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MSME Innovative Scheme: Eligibility and Opportunities

April 02, 2022

This article addresses the recently launched MSME Innovative Scheme and highlights its components, benefits and opportunities.

The Ministry of Micro, Small and Medium Enterprises (MSME) recently launched the MSME Innovative Scheme, which would act as a hub for innovation activities facilitating and guiding the development of ideas into viable business propositions that can benefit society directly and can be marketed successfully.

However, the erstwhile three schemes of incubation, design and intellectual property rights (IPR) will continue to operate as individual programmes in association with this initiative. The Ministry seeks to unify, synergize and converge these three sub-components and interventions with a holistic approach for a single purpose via this scheme.


The primary objective of the scheme is to promote and support untapped creativity and to promote adoption of latest technologies in MSMEs that seek the validation of their ideas at the proof-of-concept level.

  • Financial assistance up to INR 15 lakh per idea and up to INR 1 crore for relevant plants and machines will be provided.
  • Government has also announced the launch of an MSME Idea Hackathon to invite ideas from MSMEs, innovators and students through host institutes from 10 March till 24 March 2022.

Eligibility Criteria

To apply under this sub-scheme, one must first be registered as a Host Institute (HI). Institutions such as Technical Colleges, Universities, other Professional Colleges/Institutes, R&D Institutes, NGOs involved in incubation activities, MSME-DIs/Technology Centres or any Institute/Organization of Central/State Government can apply for registration as an HI and act as a Business Incubator (BI) for nurturing of ideas from the initial stage of conceptualization to the commercialization stage through HIs/BIs.

The HIs which were already approved will continue to be treated as HI for scheme implementation.


The objective of this component is to bring the Indian manufacturing sector and design expertise/design fraternity on to a common platform. It aims to provide expert advice and cost-effective solutions on real-time design problems for new product development, its continuous improvement and value addition in existing/new products.

  • Financial assistance up to INR 40 lakh for design projects and up to INR 2.5 lakh for student projects will be provided.
  • The partner institutions under the scheme are Indian Institute of Science (IISc) Bangalore; Indian Institutes of Technology (IITs); National Institute of Technology; National Institute of Design; and others.

Eligibility Criteria

The beneficiary unit(s) must naturally be registered as a micro, small or medium enterprise as per the definition in Micro, Small and Medium Enterprises Development Act, 2006 (MSMED, Act 2006) and should have a valid UAM or Udyam Registration.

The manufacturing MSMEs might be a profitable entity preferably for at least one year out of the last three financial years, however, the Project Monitoring and Advisory Committee (PMAC) can relax this criterion.

Only qualified industrial designers with relevant experience in the field must be employed in this scheme.

Intellectual Property Rights (IPR)

Its objective is to improve the Intellectual Property (IP) culture in India with a view to enhance awareness about IPR amongst the MSMEs and to encourage creative intellectual endeavour in the Indian economy.

It also aims to take suitable measures for the protection of ideas, technological innovation and knowledge-driven business strategies developed by the MSMEs for their commercialization and effective utilization of IPR tools through IP Facilitation Centre.

  • Government to provide financial assistance of up to INR 5 lakh for Foreign Patent, INR 1 lakh for Domestic Patent, INR 2 lakh for Geographical Indications (GI) Registration, INR 15,000 for Design Registration, INR 10,000 for Trademark in the form of reimbursement.
  • Government to provide equity support of up to INR 1 crore for commercialisation of ideas, designs and patents across all three sub-schemes and to help MSMEs further scale up to raise subsequent funding.  For this, a separate corpus will be created and managed by Small Industries Development Bank of India (SIDBI) as the fund manager.

Eligibility Criteria

In order to apply under this sub-scheme, the organization must be registered as an Intellectual Property Facilitation Centre (IPFC). Following bodies are eligible to register as an IPFC:

  • MSME-Development Institutes, Technology Centres and any other associated Field Organisations directly or indirectly under the administrative control of the Ministry of MSME.
  • The existing IPFCs will continue for implementation of the scheme till their remaining period and the financial assistance will be applicable as per the new guidelines. After completion of their project period, they will need to reapply.
  • Government Bodies / Departments / Autonomous Organisations being Run on Autonomous or Commercial Lines, MSME Industry Associations, Societies / Cooperatives / Firms / Trust and Other profit and non-profit Bodies, NGOs representing or working for MSMEs, Research / Technical and Educational Institutions, Universities / Colleges with a track record of assisting MSMEs, subject to the conditions laid out by the Government on the official portal.

Benefits of the MSME Scheme

The main objective of the scheme is to promote and support the unused creativity of individuals and to promote the adoption of latest technologies in manufacturing as well as knowledge based innovative MSMEs or ventures.

  • Enterprises registered as MSMEs can seek direct benefits on their electricity and other eligible utility bills.
  • Enterprises registered as MSMEs are provided with a subsidy of 50% for registering their patents.
  • The Credit Linked Capital Subsidy Scheme (CLCSS) for technology upgradation offers capital subsidy to eligible MSMEs for the upgradation of their technology.
  • MSMEs can obtain discounts on interest rates on overdraft facilities under the Credit Guarantee Trust Fund Scheme and from banks as well as.
  • Payment of MSME dues to be cleared by Public Sector Undertakings (PSUs) within 45 days failing which the PSUs will pay interest to MSME suppliers.
  • Assistance in setting up business incubators, start-up promotion programmes, networks of technology centres, mentoring and facilitation for fundraising, etc.
  • Plans that allow MSMEs to gain credit facilities without providing collaterals and at a much lower interest rate than regular loans.

Application and Selection Procedure

  • All existing beneficiaries under the MSME Innovative Scheme for Incubation/Design/IPR (Patents) Schemes willing to apply for Seed Capital Support can apply through a designated portal.
  • Presentation of the Seed Support requirement to the Domain Expert Selection Committee (DESC).
  • DESC will shortlist the proposals put forth by beneficiaries which demonstrate qualities like scalability, commercial viability, and financial sustainability for Seed Capital Support. DESC would recommend and forward the same to SIDBI for due financial diligence.
  • Final proposals would be forwarded to PMAC for its approval which will give the SEED Capital Support sanction orders to SIDBI for funding.


The employment opportunities in MSME have the potential to escalate by over 50% till the next decade. Also, the country should produce 10 to 15 million employment opportunities over the next decade. The current employment status in MSME stands at 28% of total employment.

Around 63 million micro sector enterprises in India account for over 99% of the total number of MSMEs, 0.331 million small sector and 5 thousand medium sector reports for 0.52% and 0.01% of overall MSMEs respectively.

Experts suggest that the MSME sector has huge growth potential in the khadi, coir and village industries.

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