Cost of production per piece

B) Selling price per piece : Rs. 42

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

Final Report: Business Plan for Development of Narasapur Lace Cluster - 17 -

Final Report: Business Plan for Development of Narasapur Lace Cluster - 18 -

 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.

 Strong Institutional Framework( Federation, Society, Artisans) established by

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

Final Report: Business Plan for Development of Narasapur Lace Cluster - 19 -

 Good support from Government and various other agencies.

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

Final Report: Business Plan for Development of Narasapur Lace Cluster - 20 -

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

Final Report: Business Plan for Development of Narasapur Lace Cluster - 21 -

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

 Scope for developing new product range & Designs.

Final Report: Business Plan for Development of Narasapur Lace Cluster - 22 -

 Easy availability of highly skilled work force.

 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

Final Report: Business Plan for Development of Narasapur Lace Cluster - 23 -

 Inadequate coordination among the stakeholders particularly Lace park and

 Lack of working capital

 Product diversification is not available

 The production facilities at Lace park is inadequate

Final Report: Business Plan for Development of Narasapur Lace Cluster - 24 -

6.2 PROPOSED INTERVENTION

Final Report: Business Plan for Development of Narasapur Lace Cluster - 25 -

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

Final Report: Business Plan for Development of Narasapur Lace Cluster - 26 -