Incentives and Schemes Associated With Msmes

INCENTIVES AND SCHEMES
ASSOCIATED WITH MSMEs

Aims and objectives
• "Imparting greater vitality and growth

impetus to the Micro, Small and Medium
Enterprises (MSME) in terms of output,
employment and exports and instilling a
competitive culture based on heightened
technology awareness."
MSME classification based on investment
limit in plant and machinery:
• Manufacturing Enterprises
•
• Micro Rs. 2.5 million (US$ 56000)
•
• Small Rs. 50 million (US$ 1.1 million)
•
• Medium Rs. 100 million (US$ 2.2 million)
•
• Services Enterprises
•
•
• Micro Rs. 1 million (US$ 22000)
•
• Small Rs. 20 million (US$ 0.4 million)
•
• Medium Rs. 50 million (US$ 1.1 million)
Micro, Small and Medium Enterprises
Development Act, 2006
• 1.Industry replaced by enterprise, which include
service enterprises also.
• 2.Ambit of sector enlarged to cover medium
enterprises.
• 3.Constitution of MSME Board
• 4.Simplification of registration procedure
• 5.Policy of preferential procurement from MSMEs
• 6.Progressive credit support
• 7.Penalty for delayed payments
• 8.Provision for exit policy
MSMED Act 2006 promulgated in
order to :
• 1.remove impediments due to multiple laws
• 2.introduce statutory consultative and
recommendatory bodies on MSME policies
• 3.improve registration procedures of MSMEs
• 4.statutory basis for purchase preference and
credit policies
• 5.Improve realization of payments of MSMEs
• Specific policy measures initiated for boosting the
growth of tiny, small and cottage industries
• a)Reservation of items for exclusive manufacturing in
small sector
• b)Preferential credit support measures
• c)Preferential government procurement policies
• d)Fiscal concessions
• e)Infrastructural development like development of
industrial estates, testing labs, common facility centers
• f)Entrepreneurship development
Major Schemes For MSME’s Support
(A)Credit support
1.Public sector banks advised to double the flow of credit

to MSMEs within 5 years (20% annual growth)
2.A minimum of 40% of bank credit earmarked for
priority sector lending which includes loans to MSEs
3.Specialised SME Bank branches in industrial clusters for
smooth flow of credit to MSMEs
4.One Time Settlement (OTS) scheme for settling NPAs of
MSMEs
5.Interest band prescribed
(B)
Performance and Credit Rating
Scheme
1.Helps MSMEs in accessing credits from banks &
financial institutions, orders from foreign buyers
2.Helps in assessing their strengths and
weaknesses.
3.Rating by one of the empanelled national or
international Rating agencies.
4.Government subsidises 75% of the cost of Rating
fee
5.Concessional credits from Banks/FIs to such rated
units
( C )Credit Guarantee Fund for Small
Enterprises
• Credit Guarantee Fund Trust for Micro & Small
Enterprises (CGFTSI) gives guarantee to its Member
Lending Institutions for their collatoral free loans to
MSEs upto INR 2.5 million (USD 64000).
• Initial guarantee fee at specified rate (1.5% ) of the
credit facility sanctioned shall be paid upfront and
thereafter annual fee.
• Provides comfort to the Banks and Financial
Institutions.
(D)Technological Support
1.Credit Linked Capital Subsidy Scheme for Technology Upgradation
•Scheme meant to improve quality of products by technology upgradation.
•Investment upto INR 10 million (US$ .250,000) eligible for support with subsidy upto 15% on
investment.
2.Technology Business Incubators for incubating new enterprises
3.Testing.Technology Business Incubators for incubating new enterprises
4.Testing Centres for Quality Certification
5.Tool Rooms and Training Centres for skill upgradation
6.Incentive scheme for obtaining ISO Certification by MSEs
(E)Marketing Assistance and Export Promotion
1.Support for participation in trade fairs and exhibitions – national as well as international
2.Training programmes on packaging for exports
3.Purchase preference in Government procurement
4.Market Development Assistance Scheme for publicity, market studies and adoption of modern market
practices
(F)Cluster Development Programme
• Grant upto 80% of Project cost with ceiling of

Rs.100 million to implementing agency for
• technology upgradation & productivity
improvement and energy conservation &
pollution control
• Rs 1 million assistance for capacity building
activities without fixed assets
• Entrepreneurship Development Programmes
• Rural Employment Generation Programme (REGP)

• Prime Minister’s Rojgar Yojna (PMRY)
• EDP Institutes
• Incubators
• (G)International Cooperation Programme

Institutional Support Structure
• At federal level
– Ministry of MSME
– Small industry development organization (SIDO)
– National small industry corporation (NSIC)
– Khadi and village industries commission (KVIC)
– Coir board
– Entrepreneurship development institutions (EDIs)
• State level
– Directorate of industries
– District industries center
– State finance corporation (SFC)
– State industrial development corporation (SIDC)
– Technical consultancy organizations
– Entrepreneurship development institutions (EDIs)
• Others.
– Industry organizations
– NGO’s
– Banks and financial institutions

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INCENTIVES AND SCHEMES

ASSOCIATED WITH MSMEs

• "Imparting greater vitality and growth

1.Public sector banks advised to double the flow of credit

• Grant upto 80% of Project cost with ceiling of

• Rural Employment Generation Programme (REGP)

• (G)International Cooperation Programme

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