What is CLCS (Credit-linked Capital Subsidy? How it aims to help MSMEs?

CLCSS or Credit-linked Capital Subsidy Scheme is a scheme launched by the MSME Ministry in India for all micro, small, and medium scale enterprises within India.  The reasoning behind launching the scheme was to offer handholding and financial help to the MSME sector to continually and consistently invest in the upgradation of existing machinery, equipment, and technology for better performance and improved productivity. However, since the costs associated with such upgradation can run in crores and it is difficult for most entities in the sector, especially in the rural areas, to afford, the government decided to step in with CLCSS.

Which business entities are eligible for the Credit-Linked Capital Subsidiary Scheme?

The types of business entities that can apply for the scheme and benefit from it include:

1.     Sole proprietorship firms,

2.     Limited liability partnerships,

3.     Partnership firms,

4.     Cooperative societies,

5.     Start-ups,

6.     Private Limited companies and

7.     Public Limited Companies.

The condition is that the business must be a part of the Indian SSI sector. The Ministry of Micro, Small, and Medium Enterprises in India prefers woman-led firms and entrepreneurship firms.

What are the inclusions in the scheme?

The key features of the scheme include:

-        15% upfront subsidy for technological upgradation for institutional credit up to INR 100 crore. It means that the beneficiary unit can get a subsidy up to INR 15 lakh with credit up to INR 100 crore.

-        The upper ceiling that was earlier INR 40 lakh had been raised to INR 1 crore.

-        The subsidy rate has been improved from 12% to 15%.

-        The admissible capital subsidy is not linked to the term loan but with the investment in purchasing the plant and machinery.

-        Earlier SSI units were categorized in different slabs based on their current investment, and then the eligible subsidy was calculated. However, this clause has been removed now.

-        The identified subsector and technologies can also get reviewed flexibly from time to time.

-        The application can be submitted online and tracked online.

 

Purpose of CLCSS

The primary cause of the launch of the CLCSS is to help the Indian small-scale sector with:

-        Induction of state-of-art or near art-of-art technological upgradation.

-        Stepping up from the current technology level to higher levels.

-        Replacing plants and machinery/equipment or acquisition of new machinery & equipment.

-        The purpose is to improve productivity and product quality

-        Improve the working environment of MSMEs.

-        Installation of better packaging techniques.

-        Installation of anti-pollution measures.

-        Equipping the unit with energy conservation machinery.

-        Units can start with in-house testing facilities as well as invest in digital quality control measures.

The Credit Linked Capital Subsidy Scheme ensures fair distribution of the scheme amongst different socio-economic categories and scales of businesses. Hence, the scheme focuses on women entrepreneurs, entrepreneurs from the SC/ST categories, and entrepreneurs from the North-Eastern Region, Hill states of J&K, Himachal Pradesh, and Uttarakhand.  Emphasis is also given to entrepreneurs to island territories like Lakshadweep and Andaman & Nicobar Islands and identified Aspirational Districts.

Beneficiaries can approach and apply to scheduled commercial banks, Regional Rural Banks, North-Easter Development Financial Institutions, State Financial Corporations, and scheduled cooperative banks that include urban cooperative banks formed by SIDBI as part of the Technological Upgradation Fund (TUF).