12 Govt of India Schemes that can Help MSMEs Uplift and Tide over Crisis

04 Aug 2022

MSMEs are the backbone of the Indian economy, contributing close to 30% of its GDP. These enterprises continue to encounter a number of difficulties, most notably a lack of resources for funding and skill developments. In an effort to address this head-on, the Government of India (GoI) has recently rolled out a number of programmes and INITIATIVES to boost this sector and make India self-sufficient.

So if you are a business owner looking for some support, this article will give you some insight on some of the recent government initiatives/schemes to build the struggling businesses:

Schemes to Enhance Tech offerings & Up-skilling

• Credit Linked Capital Subsidy and Technology Upgradation scheme - Technology upgradation would ordinarily mean induction of state-of-the-art or near state-of-the-art technology. In the varying mosaic of technology obtaining in more than 7,500 products in Indian small scale sector, technology upgradation would mean a significant step up from the present technology level to a substantially higher one involving improved productivity, and/or improvement in quality of products and/or improved environmental conditions including work environment for the unit. It includes installation of improved packaging techniques as well as anti-pollution measures and energy conservation machinery. Further, units in need of introducing facilities for in-house testing and on-line quality control would qualify for assistance, as the same are a case of technology up-gradation. Replacement of existing equipment/technology with same equipment/ technology will not qualify for subsidy under this scheme, nor would the scheme be applicable to units upgrading with second-hand machinery.
  • Nature of assistance - The revised scheme aims at facilitating technology upgradation by providing 15% up-front capital subsidy to SSI units, including tiny, khadi, village and coir industrial units, on institutional finance availed by them for induction of well-established and improved technologies in specified sub-sectors/products approved under the scheme. Revised CLCS has been amended as follows:
    • Ceiling on loans under the scheme has been raised from Rs.40 lakh to Rs.1crore
    • Rate of subsidy has been enhanced from 12% to 15%.
    • Admissible capital subsidy is calculated with reference to purchase price of plant and machinery, instead of term loan disbursed to the beneficiary unit.
    • Practice of categorization of SSI units in different slabs on the basis of their present investment for determining eligible subsidy has been done away with; and
    • Operation of the scheme has been extended up to 31st March, 2007. The above revisions/amendments are effective from September 29, 2005.

• Technology and Quality Upgradation Support to MSMEs - The scheme advocates the use of energy efficient technologies (EETs) in manufacturing units so as to reduce the cost of production and adopt clean development mechanism.
  • Nature of assistance -
    • Capacity building of MSME clusters for energy efficiency/clean development and related technologies (Applicant – for awareness programme and model DPRs by expert agencies as mentioned in the EoI; for energy audits, DPRs and EET projects by expert agencies, associations or MSMEs)
    • Implementation of energy efficient technologies in MSME units (Applicant - registered MSME unit, to be implemented by SIDBI)
    • Setting up of Carbon Credit Aggregation Centres (associations, technical institutions and ESCOs)
    • Encouraging MSMEs to acquire product certification/licenses from national/international bodies
    • Funding support of 75% for awareness programmes subject to maximum of Rs.75,000 per programme
    • 75% of actual expenditure for cluster level energy audit and preparation of model DPR
    • 50% of actual expenditure subject to maximum Rs.1.5 lakh per DPR towards preparation of subsequent detailed project reports for individual MSMEs on EET projects
    • 25% of the project cost as subsidy by Government of India, balance amount to be funded through loan from SIDBI/banks/financial institutions; minimum contribution as required by the funding agency to be made by the MSME
    • 75% of the actual expenditure, subject to a maximum Rs.15 lakh for establishing Carbon Credit Accreditation Centres
    • 75% subsidy to manufacturing MSME towards licensing of products to national/international standards; maximum GoI assistance allowed per MSME: Rs.1.5 lakh for obtaining product licensing/marking to national standards and Rs.2 lakh for obtaining product licensing/marking to international standards.

• Entrepreneurial and Managerial Development of SMEs through Incubators - The scheme endeavors to provide early stage funding for nurturing innovative business ideas (new indigenous technology, processes, products, procedures, etc.) which could be commercialized in a year. Under this scheme financial assistance is provided for setting up of business incubators. Funding support for setting up of ‘Business Incubators (BI)’: The cost may vary from Rs.4 to 8 lakh for each incubatee/idea, subject to overall ceiling of Rs.62.5 lakh for each BI. Items @ per BI:
  • Nature of assistance
    • Upgradation of infrastructure - Rs. 2.50 lakh
    • Orientation/training - Rs. 1.28 lakh
    • Administrative expenses - Rs. 0.22 lakh
    • Thus the total assistance per BI - Rs. 66.50 lakh

• Lean Manufacturing Competitiveness for MSMEs - The scheme is intended for enhancing the manufacturing competitiveness of MSMEs through the application of various Lean Manufacturing (LM) techniques.
  • Nature of assistance - Financial assistance for implementation of lean manufacturing techniques, primarily the cost of lean manufacturing consultant (80% by GoI and 20% by beneficiaries). Lean manufacturing consultants (LMCs) will raise bills for services provided to SPV; SPV will pay the first installment of 20% to the LMC and will get it reimbursed by the NMIU; funds will be transferred to the NMIU by GoI. The payment to LMC by SPV would be on a milestone basis in 5 tranches of 20% each.

Schemes to Improve Quality

• Micro & Small Enterprises Cluster Development Programme - The Ministry has adopted cluster development approach as a key strategy for enhancing productivity and competitiveness as well as capacity building of MSEs and their collectives in the country. Clustering of units also enables the providers of various services to them, including banks and credit agencies, to provide their services more economically, thus reducing the costs and improving the availability of services for these enterprises.
  • Objectives of the scheme
    • To support sustainability and growth of MSEs by addressing common issues such as improvement of technology, skills and quality, market access and access to capital.
    • To build the capacity of MSEs for common supportive action through the formation of self-help groups, consortia, upgradation of associations, etc.
    • To create/upgrade infrastructural facilities in the new/existing industrial areas/clusters of MSEs.
    • To set up common facility centres (for testing, training, raw material depot, effluent treatment, complementing production processes, etc.)
  • Nature of assistance
    • Diagnostic StudySoft Intervention
    • Setting up of Common Facility Centres (CFCs)
    • Infrastructure Development (Upgradation/New)
    • Cost of project and Govt. of India assistance
    • Diagnostic study - maximum cost Rs.2.50 lakh.
    • Soft interventions - maximum cost of project Rs.25.00 lakh, with GoI contribution of 75% (90% for special category States and for clusters with more than 50% women/micro/village/SC/ST units).
    • Hard interventions, i.e., setting up of CFCs – maximum eligible project cost of Rs.15.00crores with GoI contribution of 70% (90% for special category States and for clusters with more than 50% women/micro/village/SC/ST units).
    • Infrastructure development in the new/existing industrial estates/areas; maximum eligible project cost Rs.10.00crores, with GoI contribution of 60% (80% for special category States and for clusters with more than 50% women/micro/SC/ST units).

• NationalAwards (Individual MSEs) - MSMEs have registered tremendous growth and progress in terms of quality of production, exports, innovation, product development and import substitution, very much beyond the expected objectives of the setting up of MSMEs. Entrepreneurial efforts have made it possible to produce a number of items, which were hitherto imported. In quite a few cases new variants so produced are having additional attributes over their original versions and are capable of solving a multitude of user problems. All this has become possible owing to the ambitions and visionary spirit of entrepreneurs of MSMEs. The MoMSME with a view to recognizing the efforts and contribution of MSMEs, gives National Awards annually to selected entrepreneurs and enterprises under the scheme of NationalAwards.

• Enabling Manufacturing Sector to be Competitive through QMS & QTT - The scheme endeavours to sensitise and encourage MSEs to understand and adopt latest Quality Management Standards (QMS) and Quality Technology Tools (QTT).
  • Nature of assistance
    • Funding support for introduction of appropriate course modules in technical institutions
    • Funding support for conducting ‘QMS awareness’ workshops (applicant – expert organisation or industry associations)
    • Funding support for conducting competition watch (C-watch), study and analysis
    • Funding support for introduction of QMS and QTT in selected MSMEs (applicant – expert organisation or industry association)
    • Participation in international study mission (MSEs as selected by Monitoring andAdvisory Committee)
    • A total contribution of Rs.425 lakh per year to be made by the GoI for introduction of course material, training the trainer, awareness workshop and other activities
    • Funding support of Rs.1.25 lakh per programme to be provided for conducting awareness programme
    • Under C-watch GoI contribution of Rs.2.5 lakh for professional study on threatened products
    • GoI contribution of Rs.7.5 lakh for technical exposure visit
    • GoI contribution of Rs.2.5 lakh for procurement of samples
    • GoI contribution of Rs.5 lakh for product development
    • GoI contribution of Rs.1.5 lakh for popularisation of improved products
    • GoI contribution of Rs.2.5 lakh/unit for covering the costs of diagnostic study and for implementation of Quality Technology Tools/Quality Management Standards (25 to 50% cost will be paid by the participating units)
    • GoI contribution of Rs.2.5 lakh per SME for international visit (25% and 50% cost to be collected by the micro and small enterprise respectively)

• Capacity Building of First Time MSE Exporters scheme (CBFTE) - This scheme has been launched as a subcomponent of the International Cooperation scheme to ease the export process for first-time exporters, be it in terms of monetary support or procedural support. Its primary objective is to encourage MSMEs to offer products and services of international standards for the global market. The move is intended to help MSMEs improve their participation in the global value chain and realize export potential.

Schemes for Financial Support

• ISO 9000/ISO 14001 Certification Reimbursement - SME has emerged as dynamic and vibrant and is making significant contribution to industrial production, export and employment generation. The process of economic liberalization and market reforms has opened up Indian SMEs to global competition. In order to enhance the competitive strength of SME, the Government has introduced an incentive scheme for their technological upgradation/quality improvement and environment management. The scheme provides incentives to those SMEs/ancillary undertakings who have acquired ISO 9000/ISO 14001/HACCP certification. The scheme is enlarged so as to include reimbursement of expenses for acquiring ISO 14001 certification.
  • Nature of assistance - The scheme envisages reimbursement of charges for acquiring ISO-9000/ISO- 14001/HACCP certification to the extent of 75% of expenditure subject to a maximum of Rs.75,000 in each case.

• Credit Guarantee - Ministry of Micro, Small and Medium Enterprises, GoI and Small Industries Development Bank of India (SIDBI), established a Trust named Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) to implement Credit Guarantee Fund Scheme for Micro and Small Enterprises. The corpus of CGTMSE is being contributed by GoI and SIDBI.
  • Nature of assistance - Collateral free loans up to a limit of Rs.50 lakh - for individual MSEs

• Micro Finance Programme - The Union Government has launched a scheme of micro finance and tied up with the existing programme of SIDBI by way of contributing towards security deposits required from the MFIs/NGOs to get loan from SIDBI. The scheme is being operated in the under-served States and under-served pockets/districts of other States
  • ​​​​​​​Nature of assistance - Government of India provides funds for micro finance programme to SIDBI, which is called ‘Portfolio Risk Fund’ (PRF). At present SIDBI takes fixed deposit equal to 10% of loan amount. The share of MFIs/NGOs is 2.5% of loan amount (i.e., 25% of security deposit) and balance 7.5% (i.e., 75% of security deposit) is adjusted from funds provided by the Government of India.

• Raising and Accelerating MSME Performance (RAMP) - This is a proposal for a World Bank supported Central Sector Scheme, supporting various interventions in Corona Virus Disease 2019 (COVID) Resilience and Recovery of Ministry of Micro, Small and Medium Enterprises (Mo MSME).
  • Nature of assistance - The programme aims at improving access to market and credit, strengthening institutions and governance at the Centre and State, improving Centre-State linkages and partnerships, addressing issues of delayed payments, and greening of MSMEs. The fund through RAMP would flow into the Ministry s budget against Disbursement Linked Indicators DLIs to support ongoing Mo MSME programmes, focusing on improving market access and competitiveness.

To know more about the above mentioned schemes please visit https://dcmsme.gov.in