Solution:

Credit Link Capital Subsidy Scheme for Technology Up-gradation of SSIs Guidelines:

1. Title

• The Scheme is called the “Credit linked Capital Subsidy Scheme for Technology Upgradation of the Small Scale Industries” (SSI).

2. Purpose

• The scheme will provide a 12 percent back-ended Capital Subsidy on projects of technology up-gradation by SSI units in the specified products/sub-sectors.

3. Scope of the Scheme

• To begin with, the Scheme would cover the following products/sub-sectors in the SSI:

  • a) Leather and Leather Products including Footwear and Garments;

  • b) Food Processing ;

  • c) Information Technology (Hardware) ;

  • d) Drugs and Pharmaceuticals ;

  • e) Auto Parts and Components ;

  • f) Electronic Industry particularly relating to Design and Measuring ;

  • g) Glass and Ceramic Items including Tiles ;

  • h) Dyes and Intermediates ;

  • i) Toys ;

  • j) Types ;

  • k) Hand Tools ;

  • l) Bicycle Parts; and

  • m) Foundries-Ferrous and Cast Iron.

• The above list of products/sub-sector would be expanded as the Scheme progress with the approval of the Technical Advisory Committee constituted under this Scheme.

4. Type of Unit to be covered

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

• ii) New SSI units that are registered with the State, Directorate of Industries that set up their facilities only with the appropriate eligible and proven technology duly approved by the Technical Advisory Committee.

5. Definition of Technology Upgradation

• i) Technology up-gradation would ordinarily mean induction of state-of-the-art or near state-of-the-art technology.

  • In the case of more than 7500 products being produced in the Indian small scale sector, technology up-gradation would mean a significant step 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.

  • It would include installation of improved packaging techniques as well as anti-pollution measures and energy conservation machinery.

• 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-hand machinery.

6. Duration of the Scheme

• The Scheme will be in operation for five years from 1.10.2000 to 30.9.2005, or till the time sanctions of capital subsidy by the Nodal Agency reaches Rs. 600 crores, whichever is earlier.

7. Nodal Agency

• Small Industries Development Bank of India (SIDBI) will act as the Nodal Agency.

8. Cap on Amount of Subsidy

• i) The financial assistance by the Banks/SIDBI for technology up-gradation will be need-based. However, the subsidy support would be limited to the loan amount indicated in Table I.

• 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 a loan amount exceeding the limits indicated above.

9. Working capital requirement

• Since the success of the technology up-gradation program, to a large extent, depends upon the availability of adequate working capital, commercial banks should provide adequate working capital.

10. Other Conditions for Loans

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

• ii) Entrepreneurs availing Credit Linked Capital Subsidy for technology upgradation shall not avail any other benefit including Interest Subsidy, under any other Scheme of the Central Government.