CREDIT LINKED CAPITAL SUBSIDY SCHEME FOR TECHNOLOGY
UPGRADATION OF SMALL SCALE INDUSTRIES [CLCSS]
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
2. Scope of the Scheme
The Scheme would cover the following products/ sub-sectors in the
Bio tech Industry
Common Effluent Treatment Plant;
Drugs and Pharmaceuticals;
Dyes and Intermediates;
Industry based on Medicinal and Aromatic plants
Plastic Moulded/ Extruded Products and Parts/ Components
Rubber Processing including Cycle/ Rickshaw Tyres
Food Processing (including Ice Cream manufacturing);
Poultry Hatchery & Cattle Feed Industry
Dimensional Stone Industry (excluding quarrying and mining)
Glass and Ceramic Items including Tiles;
Leather and Leather Products including Footwear and Garments
Electric equipment viz test & measuring Industrial process
control, Analytical Medical Electronic,Consumer & Communication
Fans & Motors Industry
General Light Service(GLS)
Information Technology (Hardware);
Mineral Filled Sheathed Heating Element
Transformer/ Electrical Stampings/ Laminations /Coils/Chokes
including solenoid coils
Wires & Cable Industry
Auto Parts and Components
Combustion Devices/ appliances
Forging & Hand Tools;
Foundries - Steel and Cast Iron;
General Engineering Works
Gold Plating and Jewellery;
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
5. Type of unit to be covered under the scheme
Existing SSI units registered with the State Directorate of
Industries, which upgrade with the state- of -the -art technology,
with or without expansion.
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
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.
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.
Industry graduating from small scale to medium scale on account of
sanction of additional loan under CLCSS shall be eligible for
Labour intensive and/or export oriented new sectors/ activities
will be considered for inclusion under the scheme.
7. Definition of Technology Upgradation
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.
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
9. Nodal Agency
Small Industries Development Bank of India (SIDBI) and National Bank
for Agriculture and Rural Development (NABARD) will act as the Nodal
10. Cap on amount of Subsidy
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:
Existing Investment Limit
Maximum ceiling of loan eligible for support*
Maximum subsidy available under the scheme
Tiny units with investment in plant & machinery less
than Rs.10 lakhs
Tiny units with investment in plant & machinery between
Rs.10 lakhs to Rs.25 lakhs
SSI units with investment in plant & machinery above
[*the eligible subsidy would be calculated on the actual loan
amount or maximum ceiling on loan eligible for subsidy, whichever is
Value of Plant & Machinery being acquired under the scheme will
be determined by its purchase price.
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
Promoters’ contribution, security, debt-equity ratio, up-front
fee, etc. will be determined by the lending agency as per its existing
Unit availing subsidy under CLCSS shall not avail any other subsidy
for technology upgradation from the Central/State/UT Government.
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.
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
13. Procedural Aspects
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.
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.
The eligible PLIs would obtain application for assistance under
CLCSS in the prescribed form.
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.
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.
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.
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.
Subsidy under the scheme is also available under the Project
Finance Scheme of SIDBI.
14. Other Parameters
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.
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.
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.
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.
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.
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.
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.