SIDBI (Small Industries Development Bank of India)

NABARD (National Bank for Agricultural & Rural Development)

Credit Linked Capital Subsidy Scheme for Technology Up gradation of the Small Scale Industries (CLCSS)

1. Purpose

The scheme aims to facilitate technology up gradation of SSI 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 SSI :-

i)                    Bio-Tech Industry

ii)                   Common Effluent Treatment Plant

iii)                 Corrugated Boxes

iv)                 Drugs and Pharmaceuticals

v)                  Dyes and Intermediates

vi)                 Industry based on Medicinal and Aro9matic plants

vii)               Plastic Moulded / Extruded Products and parts / components

viii)              Rubber Processing including cycle/rickshaw tyres

ix)                 Food processing (including Ice Cream manufacturing)

x)                  Poultry Hatchery & cattle feed Industry

xi)                 Dimensional Stone Industry (excluding quarrying and mining)

xii)               Glass and Ceramic Items including tiles

xiii)              Leather and Leather Products ;including Footwear and Garments

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

xv)               Fans & Motors Industry

xvi)             General Light Service (GLS)

xvii)            Information Technology (Hardware)

xviii)          Mineral filled sheathed heating element

xix)             Transformer/Electrical Stampings/laminations/Coils/Chokes including solenoid coils

xx)               Wires & Cable Industry

xxi)             Auto Parts and Components

xxii)            Bicycle parts

xxiii)          Combustion Devices/appliances

xxiv)          Forging & Hand Tools

xxv)           Foundries – Steel and Cast Iron

xxvi)          General Engineering Works

xxvii)        Gold Plating and Jewellery

xxviii)       Locks

xxix)          Steel Furniture

xxx)           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 (Appendix II), eligible Cooperative Banks (other than Urban Cooperative Banks) (Appendix II-A), eligible Regional Rural Banks (RRBs) Appendix II-B, National Small Industries Corporation (NSIC), State Financial Corporations (SFC) (Appendix II) and North Eastern Development Financial Institutions (NEDFI).

4. Eligible Borrowers

Sole Proprietorships, Partnerships, Co-operative Societies, Private and Public Limited Companies in SSI Sector. Priority shall be given to women entrepreneurs.

5. Type of units to be covered under the Scheme

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

ii)                   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

i)                    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.

ii)                   Cases covered under Refinance Scheme for Technology Modernization 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.

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

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

7. Definition of Technology Upgradation

i)                    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 75000 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 inclu8ding 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 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. A list of well established and improved technology ;is furnished in Appendix-I. The cost of plant and machinery mentioned in Appendix – I is only indicative. Actual cost may be taken for the purpose of calculation of subsidy.

ii)                   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 had 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 Agricultural and Rural Development (NABARD) will act as the Nodal Agencies.

10. Cap on amount of Subsidy

i)                    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 :

(* the eligible subsidy would be calculated on the actual loan amount of maximum ceiling on loan eligible for subsidy, whichever is lower)

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

iii)                 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

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

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

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

iv)                 One of the main requirements for sanction of assistance under the technology upgradation scheme will be availability of competent management to the units 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

i)                    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 clarified that NSIC may avail capital subsidy under the scheme on the basis of execution a separate General Agreement.

ii)                   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 agreements to be executed by the eligible PLIs with the SSI unit in furnished in Appendix III.

iii)                 The eligible PLIs would obtain application for assistance under CLCSS in the prescribed from Appendix – IV.

iv)                 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 1^st March for April – June quarter, on or before 1^st June for July – September quarter, on or before 1 September for October – December quarter and on or before 1^st December for January-March quarter,, may be furnished as per prescribed format.

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

vi)                 The eligible PLIs shall furnish details of release of subsidy to the beneficiary units, together will the request for replenishing advance money placed with PLLIs for release fo 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.

vii)               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.

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

14. Other Parameters

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

ii)                   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.

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

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

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

vi)                 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.

vii)               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 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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Credit Guarantee Fund Trust for Small Industries

(Set by GoI & SIDBI)

 CGTSI Guarantee collateral free bank loans to SSI units in Manufacturing & IT/Software Industries –

            Credit Guarantee Fund Trust for Small Industries (CGTSI) (a Trust set up by Govt. of India and SIDBI) gives guarantee to scheduled commercial banks, Regional Rural Banks/ NSIC/ NEDFi for the loans extended by them to SSI units in manufacturing sector, as also units in Information  Technology (IT) / software industries. The credit guarantee scheme has been launched by Government of India to address the problem being faced by SSI entrepreneurs, especially first generation entrepreneurs, in availing finance required for their projects without any collateral security and/or third party guarantee. In terms of RBI directive, loans up to Rs. 5 lakh to any SSU unit are being extended by banks without collateral security. CGTSI guarantee collateral free loans over Rs. 5 lakh and up to Rs. 25 lakhs given by banks to SSI units in manufacturing sector and units in IT/Software Industries.

Eligibility –

            New or existing SSI units in manufacturing sector or units in IT/software industries are eligible to receive financial assistance (term loan and working capital) without collateral security and/or third party guarantee from the Member Lending Institutions (MLIs) of the Trust.

            Under the Credit Guarantee Scheme, such of those banks which have become MLIs of CGTSI are eligible to apply for credit guarantee facility from CGTSI for loans over Rs. 5 lakh and up to Rs. 25 lakhs sanctioned by them to eligible SSI units for their viable projects without collateral security and/or third party guarantee.

Guarantee Fee & Service Fee –

            The fees payable by MLIs to CGTSI for the guarantee cover for the eligible SSI loan are as follows :-

A one time guarantee fee at specified rate (currently 2.5%) on the amount of the credit facility sanctioned by the MLI to the borrower.

            Annual service fee at specified rate (currently 1% per annum) on the loan amount outstanding in the account of the borrower as on March 31 each year.

One of the biggest problems for small scale industries is non-availability of credit without collaterals or third party guarantees. In order to alleviate the problem, Credit Guarantee Fund Scheme for Small Industries was formulated by Government of India.

Credit guarantee Fund Trust for Small Industries (CGTSI) has been set up by GOI and SIDBI. The operations of CGTSI are fully computerized ;with facility for online transactions so as to give real-time service to the Member-Lending Institutions.

Entrepreneurs in the Small Scale Industries including Information Technology and Software Industry may contact any of the Member-Lending Institutions of CGTSI.

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