TERMS OF REFERENCE (ToR)IN RESPECT OF
EVALUATION STUDY OF
MARKET DEVELOPMENT ASSISTANCE (MDA) SCHEME
1. Background
Khadi is handspun and hand woven cloth made by around a million traditional rural artisans. Handspun and hand woven characteristic is the Unique Selling Proposition of Khadi. Govt. of India had earlier provided sales promotional assistance, popularly known as ‘rebate’ on the retail sale value of Khadi in order to facilitate the product to compete with other textile products in the market.
The rebate scheme provided discount on Khadi and Polyvastra at retail point. It had two components viz. Normal and Special. Normal rebate was extended at a flat rate of 10% throughout the year on Khadi items except reeled silk. Special rebate was extended at a rate of 10% on all Khadi items for 108 days, coinciding with local festivals, in a year in addition to normal rebate.
The rebate scheme has been studied by several committees to assess its effectiveness in increasing sale of Khadi. Based on the recommendations of these Committees, Govt. of India decided to introduce the scheme of Market Development Assistance on ‘Production’ in place of rebate after experimenting with several pilot schemes. Thereafter, Government of India had conveyed the approval on introduction of Market Development Assistance (MDA) scheme for Khadi & Polyvastra in place of rebate scheme w.e.f.1.4.2010 during two terminal years of XIth Plan i.e. 2010-11 and 2011-12. The scheme would help Khadi sector to reorient their activities by extending adequate emphasis towards increasing artisans' earnings as well as ensuring quality of Khadi to customers.
2. Salient features of the Scheme
i)The scheme of MDA on Production aims at uniform distribution of sales throughout the year, unlike the rebate scheme, where most of the sale takes place during the special rebate season of 108 days.
ii)A well-dispersed sales spread throughout the year would help Khadi Institutions to keep inventory levels down, thereby offering greater scope for mobilization of required working capital.
iii)A fixed portion of MDA assistance (i.e. 25% of MDA) will directly go to the artisan, as special incentive/bonus and increase their earnings.
iv)The cost chart will continue only for the purpose of calculating value of production of raw Khadi up to ‘Wet Processing’ stage to serve as the basis of calculating MDA. Thus, decontrolling and de-linking the sales price from the cost chart in the MDA scheme and offering scope to the institutions to add value to Khadi so that the products can be sold at market determined price. In short, the scheme offers scope for dynamic pricing for Khadi and Polyvastra products.
v)MDA will be released on quarterly basis against the claims to be submitted by Khadi institutions.
3. Objectives of the Scheme
- To encourage market oriented production by offering equitable scope of earnings/enhancement of wages to the artisans.
- To encourage predominantly Khadi producing institutions to create a matching sales network.
- To encourage the Khadi institutions, which produce better quality of Khadi to enter into export market.
- To help graduate the Khadi institutions to a level of business unit, built upon cash flows.
- To bring in a competitive approach in the Khadi sector through improvement of quality of the products and standards of marketing techniques.
4. Definition of MDA
MDA on Production is an assistance proposed to be provided on cost of production of Khadi and Polyvastra achieved by the certified Khadi institutions. The Khadi institutions, having valid Khadi certificate and categorized as A+, A, B and C are only eligible to avail MDA grant from KVIC.
5. Definition of Production
The Khadi production activity is a composite activity of spinning, weaving and wet processing of Khadi, encompassing cost of raw material, hand spinning by registered spinners and weaving on handlooms by registered weavers, including spinners / reelers and weavers wages, conversion charges and provision for their social security measures, wet processing (bleaching, dyeing, finishing and printing) etc. Conversion of Khadi cloth into ready to wear and ready to use items will not constitute cost of production.
6. Cost of Production
The cost of production in the context of Khadi and Polyvastra for the purpose of MDA includes the following:
Cost of raw material
+
Spinning/reeling and weaving charges including process wastage, artisan incentive and Artisan Welfare Fund etc.
+
Wet processing viz. bleaching, dyeing, mercerizing, finishing and Printing Charges etc… along with process waste
+
Permissible provisions such as trade expenses,
Bank interest, insurance etc*.
+
Allowable margin** (to meet establishment expenditure)
Note:
-The value addition charges for conversion of cloth into readymade, embroidery etc., shall not be included in the cost of production, as the market forces would determine prices of such value added products.
-The formula for calculation of MDA based on production in the context of Khadi will also be applicable for Polyvastra.
- The prime cost means the cost of raw material plus conversion charges up to grey cloth plus processing charges but does not includes provision for trade expenses (3%), bank interest (4%), insurance (1%) and provision for establishment expenditure as given costing structure of KVIC.
* As regards the permissible provision, the existing guidelines of KVIC stipulates provision @ 3%, 4% and 1% on the prime cost for trade expenses, bank interest, insurance respectively.
** The term allowable margin means, the margin permitted by the Central Certification Committee of KVIC to meet the establishment expenditure.
7. Rate of MDA or Pattern of Assistance
MDA shall be allowed @ 20% on cost of production of Khadi (Cotton, Silk & Woollen) and Polyvastra to the extent of production target approved by the Standing Finance Committee (SFC) of KVIC for the year.
8. Advantages of MDA Scheme compared to earlier Rebate Scheme
- Rebate was meant only for price subsidization and provided no room for quality improvement. Whereas MDA proposed to improve the quality of the products, marketing standards and techniques, besides trying to bring in a modern and competitive trend in its entire approach.
- Though normal rebate was provided throughout the year, the sales usually picked-up only during the period, when the special rebate was extended. Thus, sales were getting concentrated only during the period of Special Rebate period. MDA proposed to improve the prospects of sales throughout the year.
- MDA provides specific earmarking and distribution of allocation/commitment for enhanced wages to artisans, which would help to improve the standard of living of Khadi artisans, majority of whom belong to Below Poverty Line (BPL) category. Rebate does not have any specific component in this regard.
- MDA strives to bring in a competitive approach in the Khadi sector, since any subsidy or grant approach cannot last forever and the sector will survive only if it takes up the challenge of sustaining itself through its internal sources.
- MDA, since proposed to be provided on production, the chances of infusing material other than Khadi are rule out.
- Rebate on sales included the component on value addition on production, which will not be covered under MDA.
9. Objectives of the Assignment
(i)To evaluate the MDA scheme with regards to its present scenario vis-à-vis earlier system of ‘rebate’.
(ii)To study the inflow of MDA by Khadi institutions vis-à-vis Rebate. Time lag between receipts of rebate vis-à-vis MDA.
(iii)To study the overall impact of the scheme on the performance of implementing institutions.
(iv)To study whether the MDA assistance released to Khadi institutions has been utilized for different purposes, it has been given.
(v)To suggest specific areas for further improvement of the scheme.
(vi)To assess the impact of MDA on the overall production of khadi i.e. both in value and quantity, so as to assess the real impact of MDA scheme.
(vii)To study the impact of MDA on the qualitative improvement in the production of khadi.
(viii)To assess the impact of MDA on the retails sales of khadi.
(ix)To study the impact of MDA on the period of sales i.e. whether the sales of khadi effected throughout the year or otherwise. The study should bring out the position clearly highlighting sales made during rebate scheme in the two spells of normal and special and dispersal of sales of Khadi throughout the year in the MDA scheme. Whether, MDA has made positive impact on sales of Khadi?
(x)To assess the impact of MDA on the retail sales as well as whole sales by the khadi institutions.
(xi)To study the impact of MDA on the stock holdings.
(xii)To study the impact of MDA on the availability of working capital with khadi institutions.
(xiii)To assess the impact of MDA on the Sundry Debtors and Sundry Creditors of the institutions.
(xiv)To assess the impact of MDA on the overall financial position of khadi institutions.
(xv)To assess the impact of MDA on the improvement in the standards of living of artisans, due to enhancement of their wages i.e. to study the increase in earnings of artisans through normal earnings as per the cost chart mechanism and additional earnings of incentive through the 25% provision in the MDA grant. Trend in increase of earnings should be studies and mentioned clearly.
(xvi)To study the impact of MDA on the percentage of Khadi artisans (spinners & weavers) working and registered with the khadi institutions and opening of Bank Accounts of Artisans for payment of wages and bonus.
(xvii)To assess the impact ofMDA on the value addition of Khadi products.
(xviii)To study the mode of payment of Bonus out of MDA and also payment of wages to artisans through Bank Accounts/Post Office accounts.
(xix)To assess the utilization of MDA by khadi institutions under various heads i.e. Implements, Capacity Building, Marketing infrastructure, Training etc.
(xx)To suggest modifications for further improvement of the MDA scheme for the betterment of khadi sector as well as artisans.
(xxi)To assess the impact of MDA on the overall productivity separately among 3 types ofKhadi institutions i.e. Major, Medium and Small.
(xxii)To study the price liberalization in fabric conversion and other value addition on fabric - advantage derived by Khadi institutions in this arrangement.
(xxiii)Few case studies should be prepared while evaluating the scheme, in terms of success & failure and analysis of the reasons for failure & success should be brought out in the report.
(xxiv)To assess the overall impact of the scheme in terms of enhancement in sales, business development, benefit to artisans and Khadi institutions etc.
10.Scope of the Assignment
a)Coverage proposed under the present study
I.During the two years of implementation of the Scheme i.e.2010-11 and 2011-12, 1,677 Khadi institutions have been financed and State-wise position of the same separately for KVIC and State Khadi & V.I. Boards are given in Annexure - I
II.The study should be undertaken for the two years (2010-11 to 2011-12) on stratified random sample basis. The study will involve field study, questionnaire, scrutiny, validation and analysis of data. State-wise position of funds released under the scheme is enclosed as Annexure - II.
III.The study should cover 15% of Khadi institutions on stratified random sample basis.
IV.The study should cover the following States covering each geographical zone:
S. No. / Zone/State / Khadi InstitutionsKVIC / State KVI Boards
I. / North
- Haryana
- Rajasthan
- J & K
II. / South
- Tamil Nadu
- Karnataka
- Kerala
- Andhra Pradesh
III. / East
- West Bengal
- Bihar
IV. / North East
1.Assam / 2 / 1
2.Nagaland / 1 / -
V. / West
- Gujarat
- Maharashtra
VI. / Central
- Uttar Pradesh
- Uttarakhand
- Chhatisgarh
Total / 155 / 96
V.All varieties of Khadi i.e. Cotton including Muslin, Silk, Woolen and Polyvastra should be covered.
VI.The study should cover all types of Khadi institutions i.e. category-wise (i.e. A+, A, B and C), size-wise (Major, Medium & Small based on the turnover of the institutions) etc.
VII.Facilities such as local conveyance and secretarial assistance have to be met out by the Consultancy firm only. However, office space can be provided within the premises of State/Divisional Offices of KVIC only.
- The study is to be based on the actual data available with the Khadi institutions implementing the scheme.
IX. In addition to the general and specific observations and chapters the draft and final study report should also contain one chapter on each objective of the study.
X.The agency shall present the report along with related data and analysis including charts and statement, wherever necessary.
XI.The terms of reference, including the objectives and scope of the study may be modified/ added/ deleted as warranted by policy decisions of the Government, change of rules and regulations and revision of policy, if any, during the period of the study with the approval of the Ministry of MSME. However, KVIC will not bear any additional cost for the addition.
b)Impact of the study and outcome
The study is expected to strengthen the scheme for the benefit of Khadi institutions and artisans, assess the adequacy of the benefit derived by the institutions, artisans and consumers so far and identify the areas requiring refinement and strengthening so that the effectiveness of the scheme is further improved.
C)Expected Input of Key Professionals
- Sufficient number of Qualified Professional & Technical Experts, having experience of minimum 10 years in the field of conducting National Level Evaluations Studies for the Govt. Departments/Ministries/SME sector etc.
- Sufficient number of qualified field technical staff having experience of at least 5 years in the field of Surveys/Evaluationstudies/Data collection, compilation, analysis and report preparation, preferably in un-organized/tiny/SMEs sectors.
D)Justification for continuation of the Scheme
Looking into the objectives of the MDA scheme, how the scheme has improved in the quality of khadi, enhancement of khadi production of khadi, financial health of khadi institutions, flow of working funds, uniform sales of khadi and enhancement of wages of artisans etc. The study is expected to throw light about justification for continuation of the scheme in the 12th Five Year Plan.
7. Reporting Schedule
Procedure for review of the work of consultant after award of contract:
- Kick off Meeting
Discussion and finalization on approach & methodology, sampling plan, questionnaire - T + 2 Weeks
- Inception Report
Visit to 12 KIs, modification to questionnaire, finalization of project plan - T + 5 Weeks
- Field Survey
Field Survey, Data collection/compilation /consolidation etc. - T+10 Weeks
- Draft Report
Within 3 months from the date of release of 1st instalment.
- Final Report
Within one month from the date of acceptance of the draft report by C.E.O., KVIC.
8. Penalty Clause
Any delay in submission of the draft & final reports beyond the stipulated time, without the prior written consent of the Commission, will attract a penalty of 0.5 percent of the total cost of the study, per week. However, if the delay is more than six weeks in submission of the report, the penalty will be imposed @ of 5 percent of the total cost of the study. Under such eventuality, the penalty will be deducted out of the balance amount to be released to the agency.
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