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Credit Linked Capital Subsidy Scheme for Technology Upgradation– An Overview

calendar16 Mar, 2022
timeReading Time: 3 Minutes
Credit Linked Capital Subsidy Scheme

The MSME or Micro, Small and Medium Enterprises have introduced a subsidy scheme called Credit Linked Capital Subsidy Scheme (CLCSS) and Technology Upgradation Scheme (CLCS-TUS) for MSEs. The CLCSS or Credit Linked Capital Subsidy Scheme aims to aid technology up-gradation for providing upfront Capital Subsidy to SSI units, comprising khadi units, coir industrial units, tiny units, and village units to modernise their production process & activity.

Due to lack of investment and lack of awareness of both the quality standards and access to modern technologies, a huge percentage of SSI units continue with outdated technology and plant and machinery. With rising competition because of the liberalisation of the economy, the growth & development of the SSI units are critically dependent on their modernisation & technological upgradation. Upgradation of both the process of manufacture & corresponding plant and machinery is vital for the small enterprises to lessen the production cost and remain price competitive at a time when cheaper products are easily available in the international market.

What is the Objective of Credit Linked Capital Subsidy Scheme (CLCSS) for Technology Upgradation?

The Credit Linked Capital Subsidy Scheme is aimed to provide the technology upgradation by providing capital subsidy for the SSI and MSME units comprising khadi, village, coir industrial, and tiny units. The technology upgradation of infrastructure & machinery will enable the industry to be competitive enough to produce products or items in an inexpensive way.

Following are some industries which can avail benefits from the CLCSS Scheme:

  1. Dyes and Intermediates;
  2. Corrugated Boxes;
  3. Rubber Processing including Cycle or Rickshaw Tyres;
  4. Food Processing;
  5. Biotech Industry;
  6. Drugs and Pharmaceuticals;
  7. Common Effluent Treatment Plant;
  8. Poultry Hatchery and Cattle Feed Industry;
  9. Industry based on Aromatic & Medicinal Plants;
  10. Extruded Products and parts or components/Plastic Moulded.

Meaning of Technology Upgradation

In this context, Technology Upgradation meant a step up from the present technology level to a high-end technology that was capable of increasing productivity, environmental conditions, improving product quality, including the work surrounding the unit. It also comprised installing energy-conserving machinery and setting up anti-pollution measures. In-house quality control and testing measures were also covered under the Technology Upgradation. However, replacing the present equipment or machinery with similar technology didn’t qualify for the subsidy. Purchasing 2nd hand machinery was not encouraged either.

Nodal Agencies & Banks for the Credit Linked Capital Subsidy Scheme

The SIBDI (Small Industries Development Bank of India) and the NABARD (National Bank for Agriculture & Rural Development[1]) were the nodal agencies for implementation the CLCSS. Also, 9 public sector banks and Government agencies were appointed as nodal agencies or banks for the implementation of the scheme, such as Canara Bank, State Bank of India (SBI), the National Small Industries Corporation Limited, Andhra Bank, and Bank of Baroda.

Eligible Beneficiaries and Primary Lending Institutions

  • Eligible Beneficiaries:
  1. New units, registered with the State Directorate of Industries, which has the suitable technology approved by TSC or GTAB, can apply for a subsidy;
  2. Machinery bought under the Hire Purchase Scheme of the NSIC was eligible;
  3. Labour intensive, export-related activities were also considered;
  4. Women entrepreneurs are given preference;
  5. Present units registered with the State Directorate of Industries, can apply for upgrading under the SSI sector are eligible;
  6. Partnerships, Public & Private Limited Companies, Sole-Proprietors, and Co-operative Societies under SSI sector are eligible;
  7. Present units registered with the State Directorate of Industries can apply for upgrading the present plant & machinery;
  8. Business advancement for small scale or medium-scale on account of the extra loan was eligible;
  9. The term loan for upgrading should be sanctioned on/after September 29, 2005.
  • Eligible Primary Lending Institutions:
  1. Scheduled Commercial Banks;
  2. SFCs or State Finance Corporations;
  3. Scheduled Co-operative Banks;
  4. NEFDI or North Eastern Development Financial Institution;
  5. RRBs or Regional Rural Banks.

How to claim for subsidy under Credit Linked Capital Subsidy Scheme?

An online application and tracking system was introduced in 2013. To claim subsidy under Credit Linked Capital Subsidy Scheme, eligible MSEs are required to apply online via PLIs (Primary Lending Institutions), from where the MSEs avail term loan. The application is being uploaded by the PLI via an online application & tracking system to the attached Nodal Agency, which recommends the application online to Office to DC (MSME) for release of subsidy. After processing of application & subject to availability of funds, due approval is accorded from the CA (Competent Authority) with the concurrence of IFW (Internal Finance Wing), after which funds are released to Nodal Agencies. Funds are transferred by the Agencies to the PLIs, where the account of the MSE is operated.


The scheme (pre-advised) provided for a 12% capital subsidy to SSI units, comprising tiny units, on institutional finance (credit) availed of by them for induction of well-established and improved technology in selected sub-products/sectors approved under the Credit Linked Capital Subsidy Scheme. The eligible amount of subsidy estimated under the pre-revised scheme was based on the actual loan amount not exceeding Rs. 40 lakh.

Read our Article:MSME Sector in India: Potential and Future Prospects

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