The term ‘cluster’, in the context of EnLiFT2 (Enhancing Livelihood from Improved Forest Management in Nepal) project is used to refer to a group of community forests, leasehold forests and private forests in and around a specific forest patch. The idea emerged in response to low access to technical and institutional services and high operating costs of individual forest management units that has resulted in low returns thereby disincentivising forest managers. The scale of management is an important factor determining transaction costs, especially in the context of increasing interface with the market and associated regulatory compliance. In fact, low scale of operation, increasing market competition and exhaustive compliance requirements have weakened the economic rationale of forestry business in Nepalese hills. Most of the community forest operational plans (CFOPs) are expired and revising them would incur huge costs.