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CREDIT LINKED CAPITAL SUBSIDY SCHEME FOR TECHNOLOGY UPGRADATION OF SMALL SCALE INDUSTRIES [CLCSS]

1. Purpose

The Scheme aims to facilitate technology upgradation of  MSME units in the specified products/sub- sectors by providing 12% capital subsidy for induction of Well Established and Improved technologies approved under the scheme.

2. Scope of the Scheme

The Scheme would cover the following products/ sub-sectors in the MSME:-

  1. Bio tech Industry

  2. Common Effluent Treatment Plant;

  3. Corrugated Boxes

  4. Drugs and Pharmaceuticals;

  5. Dyes and Intermediates;

  6. Industry based on Medicinal and Aromatic plants

  7. Plastic Moulded/ Extruded Products and Parts/ Components

  8. Rubber Processing including Cycle/ Rickshaw Tyres

  9. Food Processing (including Ice Cream manufacturing);

  10. Poultry Hatchery & Cattle Feed Industry

  11. Dimensional Stone Industry (excluding quarrying and mining)

  12. Glass and Ceramic Items including Tiles;

  13. Leather and Leather Products including Footwear and Garments

  14. Electric equipment viz test & measuring Industrial process control, Analytical Medical Electronic,Consumer & Communication equipments etc.

  15. Fans & Motors Industry

  16. General Light Service(GLS)

  17. Information Technology (Hardware);

  18. Mineral Filled Sheathed Heating Element

  19. Transformer/ Electrical Stampings/ Laminations /Coils/Chokes including solenoid coils

  20. Wires & Cable Industry

  21. Auto Parts and Components

  22. Bicycle Parts;

  23. Combustion Devices/ appliances

  24. Forging & Hand Tools;

  25. Foundries - Steel and Cast Iron;

  26. General Engineering Works

  27. Gold Plating and Jewellery;

  28. Locks

  29. Steel Furniture

  30. Toys;

 

As the Scheme progresses, the above list of products/sub sectors may be expanded with the approval of the Governing and Technology Approval Board (GTAB) constituted under this Scheme.

 

3. Eligible Primary Lending Institutions (PLIs)

 

Eligible Scheduled Commercial Banks, eligible Cooperative Banks ( other than Urban Cooperative Banks), eligible Regional Rural Banks (RRBs), National Small Industries Corporation (NSIC) , State Financial Corporations (SFC) and North Eastern Development Financial Institution (NEDFi).

 

4. Eligible Borrowers

 

Sole Proprietorships, Partnerships, Cooperative Societies, Private and Public Limited Companies in SSI sector. Priority shall be given to women entrepreneurs.

5. Type of unit to be covered under the scheme

 

     

  1. Existing SSI units registered with the State Directorate of Industries, which upgrade with the state- of -the -art technology, with or without expansion.

  2. New SSI units which are registered with the State Directorate of Industries and which have set up their facilities only with the appropriate eligible and proven technology duly approved by the GTAB.

6. Eligibility Criteria

 

     

  1. Capital subsidy under the Scheme shall be available only for such projects, where terms loans have been sanctioned by the eligible PLIs (eligible Scheduled Commercial Banks, eligible Cooperative Banks, eligible RRBs, NSIC, SFCs and NEDFi) on or after October 1, 2000. Machinery purchased under Hire Purchase Scheme of NSIC are also eligible for subsidy.

  2. Cases covered under Refinance Scheme for Technology Modernisation Fund (RTDM) of SIDBI are also eligible for capital subsidy under the proposed Scheme subject to the project also conforming to the norms stipulated under CLCSS.

  3. Industry graduating from small scale to medium scale on account of sanction of additional loan under CLCSS shall be eligible for assistance.

  4. Labour intensive and/or export oriented new sectors/ activities will be considered for inclusion under the scheme.

7. Definition of Technology Upgradation

  1. 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 7500 products in the 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, or/and improvement in the quality of products or/and improved environmental conditions including work environment for the unit. It would also include installation of improved packaging techniques as well as anti-pollution measures and energy conservation machinery. Further, the units in need of introducing facilities for in-house testing and on-line quality control would qualify for assistance, as the same is a case of technology Upgradation.

  2. Replacement of existing equipment/technology with the same equipment/technology will not qualify for this scheme, nor would the scheme be applicable to units upgrading with second hand machinery.

8. Duration of the Scheme

 

The scheme will be in operation for a period of five years from October 1, 2000 to September 30, 2005, or till the time sanctions of capital subsidy by the Nodal Agency reach Rs.600 crore, whichever is earlier..

9. Nodal Agency

 

Small Industries Development Bank of India (SIDBI) and National Bank for Agriculture and Rural Development (NABARD) will act as the Nodal Agencies.

10. Cap on amount of Subsidy

  1. The financial assistance by the eligible PLIs for technology upgradation will be need based. However, the 12% capital subsidy support would be limited to the loan amount indicated below:

     

    S.No.

    Existing Investment Limit

    Maximum ceiling of loan eligible for support*

    Maximum subsidy available under the scheme

    1.

    Tiny units with investment in plant & machinery less than Rs.10 lakhs

    Rs.8 lakhs

    Rs.0.96 lakhs

    2.

    Tiny units with investment in plant & machinery between Rs.10 lakhs to Rs.25 lakhs

    Rs.20 lakhs

    Rs.2.40 lakhs

    3.

    SSI units with investment in plant & machinery above Rs.25 lakhs

    Rs.40 lakhs

    Rs.4.80 lakhs

    [*the eligible subsidy would be calculated on the actual loan amount or maximum ceiling on loan eligible for subsidy, whichever is lower.]

  2. Value of Plant & Machinery being acquired under the scheme will be determined by its purchase price.

  3. Capital subsidy under this scheme will not be admissible for loan amount exceeding the limits indicated above.

11. Working capital requirement

Since success of the technology upgradation scheme, to a large extent, depends upon the availability of adequate working capital, lending institutions would like to be assured that the borrowing units have made adequate arrangements for meeting the working capital requirements. Commercial banks should also accord priority in providing adequate working capital support to the assisted units.

12. Other conditions for loans

  1. Promoters’ contribution, security, debt-equity ratio, up-front fee, etc. will be determined by the lending agency as per its existing norms.

  2. Unit availing subsidy under CLCSS shall not avail any other subsidy for technology upgradation from the Central/State/UT Government.

  3. Units in the North-Eastern Region which are availing financial incentives/subsidy under any scheme from the Government in the Region would, however, be eligible for subsidy under CLCSS.

  4. One of the main requirements for sanction of assistance under the technology upgradation scheme will be availability of competent management to the unit concerned to carry out the upgradation programme and to manage the operation of the unit efficiently. Towards this end, the lending agencies may stipulate conditions as may be considered necessary.

13. Procedural Aspects

  1. All the eligible PLIs [except NSIC] will have to execute a General Agreement for availing capital subsidy under the scheme, irrespective of the fact whether refinance is availed by them or not. However, it may be clarified that NSIC may avail capital subsidy under the scheme on the basis of execution a separate General Agreement.

  2. After sanction of the assistance, eligible PLIs will get an agreement executed by SSI unit concerned on behalf of Government of India. Format of the agreement to be executed by the eligible PLIs with the SSI unit.

  3. The eligible PLIs would obtain application for assistance under CLCSS in the prescribed form.

  4. The eligible PLIs shall furnish subsidy forecast on quarterly basis, through their HO, which will act as a nodal office, to RO/BO of SIDBI or NABARD (as the case may be) located in the region. The subsidy forecast information for every quarter on or before 1st March for April-June quarter, on or before 1st June for July-September quarter, on or before 1st September for October-December quarter and on or before 1st December for January-March quarter, may be furnished as per prescribed format.

  5. The eligible PLIs would release the subsidy amount with each instalment of loan in a manner proportionate to the amount of term loan disbursed subject to the ceiling to the term loan/ subsidy amount as per scheme.

  6. The eligible PLIs shall furnish details of release of subsidy to the beneficiary units, together with the request for replenishing advance money placed with PLIs for release of subsidy, on quarterly basis on March 1, June 1, September 1 and December 1. PLIs request for replenishment of advance money for subsidy, however, would be entertained by SIDBI only on receipt of complete details of subsidy released to the beneficiary units.

  7. The eligible PLIs shall be responsible for ensuring eligibility for sanction of subsidy to the SSI units in terms of GoI guidelines under the scheme, disbursal and monitoring of the assisted units.

  8. Subsidy under the scheme is also available under the Project Finance Scheme of SIDBI.

14. Other Parameters

  1. The Governmental assistance cannot be utilized for the purposes other than for which it has been sanctioned. The eligible PLIs shall have to strictly follow this norm and no deviation would be permitted.

  2. In case, it is found that capital subsidy from the Government has been availed on the basis of any false information, the industrial unit shall be liable to refund the Government capital subsidy availed, along with interest to be charged from the date of disbursal to the date of refund. The rate of interest shall be the prime lending rate of PLIs concerned at the time of invoking this penal clause.

  3. The eligible PLIs shall, therefore, incorporate suitable conditions in respect of points at (ii) above in their security documents entered into with the unit, which would give necessary authorization to proceed legally in such eventualities.

  4. The credit risk under the scheme will be borne by the eligible PLIs and as such they will have to make their own commercial judgement while appraising the project. The credit decision of the eligible PLIs will be final.

  5. There shall not be any binding obligation on the part of SIDBI to obtain sanction from GoI for the governmental financial assistance in respect of the proposals which are covered under CLCSS.

  6. SIDBI shall have the right to inspect the books of eligible PLIs and the loan accounts irrespective of whether refinance is availed or not from SIDBI under the Scheme and/ or call for any other information as may be required by GoI from time to time.

  7. SIDBI shall have the right to recall from eligible PLIs the entire amount of the Government capital subsidy in respect of their assisted units whether or not the eligible PLIs have recovered the said subsidy from their units, if SIDBI comes to the conclusion that any of the accounts do not conform to the policies, procedures and guidelines laid down by SIDBI/GoI under CLCSS, from time to time.

15. Monitoring of the Scheme

 

The scheme will be monitored by a Governing and Technology Approval Board (GTAB). The Secretary (SSI & ARI) will be the Chairperson of the Board and the Development Commissioner (SSI) will be its Member Secretary. The GTAB would also periodically review the functioning of the scheme. There will be a Technical Sub-Committee under GTAB to consider inclusion of new sub-sectors/products and Well Established and Improved Technologies under the scheme.

 
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