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Credit Linked Capital Subsidy & Technology Upgradation scheme (CLCSS) from Ministry of MSME


1. Introduction

1.1 A large percentage of Micro and Small Enterprises (MSEs) units continue with outdated technology and plant & machinery, due to the requirement of investment and lack of awareness in respect of both the quality standards and access to modern technologies. With rising competition due to the liberalization of the economy, the survival and growth of the MSE units are critically dependent on their modernization and technological up-gradation as they will lead to improvement in quality and productivity. The technology up-gradation of both the process of manufacturing and corresponding plant and machinery is necessary for the micro and small enterprises to reduce the cost of production and remain price competitive at a time when cheaper products are easily available in the global market.

1.2 The Ministry of Micro, Small and Medium Enterprise has been operating three schemes for technology up-gradation of Micro, Small and Medium Enterprise (MSME) i . e. the Credit Linked Capital Subsidy Scheme (CLCSS), Technology & Quality Upgradation Support to MSMEs (TEQUP) and Technology Acquisition and Development Fund (TADF) Scheme. These schemes had similar objectives and therefore for widening the scope of the technology up-gradation component TEQUP & TADF are being subsumed within the Credit Linked Capital Subsidy (CLCS).

1.3 The CLCS Component of CLCS-TU Scheme aims at facilitating technology upgradation by providing capital subsidy to MSE units, on institutional finance (credit) availed by them for modernization of their plant and machinery involved in manufacturing process and equipment for rendering services, as the case may be. The Credit Linked Capital Subsidy also covers MSEs of Khadi & Village industries and Coir sectors. The CLCS component of the scheme will continue to provide capital subsidy to MSE units @ 15 %(Le. Pre-Revised), for induction of well-established and improved technology in select sub-sectors/products. The calculation of subsidy amount will be based on the actual cost of purchase plant and machinery inducted by the unit for technology up-gradation. The ceiling limit of the amount of loan/institutional finance eligible for subsidy is Rs.l.00 crore.

1.4 As appraised by the Expenditure Finance Committee and subsequently approved by the Cabinet Committee on Economic Affairs, the CLCS component of the CLCS-TU Scheme has been amended as follows:

advance authorization

1.4.1 The admissible capital subsidy is to be calculated with reference to the actual purchase price of plant and machinery for which, a term loan is sanctioned and disbursed to the beneficiary unit by the eligible PLI. 1

1.4.2 The intervention is only to facilitate Technology up-gradation to MSEs through institutional finance for induction of well-established and proven technologies in specified sub-sectors / products. However, To ensure fair inclusion of SC/ST, women entrepreneurs and entrepreneurs from NER, Hill states (Jammu & Kashmir, Himachal Pradesh & Uttarakhand) island territories (Andaman & Nicobar and Lakshadweep), and Aspirational Districts/ Left-wing Extremism (LWE) Districts (As per list at Annexure-A-1, A-2), the subsidy shall also be admissible for investment in acquisition/replacement of plant & machinery /equipment & technology up-gradation of any kind. But fabricated/second-hand machinery /equipment will not be eligible for subsidy under the CLCS component of the scheme.

1.4.3 In addition to the above, after disbursement of 15% subsidy under CLCS, an additional 10% subsidy to SC/ST MSEs will be provided under National SC/ST Hub (NSSH) as per the guidelines of SCLCSS.

1.4.4 The amendments will be effective from 01.04.2017 and the present validity of the CLSS Component of the CLCS-TU Scheme is extended up to 31st March 2020. In the case of the Special Credit Linked Capital Subsidy Scheme (SCLCSS), the effective date of implementation will be the date of notification of the SCLC Scheme i.e. 17.05.2017.

2. Objective:-

The CLCS Component of the CLCS-TU Scheme aims at facilitating technology upgradation by providing 15 percent capital subsidy to MSEs, on institutional finance availed of by them for induction of well established and improved technologies as per specified sub-sectors / products approved under the scheme.

3. Scope of the Scheme:
3.1 Definition under the Scheme:
3.1.1 Technology Up-gradation-

- Technology up-gradation would ordinarily mean induction of state-of-the-art or near state-of-the-art technology with or without expansion capacities for existing enterprises and new enterprises. Given the availability of a wide range of technologies, the technology up-gradation would mean a significant step up from the existing level of technology being used by the beneficiary enterprises leading to a marked improvement in the productivity/ quality of products and/or improved environmental impacts inclusive of work environment for the unit. It may also include installation of improved packaging techniques as well as anti-pollution measures and energy conservation measures. In addition, the cost of acquisition facilities for in-house testing and online quality control to meet the requirement of beneficiary unit(s) would qualify for assistance. Replacement of existing equipment/technology with the same equipment/ technology will neither qualify for a subsidy under this CLCS component of the CLCS-TU Scheme nor would the scheme be applicable to units upgrading with second-hand machinery. However, some relaxations have been considered in the case of entrepreneurs' from SC/ST categories, women entrepreneurs & enterprises located in NER, Hilly States (J&K, Himachal Pradesh, Uttarakhand )/Island territories, and Aspirational / LWE districts (as stated in para- 3.2.3 below); 2

3.1.2 Eligible Beneficiaries- The subsidy will be given to the existing & new enterprise having MSE status. Their Constitution may be sole proprietorships, partnerships, Cooperative and societies, private limited / LLP companies in the sector. The MSEs shall have the valid UAN at the time application implying: They are duly registered as Micro and Small Enterprises (MSEs) under MSMED Act, 2006 and as amended from time to time. As for MSEs in the categories of Limited Liability Partnership firms or private Ltd. Companies are also required to be registered under LLP Act 2008 or the Companies Act, 2013 or as amended from time to time.

3.1.3 Enterprises owned by SC/ST categories, women entrepreneurs: Enterprises with clear ownership of 51% & above hold by SC/ST or women will be considered and eligible.

3.1.4 Priority shall be given to SC/ST category, women entrepreneurs and entrepreneurs from NER, Hill states (Jammu & Kashmir, Himachal Pradesh & Uttarakhand) island territories (Andaman & Nicobar and Lakshadweep), and the identified Aspirational Districts/ LWE Districts ( As per list at Annexure-A-1 & A-2).

3.2 Eligibility Criteria for Credit Linked Capital Subsidy Component

3.2.1 The existing and lor new MSEs availing the institutional finance of total eligible investment towards the cost of plant and machinery for induction of well-established and improved technologies approved under the component of the Scheme (Appendix- 1) or otherwise specified for various categories/regions under the CLCS.

3.2.2 Industry graduating from small scale to medium-scale on account of sanction of an additional loan under CLCS shall be eligible for assistance.

3.2.3 To encourage entrepreneurs' from SC/ST category, women entrepreneurs and entrepreneurs with units located in NER, Hilly states (Jammu & Kashmir, Himachal Pradesh & Uttarakhand) island territories (Andaman & Nicobar and Lakshadweep), and the Aspirational Districts/ LWE Districts as identified on 01.04.2017 (details lists at in AnnexureA-1 & A-2), the subsidy shall be admissible also for investment in acquisition /replacement of plant & machinery /equipment & technology up-gradation of any kind. However, second and in-house fabricated hand plants & machinery /equipment will not be eligible for subsidy.

3.2.4 A valid Udyog Aadhar Number (UAN) and entry of the MSE into the MSME Data Bank is mandatory for availing the subsidy under the CLCS component.

3.2.5 Eligibility for capital subsidy under the scheme is not linked to any refinance scheme of the Nodal Agency (ies). Hence, the Prime Landing Institutions (Pl.ls) don't need to have to seek to refinance in respect of the term loans sanctioned by them from any of the refinancing Nodal Agencies. 3

3.2.6 Fabricated and second-hand plant and machinery shall not be eligible for consideration for subsidy under this component

3.2.7 A particular machinery eligible under one sector, may be considered eligible for other sectors as well if its requirement is justified from a technical angle and unless its eligibility is not restricted for that particular sector.

3.2.8 MSEs availing subsidy under this component of the scheme shall not be eligible to avail any other subsidy for technology up-gradation from the CentraljState/UT Government for the same purpose and vice versa.

3.2.9 Benefits under the scheme shall be available only if the eligible benchmarked machinery is purchased by availing term loan from a notified lending agency. The investment made by availing buyers credit, usance credit, leasing/hire purchase, and sellers credit will not be eligible for availing benefits under the component.

3.3 Nodal Banks / Agencies

3.3.1 In line with the existing practice, the scheme will include the following 11 Banks / Agencies that shall be continued to act as nodal for implementation of the Credit linked Capital subsidy (CLCS): 1. Small Industries Development Bank of India (SIDBI) 2. National Bank for Agriculture and Rural Development (NABARD) 3. State Bank of India (SBI) 4. Canara Bank 5. Bank of Baroda (BOB) 6. Punjab National Bank (PNB) 7. Bank of India (BOI) 8. Andhra Bank (AB) 9. Tamil Nadu Industrial Investment Corporation (TIICL) 10. Corporation Bank 11. Indian Bank

3.3.2 In addition to the above Nodal Banks, other Nationalized Banks will also be eligible to implement the CLCS component of the CLCS-TU scheme after execution of the MOU with the 0/0 DC-MSME, Ministry of MSME, New Delhi.

3.3.3 Notwithstanding the above, the nationalized banks that are acting as nodal banks at present (other than SIDBI and NABARD) would consider proposals only in respect of credit approved by their respective branches. The same will also be applicable for other Nodal agencies. 4

3.3.4 Whereas, for the other Primary Lending Institutions (PLI), SIDBI and NABARD to be the nodal agency for the release of subsidies under this scheme. Further, the SIDBI and NABARD have the authority to co-opt any PLI. However, the SIDBI & NABARD have to ensure that such PLI is coopted by only one Nodal agency either SIDBI or NABARD and there is no overlapping/duplication in this regard.

3.3.5 Before accepting the application the existing Nodal Banks/agencies have to execute MoUs with the % Dc-MSME, Ministry of MSME, New Delhi afresh to act as Nodal bank/agency. The prescribed format of MOU is at APPENDIX- II.

3.3.6 Eligible Primary Lending Institutions {PLI}: All Scheduled Commercial Banks, Scheduled Cooperative Banks [including urban cooperative banks], Regional Rural Banks (RRBs), State Financial Corporation's (SFCs) registered with RBI and North Eastern Development Financial Institution (NEDFI) are eligible as PLI under this scheme provided they execute a General Agreement (GA) with any of Nodal the Bank / Agency, namely the Small Industries Development Bank of India (SIDBI) and National Bank for Agriculture and Rural Development (NABARD) (format of the GAat APPENDIX- III). The non-banking finance corporation (governed under the RBI regulations) may also be considered in the due course, subject to consultation with the Stakeholders and approval by the Committee of Experts. However, the said entities will be coopted through SIDBI or NABARD

3.4 Duration:

The CLCS component of the CLCS-TU Scheme will be operational/valid with effect from 01.04.2017, till si" March 2020 or till the time, the aggregate capital subsidy disbursed as per the sanction accorded reaches Rs. 2360 Cr. (Approved Outlay), whichever is earlier. The computation of aggregate disbursement will also include the amount disbursed to meet pending liabilities under CLCSS, TEQUP & TADF. If the CLCS component of the CLCS-TU Scheme terminates, in that case, and the SCLCSS continues, eventually the SCLCSS will be delinked.

3.5 Coverage of the Credit Linked Capital Subsidy (CLCS):

3.5.1 Initially, The CLCS component would cover the approved technology/products/subsectors already approved and added through subsequent supplements notifications' (details available at www.dcmsme.gov.in). The detailed list of well-established and Improved Technologies is enclosed in Appendix-I. The actual cost of plant and machinery may be taken for the purpose of calculation of subsidy.

3.5.2 Term Loan sanctioned and disbursed by banks / Pl.ls for acquiring new plant & machinery for technology and process up-graded from the approved list shall qualify for a subsidy under the scheme. The second-hand/fabricated machines will not be considered to calculate the subsidy under the scheme. The list of technologies/ machines eligible for subsidy shall be updated from time to time depending on the requirement. The procedure given in Para 3.6 below will be adopted for such updation. However, an MSE shall continue to get the benefit of the scheme during the currency of the approved loan even if a particular technology stands subsequently removed from the approved list. 5

3.5.3 Replacement of existing Plant & Machinery / Technology with the same equipment /technology will not qualify for a subsidy under the CLCS component under CLCS-TUS, save and except the provisions stipulated under item 3.5.2 above.

3.6 Addition and deletion of Technology / Process/sector / Sub-sector: Any modern technology that may be added in an outdated technology may be deleted from time to time from the existing list of the sectors/technologies with the approval of the Committee of Experts. The preliminary exercise in this regard may be executed through an external expert agency and/or field offices of this Ministry.

3.6.1 An external expert agency like Global Innovation and Technology Alliance (GITA)* will be engaged as the Knowledge Partner to identify the new, latest, clean, green, and energy-efficient technologies under different sectors and also the exclusion of the outdated sector/processes/technologies. The Observations/recommendations on inclusions/exclusions of technologies /processes/sectors/sub-sectors by the knowledge partners will be placed before the Committee of Experts for appraisal & approval in the matter, Views of field offices may also be taken on board, if felt necessary.

3.6.2 The fees/remuneration to be payable to the expert agency engaged as knowledge partner for the aforesaid assignment(s) will be decided as per the provisions in the GFR. The earmarking to the tune of Rs.82.50 Lakh for promotional activities, professional services charges in the scheme approved by the Competent Authority may be utilized for the said purpose.

3.6.3 There is a provision of Management & Implementation fee @0.25% of the subsidy released to Nodal Agencies like SIDBI & NABARD and PU/Co-opted PU etc. The management and implementation provisions will include the cost of Information, Education & Communication (lEe) and other thematic interventions (like-identification of technologies, at HQ level for the scheme duration (Break up of @0.25%- Nodal-30%, PU/co-opted PU-30% and 40% for HQ and other agencies involve for implantation of above-mentioned activities

4.0 Quantum of Subsidy & disbursement:

4.1 The ceiling limit of the loan to be considered for granting the subsidy under the Credit Linked Capital Subsidy (CLCS) is Rs. 100.00 Lakh. The subsidy would be continued @ 15% of the actual term loan sanctioned and disbursed by PUs. for the acquisition of eligible Plant & Machinery, Subject to the maximum of Rs. 15.00 Lakh i.e. 15% of the term loan of Rs.l.OO Crore. 6

4.2 In calculating the eligible cost of Plant & Machinery for subsidy computation the following shall be excluded:

  • The cost of equipment such as tools, jigs, dies, moulds, and spare parts for maintenance and the cost of consumables;
  • The cost of installation of Plant & Machinery;
  • The cost of research & development equipment and pollution control equipment (except for where they are approved for specific products /subsectors by the Committee of Experts, and fire fighting equipment.
  • The cost of generating sets and extra transformer installed as per the regulations of the State Electricity Board (except where gas-based generation sets have been approved for specific products /sub-sector by the Committee of Experts.
  • The cost involved in procurement or installation of the machinery such as like installation cables, wiring, bus bars, electrical control panels (not those mount on individual machines, oil circuit breakers, or miniature circuit breakers which are necessary to be used for providing electrical power to the plant & machinery or for safety measures;
  • Transportation charges (excluding prevailing tax and excise) for indigenous machinery from the place of manufacturing to the site of the factory/ firm;
  • Charges paid for technical know-how for the erection of Plant & machinery;
  • Cost of storage tanks for raw materials and finished products but into way linked to the manufacturing process; and
  • Cost of fire fighting equipment.

    4.3 In case of imported machinery, the following shall be included while calculating the value of plant & Machinery, namely:-

  • Import duty (excluding miscellaneous expenses as transportation from the port to the site of the factory, demurrage paid at the port);
  • The shipping charges;
  • Custom clearance charges; and
  • GST.

4.4 Disbursement' of subsidy: Banks will follow the principle of First -In -First -Out (FIFO) while submitting the claims online under the CLCS component of the CLCS-TU Scheme to this Ministry. The principle of First -ln -First -Out (FIFO) will also be followed by the Ministry for disbursement of subsidy to the eligible beneficiary unit.

List of approved 51 Sectors I Sub-sectors under Credit Linked Capital Subsidy (ClCS) Appendix-I

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