Scheme for Technology and Quality Upgradation of MSMEs

Research states that utilizing energy-efficient products reduces the manufacturing costs of an MSME by 50%. This improves their productivity levels, gives them a better profit margin and helps them to reduce their carbon footprint. The Technology and Quality Up-gradation Scheme enables the MSMEs to achieve the same.

Overview:

The Technology and Quality Up-gradation Scheme provides MSMEs with financial assistance and support for implementing energy efficient technologies. This enables them to upgrade their manufacturing processes, thereby resulting in reduced cost of production and lower emission of Greenhouse gases. The scheme also enables MSMEs to improve their product quality in order to make them globally competitive.

This can be achieved by conducting the following major activities:

  1. Capacity Building of MSME Clusters for Energy Efficiency/ Clean Development Mechanism

 Objective:

The primary objective of this activity is to promote the usage of energy efficient processes in MSME clusters. Under this activity, the following initiatives will be taken up:

  1. Conducting awareness programs in MSME clusters on:
  • Energy Efficient Technologies (EET)
  • Availability of energy efficient equipment
  • Need for energy efficiency and cash benefits from Energy Efficient Technologies (EET) and Clean Development Mechanism (CDM)
  1. Supporting energy audits in sample units (three numbers in each cluster representing MSMEs respectively) of energy-intensive clusters. The related activities will include identification of EET for typical production units and preparation of model Detailed Project Reports (DPRs) for cost effective, bankable and energy-efficient projects.
  2. Promoting replication of model EET projects in the cluster-based MSMEs and subsiding the preparation cost of the DPRs for the EET projects taken up by the individual MSMEs.

For the first detailed project report

 

Individual contribution 25%
Government contribution 75%

 

Of this, 50% of the amount will be provided when the government approval is released, and private units deposit part of their contribution

The remaining 50% contribution will be made when the final report has been accepted. The balance amount from the private units have been received based on the receipt of invoice or audited statement of expenditure.

For subsequent project reports:

Assistance provided will be up to a maximum of ₹1.5 lakh per Detailed Project Report.

  1. Of this, 50% will be contributed post the receipt of approval and percentage contribution by the private units
  2. Second instalment will be released from SIDBI, other banks or any financial institutions, post sanctioning of the loan for the project.

Benefits:

How can an MSME benefit from this activity?

An MSME can benefit from this activity in the following ways: 

  • Financial support to the extent of 75% of the actual expenditure will be provided by the Government of India, subject to maximum ₹75,000 per program (average cost of one program is expected to be ₹80,000)
  • The aforementioned Government grant shall be utilized towards meeting the expenditure on technical inputs from faculties/experts and their course material, travel and lodging expenses, other miscellaneous expenses, etc.
  • Balance 25% to be contributed by the participants, cluster associations, etc.
  • Maximum permissible expenditure for conducting the cluster level energy audits and model DPRs (for three selected enterprises) will be ₹9 lakh per cluster. (average cost of preparation of one model DPR is expected to be ₹6 lakh).
  • 75% of this actual expenditure will be provided by GoI and the balance 25% is to be contributed by the respective MSMEs selected for preparation of the model DPRs.
  • Towards preparation of subsequent DPRs for individual MSMEs on EET projects, the government grant will be 50% of the actual expenditure subject to maximum ₹5 lakh per DPR. (average cost of preparation of one EET DPR is expected to be ₹2 lakh). The balance amount is to be contributed by the MSME concerned.

Eligibility Criteria:

Which organisations are eligible to participate in this activity?

The following organisations are eligible to participate in this activity: 

  • Expert organisations like PCRA, BEE, TERI, IITs, NITs, etc., State Govt. agencies like MITCON, GEDA, etc., Cluster/Industry based associations of MSMEs, NGOs and Technical Institutions interested in application of Energy Efficient Technologies (EET)
  • Tool Rooms and other autonomous bodies under Ministry of MSME
  • Individual MSMEs of identified clusters/sectors can apply for seeking support/subsidy in preparation of enterprise level EET DPRs

 Application

How can an MSME apply for this activity?

An MSME can apply for this activity in the following ways: 

  • The application format for conducting the awareness programs is given at Annexure –I. You can also find the format here
  • The implementing agencies interested in preparing the cluster-level model DPRs and the enterprise-level DPRs are required to submit the details of their technical competencies and credentials in the format given at Annexure I-A. The application format for the same can be accessed here

Selection:

The procedure for selection of MSME clusters and the institutions providing the awareness programs are as follows:

  • MSME development institutes, non-government organisations, technical institutions, and cluster-based associations are required to send in applications nominating SMEs for the awareness programs. Selection of MSME clusters for arranging awareness programs will be done by the office of Development Commissioner from the names nominated.
  • Out of the attendees, a steering committee will shortlist the three MSMEs (one micro, small, and medium) per cluster, based on the DPRs. Based on their plan for implementation of EET, these entities are then invited to prepare reports to avail the subsidy.

 

  1. Implementation of Energy Efficient and Other Technologies as per the Global Standards in Micro, Small, and Medium enterprises (MSMEs):

Objective:

The objective of this scheme is to provide assistance to MSMEs for implementation of projects through the grant of loans in the form of subsidy. Up to 25% of project cost will be borne by SIDBI, other banks, and financial institutions.

Benefits:

How can an MSME benefit from this activity?

An MSME can benefit from this activity in the following ways:

  • The Government of India will provide financial support to the extent of 25% of the project cost for implementation of Energy Efficient Technologies (EET), as per the approved DPR. The maximum amount of GoI assistance from the scheme will be ₹10 lakh (average subsidy for one EET project is estimated to be ₹5 lakh).
  • The project cost may include cost of machines, sales and excise tax, transportation and transit insurance cost, import related duty, etc. (which will be limited to the maximum cost of machine at F.O.R factory of the beneficiary).
  • The balance amount is to be funded through loan from SIDBI/other banks/financial institutions. The minimum contribution as required by the funding agency will have to be made by the MSME unit.

Eligibility Criteria:

What is the eligibility criteria for this activity?

The eligibility criteria for this activity is as follows: 

  1. An MSME interested in implementation of Energy Efficient Technology and has a DPR prepared by a particular agency may apply for assistance under the scheme
  2. An MSME unit filing an Entrepreneurial Memorandum with specific authority or having a DIC Registration will be eligible for support under the scheme

Below mentioned are the general conditions for eligibility:

  1. An MSME should have been audited for energy consumption and must have a DPR on Energy Efficient Technologies
  2. Project reports must be prepared by the qualified energy manager or auditor

Application:

What is the application process for this activity?

The application process for this activity is as follows:  

  1. An MSME unit can apply to SIDBI, other banks, or financial institutions for sanction of loan on the basis of preparation of a DPR
  2. Following which an MSME will have to fill up the application form given on page 23 of the link and submit it to SIDBI, other banks, or financial institutions
  3. In case the application was not submitted through SIDBI, the other bank or the concerned financial institution, the MSME needs to submit two copies of the same, a copy of the loan sanction letter, and a project viability report to SIDBI
  4. A copy of the approval decision taken by the Steering Committee will be submitted to SIDBI and the concerned MSME for taking action accordingly
  5. Post sanction of assistance under the scheme, an MSME shall sign an agreement with SIDBI, other banks, or financial institutions, sanctioning the loan in the specified format

 

  1. Setting up Carbon Credit Aggregation Centres (CCA) for the purpose of introduction to Clean Development Mechanism in the MSME clusters:

Objective:

The objective of this scheme is to approximately set up 16 clusters for providing help to MSMEs in registering Greenhouse Gas reduction projects for the purpose of allotment of Certified Emission Reduction (CER). Carbon credits availed from individual MSMEs will be combined for the purpose of trading. These credits, released as Certified Emission Reductions, will be traded in National and International Commodity Exchanges.

Benefits:

How can an MSME benefit from this activity?

An MSME can benefit from this activity in the following ways:

If a cluster is selected, then it would receive financial assistance of up to 75% of the total expenditure up to a maximum of ₹15 lakh. The fund could be utilised in registering the greenhouse gas reduction projects for allocation of CER. Since the CER may not be large enough to be traded in exchanges, the CCAs will aggregate Carbon Credits obtained by individual MSMEs in a cluster into bulk for trading.

The financial assistance will be released in five instalments, initial 20% of the grant will be released post approval for proposals and remaining instalments to be released on milestone basis as defined by the Steering Committee.

Eligibility Criteria:

Who is eligible for this activity?

Technical institutions, cluster-based MSME institutions, and Energy Service Companies engaged in implementation of Energy Efficient Technology and other renewable energy projects which can be registered under Clean Development Mechanism are eligible to apply. 

Application:

How can an MSME apply for this activity?

MSMEs can apply for the assistance as per the format specified in the Annexure – III (page 25) of the below mentioned link

A brief proposal with all details, targets, and deliverables of the project are also required to be submitted.

 

  1. Providing the encouragement to the Micro, Small, and Medium Enterprises for availing Product Certification Licenses from National or International Bodies:

Objective:

The objective of this activity is to provide the MSME units reimbursement for the expenses they incurred for availing product certification licenses from national standardisation bodies. These bodies include the Bureau of Indian Standards and Bureau of Energy Efficiency and for international Certifications like CE, ANSI, UL, and Energy Star. The clusters are also encouraged to conduct awareness programs about the above certifications.

Benefits:

How can an MSME benefit from this activity?

An MSME can benefit from this activity in the following ways: 

The MSME manufacturing units will be provided the subsidy of up to 75% of the actual expenditure towards product licensing at National and International levels. Assistance allowed is up to ₹1.5 lakh for product licensing at National level and up to ₹2 lakh at International level.

The financial assistance provided towards organising awareness programs is up to 75%, subject to a maximum of ₹45,000 per program, the balance being contributed by the participants or cluster associations.

Eligibility Criteria:

What is the eligibility criteria for this activity?

The MSME units in manufacturing sector who have a valid Udyog Aadhar are eligible to apply for this scheme.

Subsidy is available only for the first license applied for. The testing and calibration charges will be subsidised, subject to approval from testing laboratories. 

Application:

How can an MSME apply for this scheme?

An MSME can apply for this scheme in the following ways:

  1. An MSME must follow the format subscribed under the annexure – IV A to IV F in the following link to the concerned MSME Development Institute
  2. Participants can apply for the activity as per the format subscribed under the Annexure – IV A to IV F (page 27 – 33) of the link to the MSME Development Institute concerned

 

  1. Impact Study of the Scheme, Evaluation, Administrative and Other Activities: 

Objective:

Under this activity, the government aims to fulfil the following objectives:

  1. To ensure regular monitoring of the implementation of the scheme vis-à-vis the action plan prepared
  2. Cover impact studies, evaluations of the present scheme as well as mid-term review, etc. as per the Government instructions
  3. To pay the administrative expenditures to the concerned or other implementing agencies

Benefits:

How can an MSME benefit from this activity?

An MSME can benefit from this activity in the following ways:

The fee for carrying out the above activity will be decided by the Steering Committee, as and when required, depending upon the scope of work involved. 

Eligibility Criteria & Application:

This is an adhoc activity to be conducted at the discretion of the Steering Committee. Hence, eligibility criteria and the procedure to apply for the same will be detailed in the expression of interest as and when the same is issued. 

For further queries and guidelines with regards to this scheme, click here.

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