MSME Subsidies 2024

Introduction

Micro, Small, and Medium Enterprises (MSMEs) form the backbone of India’s economy, contributing significantly to industrial growth, employment generation, and overall economic development. Recognizing their vital role, the government has introduced various schemes and subsidies aimed at supporting and nurturing the growth and development of MSMEs. 

In this article, we will explore who is eligible for MSME subsidies, eligibility criteria, registration process, types of subsidies available, and their impact on economic development.

Definition of MSMEs

The classification of MSMEs is crucial for understanding the scope and scale of enterprises falling under this category. Traditionally, MSME classification was based solely on the criteria of investment in plant and machinery for manufacturing units and equipment for service enterprises. However, being based entirely on investment limits posed challenges for MSMEs looking to scale their operations while continuing to avail benefits. To address this issue and keep up with the evolving economic context, the government has introduced a revised MSME classification under the Atmanirbhar Bharat Abhiyan. This revised classification comprises a composite criterion of both investment and annual turnover.

Under the revised classification, as MSMEs are categorized based on their investment and annual turnover, the distinction between the manufacturing and service sectors has been removed – promoting parity between the two.

Enterprises are now classified as Micro, Small, and Medium based on their combined investment and annual turnover.

– Micro Enterprises

Enterprises with investments and annual turnover both up to Rs. 1 crore and Rs. 5 crore respectively.

– Small Enterprises

Enterprises with investments and annual turnover both up to Rs. 10 crore and Rs. 50 crore respectively.

– Medium Enterprises 

Enterprises with investments and annual turnover both up to Rs. 50 crore and Rs. 250 crore respectively.

The lower limits for investment and annual turnover are set to ensure that enterprises can scale their operations while continuing to avail MSME benefits. This not only enables healthy competition but also encourages MSMEs to strive for growth and innovation.

Government Schemes for MSMEs

MSMEs add a significant contribution to India’s employment and overall economic growth. Recognizing their importance, the Government of India has implemented various schemes to support and promote the growth of MSMEs. These schemes are rolled out to support MSMEs with access to credit and provide financial and technological assistance. 

Let us look into some of the prominent government schemes designed to benefit MSMEs:

Overview of MSME Subsidy Schemes

1. Pradhan Mantri Mudra Yojana (PMMY)

The Pradhan Mantri Mudra Yojana (PMMY) was launched in 2015 by the Hon’ble Prime Minister. This loan scheme offers loans of up to Rs. 10 lakh for non-corporate and non-farm, small and micro-enterprises. Under this scheme, loans are classified into three categories – Shishu, Kishor, and Tarun, based on the stage of development or growth of the beneficiary micro-units.

Within the Pradhan Mantri Mudra Yojana structure, MUDRA (Micro Units Development and Refinance Agency Limited) is a non-banking financial company (NBFC) that supports the development of MSMEs by refinancing loans provided by commercial banks, small finance banks, microfinance institutions (MFIs), and NBFCs. The interested borrowers can approach any of these institutions that offer lending, or apply through the UdyamiMitra portal online.

Eligibility Criteria:

– Applicants must be citizens of India to qualify for the Modi Loan Scheme.

– Individuals applying for the loan should not have any history of defaulting on loans with banks.

– The businesses for which the loan is sought should not fall under the category of corporate institutions.

– Applicants must possess a valid bank account in their name to facilitate loan disbursement and repayment.

– The minimum age requirement for individuals applying for the Modi Loan Scheme is 18 years or above.

– Applicants must be non-corporate and non-farm small or micro-enterprises.

– Loans are categorized into Shishu, Kishor, and Tarun schemes based on the stage of development or growth of the beneficiary micro-units.

– Borrowers can avail loans up to Rs. 10 lakh, depending on the category.

2. Prime Minister’s Employment Generation Programme (PMEGP)

The Prime Minister’s Employment Generation Programme (PMEGP) focuses on generating self-employment opportunities for unemployed youth and traditional artisans through micro-enterprise establishments in the non-farm sector. It is administered by the Khadi and Village Industries Commission (KVIC), PMEGP provides financial assistance for setting up new projects in manufacturing, business, or service sectors. This scheme offers subsidies for project costs and promotes business initiatives at the grassroots level.

Eligibility Criteria:

(i) Any individual, above 18 years of age
(ii) There will be no income ceiling for assistance for setting up projects under PMEGP.
(iii) For setting up of projects costing above Rs.10 lakh in the manufacturing sector and above Rs. 5 lakh in the business / service sector, the beneficiaries should possess at least VIII standard pass educational qualification.
(iv) Assistance under the Scheme is available only for new projects sanctioned specifically under the PMEGP.
(v) Self Help Groups (including those belonging to BPL provided that they have not availed benefits under any other Scheme) are also eligible for assistance under PMEGP.
(vi) Institutions registered under Societies Registration Act,1860;
(vii) Production Co-operative Societies, and
(viii) Charitable Trusts.
(ix) Existing Units (under PMRY, REGP or any other scheme of Government of India or State Government) and the units that have already availed Government Subsidy under any other scheme of Government of India or State Government are not eligible.

Other eligibility conditions

(i) A certified copy of the caste/community certificate or relevant document issued by the competent authority in the case of other special categories, is required to be produced by the beneficiary to the concerned branch of the Banks along with the Margin Money (subsidy) Claim.
(ii) A certified copy of the bye-laws of the institutions is required to be appended to the Margin Money (subsidy) Claim, wherever necessary.

(iii) Project cost will include Capital Expenditure and one cycle of Working Capital. Projects without Capital Expenditure are not eligible for financing under the Scheme. Projects costing more than Rs.5 lakh, which do not require working capital, need clearance from the Regional Office or Controller of the Bank’s Branch and the claims are required to be submitted with such certified copy of approval from Regional Office or Controller, as the case may be.

(iv) Cost of the land should not be included in the Project cost. Cost of the ready built as well as long lease or rental Workshed / Workshop can be included in the project cost subject to restricting such cost of ready built as well as long lease or rental workshed/workshop to be included in the project cost calculated for a maximum period of 3 years only.

(v) PMEGP is applicable to all new viable micro enterprises, including Village Industries projects except activities indicated in the negative list of Village Industries. Existing/old units are not eligible.

3. Credit Guarantee Trust Fund for Micro and Small Enterprises (CGTMSE)

The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGTMSE) was jointly launched by the Government of India, Ministry of Micro, Small and Medium Enterprises (MSME) and the Small Industries Development Bank of India (SIDBI) to implement a institutional credit guarantee scheme for MSEs. It was established to make collateral-free credit (/without third-party guarantees) available to the micro and small enterprise sector. Both the existing and the new enterprises are eligible to be covered under the scheme.

The Credit Guarantee Scheme (CGS) was set up to strengthen the credit delivery system and to promote the flow of credit to the MSE sector, create access to finance for unserved, under-served and underprivileged, making availability of finance from conventional lenders to new generation entrepreneurs. CGTMSE enables this by providing credit guarantees to banks and financial institutions, and encouraging them to extend credit facilities to MSMEs.

Eligibility Criteria:

– All existing and new Micro and Small Enterprises (MSEs) are eligible under the Credit Guarantee Scheme.

– Candidates that meet the eligibility criteria may approach banks or financial institutions.

– The extent of guarantee cover ranges from 50% to 85% of the sanctioned amount of the credit facility. Small and Micro-Enterprises owned and/or operated by Women Entrepreneurs are eligible for a Guarantee Cover of 80%, whereas all the credit/loans in the North-East Region (NER) for credit facilities are eligible for a guarantee of Rs. 50 lakh.

Lending Institutions offering funds under CGTMSE Scheme:

• – Scheduled Commercial Banks (SCBs)
• – Regional Rural Banks (RRBs)
• – Small Finance Banks (SFBs)
• – Non-banking Financial Companies (NBFCs)
• – Small Industrial Development Bank of India (SIDBI)
• – National Small Industries Corporation (NSIC)
• – North Eastern Development Finance Corporation Ltd.

4. Credit Linked Capital Subsidy Scheme (CLCSS)

The Credit Linked Capital Subsidy Scheme (CLCSS) provides a subsidy for technology upgradation to MSMEs. Under this scheme, MSMEs receive a 15% subsidy on additional investments up to Rs. 1 crore for adopting state-of-the-art technologies. CLCSS aims to enhance the competitiveness of MSMEs by facilitating the induction of modern technology and improving productivity across various sectors.

Eligibility Criteria:

– Any of the Micro, Small and Medium Enterprise entities belonging to sub sectors specified by the Ministry of MSME is eligible under this subsidy scheme.

– Both new and existing enterprises can avail a subsidy under this scheme.

– Small and Micro Enterprises based in semi-urban and rural areas with a valid UAM number are also eligible.

– The entity must invest in technology upgradation by adopting state-of-the-art or near state-of-the-art technology. This subsidy provides 15% upfront capital subsidy on institutional finance availed by MSMEs.

– Typically, the enterprises include – sole-proprietorship, private limited companies, tiny industries, khadi, coir units, partnerships, village industries, etc. 

5. Equity Infusion through Fund of Funds (for MSMEs)

Recognizing the shortage of equity faced by MSMEs, the Fund of Funds initiative aims to provide equity funding to viable and high-growth MSMEs. By encouraging private sector investments in MSMEs, this scheme supports the business growth and facilitates their participation in the ‘Make in India’ campaign.

Through this, the Fund of Funds initiative seeks to address the funding gap faced by MSMEs and promote their sustainable development.

Eligibility Criteria:

– All MSMEs are eligible to apply.

– MSMEs can apply through the onboarded investor funds and are registered with the proposed Fund of Funds.

– The Government of India supports VC or PE firms in investing in commercially viable MSMEs.

6. Credit Guarantee Scheme for Subordinate Debt (CGSSD)

The Credit Guarantee Scheme for Subordinate Debt (CGSSD) aims to provide support to stressed MSMEs by extending credit to their promoters. Under this scheme, promoters of operational MSMEs that have become stressed or non-performing assets (NPAs) can infuse funds into their enterprises as equity. CGSSD offers credit guarantees for subordinate debt, enabling MSMEs to improve their liquidity and debt-equity ratio.

Eligibility Criteria:

– Operational MSMEs that are stressed or NPAs are eligible.

– Promoters of MSMEs meeting the eligibility criteria can apply for this scheme.

– The scheme provides 90% guarantee for the sub-debt, with the remaining 10% from the concerned promoters.

7. SIDBI Make In India Loan For Enterprises (SMILE)

The SIDBI Make In India Loan For Enterprises (SMILE) scheme is aligned with the Government of India’s ‘Make in India’ campaign, aiming to support MSMEs in participating in this initiative. SMILE provides soft loans and term loans to new and existing MSMEs for establishment, expansion, modernization, or technology upgradation. By offering financing solutions tailored to the needs of MSMEs, SMILE promotes their growth and competitiveness.

Eligibility Criteria:

– This scheme covers all new and existing MSME units in the manufacturing and services sector.

– Existing enterprises undertaking expansion or modernization are also eligible.

– Financing is available for smaller enterprises within the MSME sector. 

– Additionally, the enterprises can secure finance more conveniently through SIDBI.

8. MSME Business Loan for Startups in 59 Minutes

In a bid to promote ease of doing business and expedite access to credit, the Government of India introduced the MSME Business Loan for Startups in 59 Minutes scheme. This initiative offers quick and automated loan processing through an online portal, enabling MSMEs to obtain loan approvals within 59 minutes. By leveraging technology and digitization, this scheme streamlines the loan application process, facilitating timely access to finance for MSMEs.

Eligibility Criteria:

– Existing businesses or MSMEs looking for term loans or working capital loans are eligible.

– Businesses should be IT compliant and have a six-month Bank Statement Facility.

– GST registered as well as non-registered businesses are eligible to apply.

These government schemes exemplify the commitment of the Indian government to promote the growth and development of MSMEs. By providing financial support, credit guarantees, and incentives for technological upgradation, these schemes empower MSMEs to unleash their full potential and contribute to India’s economic prosperity.

Registration Process for MSME Subsidy

Once MSMEs understand the eligibility criteria for various subsidies, the next step is to complete the registration process to avail themselves of the benefits. The steps in the registration process typically vary depending on the subsidy scheme and the implementing authority. 

Below is an overview of the general registration process for MSME subsidies:

1. Identification of Eligible Subsidies

MSMEs need to identify the specific subsidies for which they are eligible based on their size, sector, and business requirements. Each subsidy scheme may cater to different needs, such as funding, technology upgradation, skill development, or market access.

2. Documentation and Information Gathering

MSMEs must gather the necessary documentation and information required for the subsidy application. This may include business registration documents, financial statements, project proposals, compliance certificates, and other relevant records.

3. Online Registration

Many subsidy schemes offer online registration portals to streamline the application process. MSMEs can visit the respective government websites or designated portals for subsidy schemes and create accounts to initiate the registration process.

4. Application Form Submission

MSMEs are required to fill out the application forms provided by the subsidy scheme authorities accurately and completely. The forms may require detailed information about the enterprise, its operations, financial status, proposed projects, and the intended use of the subsidy funds.

5. Document Upload

Along with the application form, MSMEs may need to upload scanned copies of supporting documents, such as incorporation certificates, bank statements, project reports, audited financial statements, and any other relevant paperwork specified in the application guidelines.

6. Verification and Processing 

Once the application is submitted, it undergoes a verification process by the authorities responsible for administering the subsidy scheme. This may involve scrutiny of the submitted documents, verification of eligibility criteria, and assessment of the proposed projects or initiatives.

7. Site Visits and Inspections

In some cases, MSMEs may be subjected to site visits or inspections by officials to assess the viability and feasibility of the proposed projects. Site visits help ensure that the subsidy funds are utilized for the intended purposes and comply with regulatory requirements.

8. Approval and Disbursement

Upon successful verification and approval of the application, MSMEs receive notification regarding the approval of the subsidy. The subsidy funds are then disbursed to the beneficiaries through direct bank transfers or other designated payment methods specified by the subsidy scheme authorities.

9. Compliance and Reporting Obligations

MSMEs receiving subsidies are typically required to comply with certain reporting obligations, such as submitting progress reports, financial statements, and utilization certificates as per the terms and conditions of the subsidy scheme. Non-compliance may result in penalties or disqualification from future subsidy schemes.

10. Periodic Review and Renewal

Subsidy schemes may have provisions for periodic review and renewal of subsidies based on the performance and compliance of the beneficiary MSMEs. Regular reviews help ensure that the subsidies continue to support the intended objectives and outcomes effectively.

Also Read: MSME Registration In India: Procedure, Documents Required

Benefits of MSME Subsidies

MSME subsidies play a large part in the growth and development of micro, small and medium enterprises, and opting for MSME registration offers several advantages to your business.

It grants eligibility for an excise exemption scheme from direct taxes and access to special schemes tailored for MSMEs by banks, among other benefits. Additionally, businesses that hold an MSME certificate can avail themselves of various perks from government departments, including electricity.

Here are some key benefits that MSMEs enjoy through registering as MSMEs for these subsidies:

1. Access to the lowest interest rates on bank loans.
2. Eligibility for tax rebates customized for MSMEs and credit for Minimum Alternate Tax (MAT).
3. Easy accessibility to credit for MSMEs.
4. Reimbursement of ISO Certification fees.
5. Special rebates and concessions on patents and industry setups.
6. One-time settlement fee for outstanding amounts.
7. Government preference given to MSMEs.
8. Concession in electricity bills.
9. Access to credit guarantee schemes from the Government.
10. Special consideration for participation in International Trade fairs.
11. Subsidy for barcode registration.
12. Support from the state government.

Also Read: Benefits Of MSME Registration For Small Business Owners In India

Who can apply for MSME registration?

Entities falling under the Micro, Small, and Medium Enterprises (MSME) classification are eligible to apply for MSME registration. This includes proprietorships, partnership firms, companies, trusts, or societies with investments below Rs. 50 crore and annual turnovers below Rs. 250 crore. However, individuals are not eligible to apply for MSME registration.

Also Read: Who is Eligible for the MSME Scheme?

Conclusion

In summary, MSME subsidies represent a pillar of growth, competitiveness, and sustainability for small and medium enterprises by providing financial assistance, promoting innovation, enhancing market access, and mitigating risks. With the help of targeted schemes catering to MSMEs, businesses can thrive in a dynamic environment, driving economic growth, job creation, and inclusive development.

FAQs

1. What are MSMEs, and why are they important for India’s economy?

MSMEs, or Micro, Small, and Medium Enterprises, are crucial for India’s economy as they contribute significantly to industrial growth, employment generation, and overall economic development. They play a vital role in fostering entrepreneurship, driving innovation, and promoting inclusive growth.

2. What is the revised classification of MSMEs, and how does it benefit enterprises?

The revised classification of MSMEs under the Atmanirbhar Bharat Abhiyan comprises a composite criterion of both investment and annual turnover, removing the distinction between the manufacturing and service sectors. This promotes parity between the two sectors and enables businesses to scale their operations while continuing to avail MSME benefits.

3. What is the eligibility criteria for the Pradhan Mantri Mudra Yojana (PMMY)?

To qualify for the Pradhan Mantri Mudra Yojana, applicants must be citizens of India, have a valid bank account, and be non-corporate and non-farm small or micro-enterprises. Loans are categorized into Shishu, Kishor, and Tarun schemes based on the stage of development or growth of the beneficiary micro-units. MUDRA supports MSMEs by refinancing loans from various financial institutions.

4. What are the eligibility criteria for the Prime Minister’s Employment Generation Programme (PMEGP)?

Eligibility includes being above 18 years, possessing a minimum educational qualification, and having no history of loan defaults. New projects in manufacturing or service sectors are eligible for assistance.

5. How does the Credit Guarantee Trust Fund for Micro and Small Enterprises (CGTMSE) benefit MSMEs?

The CGTMSE provides credit guarantees to banks and financial institutions, encouraging them to extend credit facilities to MSMEs without requiring third-party guarantees or collateral. Both existing and new enterprises can avail coverage under this scheme.

6. What is the objective of the Credit Linked Capital Subsidy Scheme (CLCSS)?

The CLCSS provides a subsidy for technology upgradation to MSMEs, offering a 15% subsidy on additional investments up to Rs. 1 crore for adopting state-of-the-art technologies. Any Micro, Small, and Medium Enterprise entity belonging to specified sub-sectors is eligible for this subsidy scheme.

7. How does the Equity Infusion through Fund of Funds support MSME growth?

The Fund of Funds initiative provides equity funding to viable and high-growth MSMEs by encouraging private sector investments. This scheme addresses the funding gap faced by MSMEs, promoting their sustainable development and participation in initiatives like ‘Make in India’. 

8. What is the purpose of the Credit Guarantee Scheme for Subordinate Debt (CGSSD)?

CGSSD aims to support stressed MSMEs by extending credit to promoters. It offers credit guarantees for subordinate debt, enabling MSMEs to improve liquidity and debt-equity ratio.

9. How does the MSME Business Loan for Startups in 59 Minutes facilitate access to credit?

This scheme offers quick and automated loan processing through an online portal, providing timely access to finance for existing businesses or startups.

10. Who is eligible to apply for MSME registration and subsidies?

Entities that fall under the Micro, Small, and Medium Enterprises (MSME) classification, including proprietorships, partnership firms, companies, trusts, or societies with  investments below Rs. 50 crore and annual turnovers below Rs. 250 crore, are eligible to apply. However, individuals cannot apply for MSME registration.

11. What are some important government schemes aimed at supporting MSMEs?

Several government schemes are designed to support and promote the growth of MSMEs, including the Pradhan Mantri Mudra Yojana (PMMY), Prime Minister’s Employment Generation Programme (PMEGP), Credit Guarantee Trust Fund for Micro and Small Enterprises (CGTMSE), Credit Linked Capital Subsidy Scheme (CLCSS), and others.

12. What is the registration process for availing MSME subsidies?

The registration process for MSME subsidies involves identifying eligible subsidies, gathering necessary documentation, completing online registration, submitting application forms, uploading supporting documents, undergoing verification and processing, site visits and inspections, approval, disbursement, compliance, reporting obligations, and periodic review and renewal.

13. What are some key benefits of MSME registration for accessing subsidies?

MSME registration grants eligibility for excise exemption schemes, access to low-interest bank loans, tax rebates, credit guarantee schemes, concessions on patents and industry setups, electricity bill concessions, participation in international trade fairs, barcode registration subsidies, and support from state governments.

Twinkle Barot

Twinkle loves everything content. She brings over 5 years of experience writing for leading financial institutions, some of the Fortune 500 companies and fintech firms - simplifying complex financial concepts into clear, engaging content. She is committed to delivering high-value content that empowers clients to achieve their goals.

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