MARKET DEVELOPMENT ASSISTANCE (MDA) [PRODUCTION INCENTIVE PLAN]

Modified MDA [PI Plan] is a financial assistance on Khadi categories requiring fiscal support to increase the competitiveness of the Khadi products by improving quality as well as marketability.Modified MDA [PI Plan] on production is an assistance proposed to be provided on the prime cost of Khadi and Polyvastra achieved by the certified Khadi institutions. Under Modified MDA [PI Plan] scheme the institutions will be authorized to market linked pricing, completely de-linking from cost chart mechanism. Such freedom was partially available under MDA restricted only to fabric conversion stage. With introduction of market linked pricing some products under Benefit Chart regime may not be profitable. The Modified MDA [PI Plan] will help institution to cross subsidize non-economic products for the period the quality of production is improved.The Modified MDA [PI Plan] will serve as incentive to Khadi Institutions to increase their value addition by focusing on product development, using alternate marketing channels and employment of expert agencies for marketing, promotion and publicity.

Modified MDA [PI Plan] takes MDA further ahead

  • Modified MDA [PI Plan] takes care of market segmentation thereby offer more focus on products that need support. Evolving Product/Marketing strategies are quite complex task particularly for small institutions.
  • Modified MDA [PI Plan] offer scopes to institutions to take support of a professional agency like Marketing Organization or any other alternate marketing channel in this regard.
  • Modified MDA [PI Plan] offers full flexibility in pricing.
  • Modified MDA[PI Plan] proposes to offer incentive to all artisans and karyakartas for their whole hearted efforts with additional incentive to spinners who form the distinctive characteristics of Khadi.

Utilization of  assistance through Modified MDA[PI Plan]

The Modified MDA [PI Plan] scheme offers flexibility to Khadi Institutions to go for need based utilization of funds towards activities for improving the earning of artisans as well as improves the market for Khadi and Polyvastra.A fixed portion of the Modified MDA[PI Plan] available to the institutions shall be distributed amongst the spinners, weavers and other artisans.While hand-spinning is the key differentiator of Khadi from other textile, the earning of Khadi spinners is extremely low. Hence, allocation of an additional portion of Modified MDA [PI Plan] for giving additional incentive to spinners may be considered.The institutions shall be free to utilize the remaining amount for various purposes in the areas of product development and marketing reforms.

Activities for which the amount available from Modified MDA [PI Plan] can be utilized by the institutions are:
•    Incentives to all artisans and karyakartas directly involved in production and sales activities.
•    Additional incentivestospinners.
•    Skill development of all artisans and karyakartas.
•    Procurement of improved implements.
•    Product and design development, o    Renovation of outlet.
•    Payment to external marketing agencies.
•    Marketing promotion, advertisement and publicity. o    Use of alternate marketing channels.
•    Need base discounts on sales (whole sale as well as retail sales).

Calculation of assistance of Modified MDA[PI Plan]

Modified MDA [PI Plan] may be calculated on the cost directly attributable to theproduction of Khadi and overhead costs should be excluded for the purpose of calculation of PI.Modified MDA[PI Plan] shall be calculated as a fixed percentage of the prime cost of Khadi (Cotton, Silk, and Woolen) and Polyvastra produced by the Khadi Institutions.The composite production activity of spinning, weaving and wet processing of Khadi encompassing cost of raw material, hand spinning and hand weaving including spinners/ reelers and weaver wages/ conversion charges and provision for their social security measures, wet processing (bleaching, dyeing, finishing, printing) etc. Conversion of Khadi cloth into ready to wear and ready to use items will not constitute cost of production.

Classification of  market segmentation under Modified MDA[PI Plan]

Under the Modified MDA [PI Plan] products would be classified into 3 broad categories:
Category 'a1, which can be sold at a premium by adopting market linked pricing, Category 'b', which have the potential to be sold at a premium after some product design and quality changes and
Category 'c1, which are not capable to compete with the mill made fabrics and will continue to be sold at cost.
This classification would indicate the market acceptability and demand of the various products and help in identifying the fast moving products.
To start with, the Modified MDA [PI Plan] shall be applicable for all the products. However, with the introduction of Benefit Chart and successful implementation on products under category'a1, such products shall be gradually taken out of the Modified MDA [PI Plan]. Similarly, after the Marketing Organization comes on board, products under category 'b' shall gradually move towards Benefit Chart concept and shall betaken out of the Modified MDA [PI Plan] after they become self sustainable.
Modified MDA [PI Plan] shall be restricted to category 'c1 which is unable to compete with similar products in the market, despite marketing reforms and where the target consumer is price sensitive;
A scientific study/market survey will be conducted to understand which products are viable enough to be taken out of the Modified MDA [PI Plan].

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