CREDIT AND TECHNOLOGY UPGRADATION MSME

Micro & Small Enterprises–Cluster Development Programme (MSE-CDP)

Cluster based intervention has been acknowledged as one of the key strategies for comprehensive development of Indian industries, particularly the Micro and Small Enterprises (MSEs). The Ministry of MSME, Government of India has adopted the cluster approach as a key strategy for enhancing the productivity and competitiveness as well as capacity building of micro and small enterprises and their collectives in the country. In 1998, a cluster based scheme namely the Integrated Technology Upgradation and Management Programme (UPTECH) was launched to address the issues related to Technology Upgradation and Modernisation of MSE sector. Later on, it was felt that for overall development of a cluster, holistic approach needs to be adopted. Accordingly, UPTECH was renamed as ‘Small Industry Cluster Development Programme’ (SICDP) in the year 2003 and the scheme was broad-based by including setting up of Common Facility Centers, marketing support, etc. The cluster development initiatives have evolved over a period of time and are being implemented under Micro & Small Enterprises–Cluster Development Programme (MSE-CDP). The Ministry of MSME is also implementing another cluster mode scheme “Scheme of Fund for Re-generation of Traditional Industries” (SFURTI) for the benefit of traditional industries.

The MSE-CDP Scheme aims at holistic and integrated development of micro and small enterprises through Soft Interventions (such as diagnostic study, capacity building, marketing development, export promotion, skill development, technology upgradation, organizing workshops, seminars, training, study visits, exposure visits, etc.), Hard Interventions (setting up of Common Facility Centers) and Infrastructure Upgradation (create/upgrade

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infrastructural facilities in the new/existing industrial areas/ clusters of MSEs).

Objectives

(i) To support the sustainability and growth of MSEs by addressing common issues such as improvement of technology, skills and quality, market access, access to capital, etc.

(ii) To build capacity of MSEs for common supportive action through formation of self help groups, consortia, upgradation of associations, etc.

(iii) To create/upgrade infrastructural facilities in the new/existing industrial areas/clusters of MSEs.

(iv) To set up common facility centres (for testing, training centre, raw material depot, effluent treatment, complementing production processes, etc).

Scope of the Scheme

(i) Preparation of Diagnostic Study Report with Government of India (GoI) grant of maximum Rs 2.50 lakh (Rs 1.00 lakh for field offices of the Ministry of MSME).

(ii) Soft Interventions like training, exposure, technology upgradation, brand equity, business development, etc with GoI grant of 75% of the sanctioned amount of the maximum project cost of Rs 25.00 lakh per cluster over a period of maximum 18 months. For NE & Hill States, clusters with more than 50% (a) micro/village, (b) women owned, (c) SC/ST units, the GoI grant will be 90%. The cost of project will be moderated as per size/ turnover of the cluster.

(iii) Detailed Project Report (DPR) with GoI grant of maximum Rs. 5.00 lakh for preparation of a technical feasible and financially

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viable project report for setting up of a Common Facility Centre for cluster of MSE units and/or infrastructure development project for new industrial estate/area or for upgradation of existing infrastructure in existing industrial estate/area/cluster.

(iv) Hard Interventions in the form of tangible assets like Common Facility Centre having machinery and equipment for critical processes, research and development, testing, etc. for all the units of the cluster with GoI grant of 70% of the cost of project of maximum Rs 15.00 crore. GoI grant will be 90% for CFCs in NE & Hill States, Clusters with more than 50% (a) micro/village, (b) women owned, (c) SC/ST units. The cost of project includes cost of land (subject to maximum of 25% of Project Cost), building, pre-operative expenses, preliminary expenses, machinery and equipment, miscellaneous fixed assets, support infrastructure such as water supply, electricity and margin money for working capital.

(v) Infrastructure Development: With GoI grant of 60% of the cost of project of Rs 10.00 crore, excluding cost of land. GoI grant will be 80% for projects in NE & Hill States, industrial areas/ estates with more than 50% (a) micro

(b) women owned (c) SC/ST units. For existing clusters, upgradation proposals will be based on actual requirements.

(vi) Exhibition Centres by Associations of Women Entrepreneurs: The GoI assistance shall also be available to Associations of Women Entrepreneurs for establishing exhibition centres at central places for display and sale of products of women owned micro and small enterprises @ 40% of the project cost. The GoI contribution will be towards furnishings, furniture, fittings, items of permanent display, miscellaneous assets like generators, etc.

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Implementing Agencies

Activity	Implementing Agency
Diagnostic study	l Offices of the Ministry of MSME
	l Offices of State Governments
Soft Interventions
Setting up of CFC	l National and international institutions
	engaged in development of the MSE sector.
	l Any other institution/agency approved by
	the Ministry of MSME
Infrastructure	State/UT Governments through an appropriate
Development	state government agency with a good track
projects	record in implementing such projects.

Benefits of the Cluster Development Scheme

Cluster Development approach is considered as an effective approach for inducing competitiveness in the industry by ensuring inter-firm cooperation based on networking and trust. Due to geographical proximity of units and homogeneity/similarity of products, development interventions can be made for a large number of units and simultaneously leading to higher gains at lower cost of implementation. The approach also aims for sustainability in long run.

l helps overcome disadvantages of economies of scale and weak capital base

l increase competitiveness by leveraging the advantages of flexible structure and faster decision-making process

l better responsiveness to market challenges

l quicker dissemination of information

l sharing of best practices (organisational capabilities, skills, technological innovations)

l better cost effectiveness due to distribution of many common costs

l wider public appropriation of benefits

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Project Approval

The proposals under the scheme will be considered for approval by the Steering Committee of the MSE-CDP under the Chairmanship of Secretary (MSME). Proposals for DSR, DPR and Soft Interventions will be approved in one stage only. Hard interventions (CFC) and infrastructure development projects will be approved in two stages: In-principle approval and final approval.

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Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE)

Objectives

To ensure better flow of Credit to micro and small enterprises by minimizing the risk perception of financial institutions and banks in lending without collateral security, a Credit Guarantee Fund Scheme for Micro and Small Enterprises was introduced by the Government in August 2000.

Salient Features

(i) The Scheme is being implemented by the Credit Guarantee Fund Trust for Micro and Small Enterprises, set up jointly by the Government of India and Small Industries Development Bank of India (SIDBI). The Government of India and SIDBI contribute to the Corpus Fund of the Trust in the ratio of 4:1.

(ii) The Scheme became operational with effect from January 1, 2001.

(iii) All scheduled commercial banks and Regional Rural Banks (categorized under ‘sustainable viability’) or such of those institutions as may be directed by Government of India are eligible to become Member Lending Institutions under the Scheme.

(iv) The Scheme covers collateral free credit facility (term loan and/or working capital) extened by eligible lending institutions to new and existing micro and small enterprises upto Rs. 100 lakh per borrowwing unit. The guarantee cover provided is upto 75% of the credit facility

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upto Rs. 50 lakh with an incremental guarantee of 50% of the credit facility above Rs. 50 lakh and upto Rs. 100 lakh (85% for loans upto Rs. 5 lakh provided to micro enterprises, 80% for MSEs owned/operated by women and all loans to NER). One time guarantee fee of 1.5% of the credit facility sanctioned (0.75% for NER including Sikkim) and Annual Service Fee of 0.75% is collected from MLIs.

(v) 120 Banks and institutions, i.e., 26 public sector and 19 private banks, 63 RRBs, 4 foreign banks and 8 other institutions including NSIC, NEDFI, SIDBI have joined this scheme as Member Lending Institutions (MLIs).

Eligibility

(i) The scheme covers collateral free credit facility (term loan and/or working capital) up to Rs. 100 lakh extended by eligible lending institutions to new and existing micro and small enterprises.

(ii) The scheme is operated through Credit Guarantee Fund Trust for Micro and Small Enterprises, 7th Floor, SME Development Centre, Plot No. C-11, G-Block, Bandra Kurla Complex, Bandra (E), Mumbai-400051.

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Micro Finance Programme

Objectives

The main objective of the Scheme is to provide credit at the door step to the poor and low income category people in the country to enable them to carry on business or manufacturing activities. The Scheme is operated through Micro Finance Institutions (MFIs)/Non-government Organisations (NGOs), who monitor the projects on regular basis. The Scheme is in operation from March 2004.

Salient Features

(i) The Scheme is implemented by Office of the DC (MSME) through SIDBI.

(ii) The Scheme has been tied up with the existing programme of Small Industries Development Bank of India (SIDBI), which is under operation since January 1999. ‘Portfolio Risk Fund’ is provided by the Government of India to SIDBI to be used for security deposit requirement of the loan amount from micro finance institutions/non-government organizations. At present, SIDBI takes fixed deposit equal to 10% of the loan amount. The share of MFIs/NGOs is 2.5% of the loan amount (i.e. 25% of security deposit) and balance 7.5% (i.e. 75% of security deposit) is adjusted from the funds provided by the Government of India.

(iii) A Committee under the chairmanship of Additional Secretary and Development Commissioner (MSME) has been constituted to review the progress, approve the adjustment of security, rotation of funds, etc.

(iv) The Scheme is operated through SIDBI.

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Trade Related Entrepreneurship Assistance and Development (TREAD) Scheme for Women

The Ministry of Micro, Small & Medium Enterprises has launched a scheme Trade Related Entrepreneurship Assistance and Development (TREAD) for economic empowerment of women specially illiterate and semi-literate women of rural and urban areas for the development of their entrepreneurial skills in non-farm activities. The scheme provides loan from banks through NGOs to women of rural and urban areas. GoI grant is provided for capacity building of the NGO for trade related training, information and counseling, extension activities related to trades, products and services, etc. The scheme is purely women-specific.

Objectives

To help women entrepreneurs, specifically poor, illiterate and semi-illiterate women of rural and urban areas who are unable to avail credit due to various reasons, by involving NGOs to help them in getting credit, managing fund, trade related training and counseling, etc. and help NGOs by providing GoI grant for capacity building.

Salient Features

(i) Applicability : Scheme is applicable for women entrepreneurs engaged in non-farm activities only.

(ii) Credit : Assistance in the form of the Government of India (GoI) grant of upto 30 per cent of the total project cost, as appraised by the lending agency, is provided to the Non-governmental Organisations (NGOs) for promoting entrepreneurship among target groups of women. The remaining 70 per cent of the project cost is financed by the lending agency as loan to women entrepreneurs for undertaking activities as envisaged in the project.

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(iii) Training and Counseling : Selected training institutions and NGOs conducting training programmes for empowerment of women beneficiaries identified under this scheme can also avail GoI grant of upto Rs. 1 lakh per programme for imparting training to the women entrepreneurs, provided such institutions also bring their share of at least 25 per cent of the grant. However, NGOs from the North Eastern Region (NER) are allowed to conduct training programmes with a contribution of 10% share by the NGO.

Need-based GoI grant upto Rs. 5 lakh per project is provided to Institutions such as Entrepreneurship Development Institutes (EDIs), NIMSME, NIESBUD, IIE, MSME-DIs, EDIs sponsored by State Govt. and any other institution of repute primarily for undertaking field surveys, research studies, evaluation studies, designing of training modules etc.

Eligibility Requirement of an NGO

(a) Be a legal entity with a minimum registration period of three years.

(b) Having experience in thrift and saving programmes with Self-Help Groups (SHGs).

(c) Be engaged in income generation activities for women entrepreneurs.

(d) Have basic infrastructure, qualified support staff and services to undertake micro-enterprise development for women.

(e) Prior experience in preparing project proposals on behalf of women entrepreneurs/women SHGs for income generation activities and take loan from financial institutions for onward disbursement to them.

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MSME Credit Monitoring Cell

Objectives

The Government has set up a MSME Credit Monitoring Cell in the Office of the Development Commissioner (MSME). The matters of MSMEs remaining unresolved with the Banks-SME Helpline for more than a fortnight brought to the notice of the Cell would be taken up with the bank concerned for early resolution.

Salient Features

l The Monitoring Cell has been jointly set up by the Ministry of MSME and Department of Financial Services.

l The Monitoring Cell would entertain such cases that have been referred to the Cell after having not been resolved by Bank–SME Helpline within 14 days.

l The petition/grievance so received would be forwarded to the concerned Bank by the Cell for appropriate action and report within a fortnight.

MSMEs may contact the Cell at Telefax: 011-23062465, email id: creditmon@dcmsme.gov.in or at Room No. 734 B, 7th Floor, A-Wing, Nirman Bhawan, Maulana Azad Road, New Delhi-110 108 for lodging such grievances. More details of the Cell are available on the website of the Development Commissioner (MSME) (www.dcmsme.gov.in).

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Performance and Credit Rating Scheme

Objectives

This Scheme was launched in the year 2005. NSIC has been appointed as implementing agency for the Scheme by the M/o MSME.

Under the Scheme, seven renowned accredited rating agencies viz., CARE, CRISIL, Dun & Bradstreet (D&B), FITCH, ICRA, ONICRA and SMERA have been empanelled to carry out the rating. MSMEs are free to choose any one of them as per their convenience.

Salient Features

The Scheme is aimed to create awareness among micro and small enterprises (MSEs) {medium enterprises are not included under the Scheme} about the strengths and weaknesses of their existing operations and to provide them an opportunity to enhance their organizational strengths and credit worthiness. The rating under the scheme serves as a trusted third party opinion on the capabilities and creditworthiness of the micro and small enterprises. An independent rating by an accredited rating agency has a good acceptance from the banks/financial institutions, customers/buyers and vendors. Under this scheme, rating fee payable by the micro and small enterprises is subsidized for the first year only subject to a maximum of 75% of the Fee or Rs. 40,000/-, whichever is lower.

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Credit Linked Capital Subsidy Scheme for Technology Upgradation (CLCSS)

Objectives

The Ministry of Micro, Small & Medium Enterprises (MSME) is operating a Scheme, namely, Credit Linked Capital Subsidy Scheme (CLCSS) for Technology Upgradation by providing 15 per cent upfront capital subsidy with effect from 29.09.2005 (12 per cent prior to 29.09.2005) to micro and small enterprises on institutional finance (term loan) from the eligible Primary Lending Institutions (PLIs) for induction of well-established and improved technologies in the specified sub-sectors/products approved under the Scheme. The Scheme is implemented through the Small Industries Development Bank of India (SIDBI), the National Bank for Agriculture and Rural Development (NABARD), the State Bank of India, the Andhra Bank, the State Bank of Bikaner & Jaipur, Bank of Baroda, Punjab National Bank, Canara Bank, Bank of India and the Tamilnadu Industrial Investment Corporation Limited. The period of operation of Scheme has been extended till end of 11th Five Year Plan.

Salient Features

(i) Technology upgradation under the scheme would mean significant improvement from the present technology level to a substantially higher one involving improved productivity, and/or improvement in the quality of the products and/or improved environmental conditions including work environment for the units. This will also include installation of improved packaging techniques, anti-pollution measures, energy conservation machinery, on-line quality control equipments and in-house testing facilities.

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(ii) Forty-nine sub-sectors have been approved under the scheme.

(iii) The scheme is gradually widened by adding new sub-sectors and new technologies for assistance.

(iv) The financial assistance by way of 15 per cent subsidy under the scheme is subject to ceiling on eligible term loan of Rs. 100 lakh i.e. the ceiling on the subsidy is Rs. 15 lakh.

(v) The eligible amount of subsidy is calculated at the rate of 15 per cent of the cost of eligible investment in plant and machinery where term loans have been sanctioned by the Primary Lending Institutions (PLIs) on or after 29.09.2005. In earlier cases, it was 12 per cent of eligible term loan subject to other terms and conditions which were prevalent prior to 29.09.2005.

Eligibility

(i) Capital subsidy at the rate of 15 per cent of the eligible investment in plant and machinery under the Scheme shall be available for such projects, where term loans have been sanctioned by eligible PLI on or after 29.09.2005.

(ii) Eligible units graduating from small scale to medium scale on account of sanction of additional loan under CLCSS shall be eligible for assistance.

(iii) Labour intensive and/or export oriented new sectors/ activities are considered for inclusion under the scheme.

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Quality Upgradation in Micro and Small Enterprises through Incentive for Acquiring

ISO 9001/ISO 14001/HACCP Certification

Objectives

To encourage technological upgradation and quality improvement in micro and small enterprises and prepare them to face the global competition, the Office of the Development Commissioner (MSME) has introduced the Incentive Scheme for ISO 9001/ISO14001/HACCP certifications.

Salient Features

The scheme provides for reimbursement of 75% of the Certification expenses up to a maximum of Rs. 75,000/- to each unit as one-time reimbursement. The scheme is applicable only to those micro and small enterprises which have already acquired ISO 9001/ISO 14001/ HACCP Certifications. The scheme has been extended up to March 31, 2012.

Reimbursement

Reimbursement under the scheme has been decentralized w.e.f. 01.04.2007 and subsidy is being reimbursed through Micro, Small and Medium Enterprises-Development Institutes (MSME-DIs, formerly SISIs) all over India.

Eligibility

All micro and small enterprises with Entrepreneurial Memoranda (EM) Number and ISO Certificate with National Accreditation Board for

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Certification Bodies Accreditation (NABCB) only are eligible to avail the benefit. ISO Certificate issued by BIS for a period of 1-4-2010 to 31-3-2011 with Raad Voor Accreditation (RVA) Netherlands Accreditation are also eligible for reimbursement.

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VSBK Technology for Adoption and Promotion in Brick Manufacturing Units

A Plan Scheme, namely, Adoption of VSBK Technology in Brick Manufacturing Units under Package for Promotion of Micro and Small Enterprises is under implementation.

In the recent years, the housing sector has been witnessing rapid growth due to higher demand and availability of cheap credit. This in turn has led to high demand for bricks. Bricks are at present manufactured nearly in thirty major clusters of MSEs by employing a highly energy intensive technology. The manufacturing process has a vast potential of technological upgradation to make it more energy efficient and eco-friendly. The adoption of the Vertical Shaft Brick Kiln technology can lead to substantial reduction in cost by energy conservation. It would also lead to reduction of green house gas emissions. The Government has, therefore, approved a scheme under Package for Promotion of Micro and Small Enterprises to establish five demonstration VSBK units by upgrading the functional kilns and promote the use of this technology under the Credit Linked Capital Subsidy Scheme with 30% capital subsidy to the MSEs, subject to a ceiling of Rs. 2 lakh per unit.

The programme is being implemented in the selected clusters of brick manufacturing units in the States of MP, Chhattisgarh, Jharkhand, Orissa and Rajasthan. MSME-DIs, Cuttack, Indore, Ranchi, Jaipur and Raipur are the coordinating agencies for implementation of the programme.

The programme also involves organization of seminars/workshops by MSME-DIs to introduce the technology and showcasing the technology by conducting tours of entrepreneurs at the sites of technology providers and entrepreneurs where successful units of VSB Kilns are already in operation. Interested entrepreneurs will be

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able to undergo various training courses on VSBK technology in their respective areas for upgradation of their knowledge. The progress of this Scheme is given below:

1.	No. of Demo Plants set up till date	:	4
	in Chhattisgarh, Orissa, Rajasthan
	and Madhya Pradesh
2.	No. of Seminars/Workshops	:	26
	organised for awareness of Brick
	manufacturing owners
3.	No. of training programmes organised	:	18
4.	No. of exposure visits organised	:	5
5.	No. of Testing Labs. set up till date	:	2
	in Orissa and Madhya Pradesh

s

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Setting up of the Training-cum-Product Development Centres (TPDCs)

The Ministry of Micro, Small & Medium Enterprises announced Package for Promotion of Micro & Small Enterprises in 2006. Under technology and quality upgradation support of the Package, four Training-cum-Product Development Centres (TPDCs) are being set up for Agro and Food Processing Industries within the campus of MSME-Development Institutes at Ludhiana, Kanpur, Indore and Guwahati within a cost of Rs.4.57crore. The scheme has been revised in September 2009.

Objectives

The main aim for setting up of these centres is to improve the quality of the training and product manufacturing process demonstration during training courses and to establish the testing facilities to improve the quality of food products as per IS Specification/Standard Specification prescribed for Agmark/food safety system. This will help the entrepreneur for seting up/upgrade the enterprise after completing the training course. The detailed objectives of these centres are as under:

(i) To provide training and exposure regarding principles and methods of food preservation/processing such as fruits and vegetables, bakery, confectionery products etc.

(ii) To upgrade the skill of personnel of micro, small and medium enterprises regarding processing and preservation of food products.

(iii) To provide appropriate technology and training to the growers and entrepreneurs of micro, small and medium enterprises regarding processing of seasonal fruits and vegetables and reducing post harvest loses.

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(iv) To create self-employment opportunity to the unemployed youth at rural level by setting up micro and small enterprises.

(v) To provide job oriented skill and training (different duration course) in food processing industry for young graduates.

(vi) To act as a community training centre and provide services to the public for preparation of products.

(vii) Capacity building by training of trainers including the officers of SIDO in the field of food processing industries.

(viii) Resource centre of training material such as video films, books, magazines, brochures etc. related to food processing industries.