International Joint Ventures and Merger & Acquisitions

Credit Linked Capital Subsidy and Technology Up-gradation scheme (CLCS- TUS)

February 25, 2021

The objective of this scheme is to facilitate technology to MSEs through institutional finance for induction of technologies in the specific sub-sector/products approved under the scheme.

In order to strive in a competitive global environment, any sector would require cutting-edge technology and advanced plant & machinery. The technology up-gradation of both the process of manufacturing and corresponding plant and machinery is necessary for the micro and small enterprises (MSEs) to reduce the cost of production and remain price competitive at a time when cheaper products are easily available in the global market.

Is There a Need For Credit and Technology Support Schemes For MSEs?

The Ministry of Micro, Small and Medium Enterprise (Ministry) started operating three schemes to tackle the above mentioned problems. Technology up-gradation of Micro, Small and Medium Enterprise (MSME) i.e. Credit Linked Capital Subsidy Scheme (CLCSS), Technology & Quality Upgradation Support to MSMEs (TEQUP) and Technology Acquisition and Development Fund (TADF) Scheme were implemented. These schemes had similar objectives and therefore for widening the scope of the technology up-gradation, they were subsumed within the scope of Credit Linked Capital Subsidy (CLCS).

The objective of this scheme is to facilitate technology to MSEs through institutional finance for induction of technologies in the specific sub-sector/products approved under the scheme.

What is the benefit of these schemes?

The CLCS Component of CLCS-TU Scheme aims at facilitating technology up-gradation by providing capital subsidy to MSE units, on institutional finance (credit) availed by them for modernization of their plant and machinery involved in manufacturing process and equipment for rendering services, as the case may be. The subsidy extended on the purchase of eligible machinery and equipment comes in handy for reducing the overall loan burden of the MSME to a considerable extent.

The scheme provides for an upfront subsidy of 15% on institutional credit for identified sectors, subsectors, and/or technologies. The calculation of subsidy amount is based on the actual cost of purchase plant and machinery inducted by the unit for technology up-gradation. The ceiling limit of amount of loan eligible for subsidy is Rs. 1 crore.

Who will benefit from these schemes?

  • The subsidy is given to any existing or new enterprise having MSE status. Their Constitution may be sole proprietorships, partnerships, Cooperative and societies, private limited / LLP companies in the sector.
  • As long as the MSEs have a valid UAN at the time application, implying that they are duly registered as MSEs under MSMED Act, 2006, they can benefit under this scheme.
  • As for MSEs which are in the categories of a Limited Liability Partnership firms or Private Limited Companies, they are required to be registered under LLP Act 2008 or the Companies Act, 2013.
  • The subsidy is available for investing in acquisition or replacement of plant and machinery, equipment and technology up-gradation of any kind. However, second and in house fabricated hand plant and machinery or equipment is not eligible for the subsidy.
  • At present, 51 Sub-sectors or Products have been covered under the up-gradation scheme as per Guidelines pdf passed by the Ministry on 13th August, 2019. If an industry comes under one of these sectors or products, then the said business is eligible to apply for the up-gradation scheme.
  • Equipment acquired under the Hire Purchase Scheme of the NSIC is also qualified for subsidy in this Scheme.
  • In addition, it must be highlighted that priority is given to women entrepreneurs.
  • The Capital subsidy in Scheme would be obtainable for projects where terms loans have been certified by the eligible Primary Lending Institution (PLI).
  • Eligibility to this scheme is not linked to any refinancing schemes of the Nodal Agencies and is not necessary to do so.

Eligible Primary Lending Institutions:

In line of the existing practice, the CLCS scheme includes eleven Financial Institutions such as NABARD, SIDBI, SBI, etc which continue to act as nodal for implementation of the Credit linked Capital subsidy.

How to apply for these schemes?

The following steps must be taken to apply for the CLCSS scheme:

  • Apply via a listed financial institution.
  • An online form can be filled out on MSME’s official website (
  • Once the form is submitted, it will be reviewed after which individuals will receive the application back for clarification.
  • Post clarification, the nodal verification of the said application will be forwarded for loan sanction based on applicant’s eligibility, urgency level and availability of funds.
  • Applicants can track the status of their application online or by contacting the concerned nodal officer.
  • On sanction, the funds are transferred to the designated nodal agency and will subsequently be disbursed to the financial institution where the applicant holds an account.

Can the loan be transferred from one lending agency to another lending agency?

The outstanding principal amount of the term loan account under this scheme from one lending agency can be transferred to another lending agency only once subject to the condition that the entire portfolio (i.e., balance principal term loan amount and interest due or payable) remains unchanged and subject to the consent of the PLI.

If such transfer needs to be done, then it is done along with TDR to only those banks which are nodal agencies or PLIs under any nodal agency, provided, functions and conduct of the unit along with other terms and conditions remain unchanged.

The foreign Currency Term Loan:

The conversion of INR term loan into foreign currency term loan and conversion of term loans in to letter of credit (LC), availed from overseas branch of the Indian Bank or Foreign Bank having an Indian branch is not be eligible for benefits under this scheme.

Since the initiation of this scheme, many non-productive industries have substantially improved. Without the help in technological application and low investment opportunities in research and development activities, the sector simply cannot become competent in a globalised world. Globally available technologies have been subsidised by the government so that the product quality of the MSME players can be improved using existing resources.

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