Schemes and subsidies for MSMEs foster ease of doing business, provided the industry knows it!

Micro, Small and Medium Enterprises (MSMEs) are the backbone of the country and the Government knows it. In India, there are approximately 6.30 crore MSMEs which involve in national and international trades, contributing about 29 per cent towards the country’s GDP. Unlike bigorganisations, MSMEs need assistance and protection as they lack resources and technology. And, the governments – both Central and State – are providing some schemes, rebates or counselling to these enterprises so that they grow bigger and scale their businesses further.

National Capital Region (NCR) – that clubs Noida, Gurgaon, Faridabad and Ghaziabad from UP and Haryana states – is one of the major manufacturing hubs for garments in India that constitutes around Rs. 55,000 crore in India’s total garment exports and shares almost similar amount in domestic manufacturing turnover in the organised sector. Apart from these four cities, UP and Haryana also have a number of cities that have proved their worth by setting great number of manufacturing factories in garment segment. Hence, it’s imperative to talk about these two states in this feature so that MSMEs in these states will know what all benefits they can get through MSME schemes. But before we talk about that, let’s see the latest revision that the Central Government has made in MSME definition.

Which all companies fall under MSME category?

Until the first half of 2021, the MSME classification was based on the criteria of investment in plant and machinery or equipment. So, to avail the MSME benefits, the organisations had to limit their investment to a lower limit, as mentioned below:

The MSMEs felt these lower limits were growth impediment factors as they restricted the urge for growth and scaling the businesses further. Additionally, there had been a long-pending demand for the revision of MSME classification so that the expansions can take place while continuing to avail the MSME benefits. Therefore, under the Atmanirbhar Bharat Abhiyan, the Central Government revised the MSME classification by inserting composite criteria of both investment and annual turnover.

Also, the distinction between the manufacturing and the services sectors under the MSME definition has now been removed to create parity between the sectors. The following is the revised MSME classification, where the investment and annual turnover, both are to be considered for deciding an MSME.

Here is what UP and Haryana Governments (and Centre) are offering to support MSMEs…

Despite continuous thrust and awareness sessions organised by the governments at different levels, most of the MSMEs are still unsure of the channels through which they can avail the benefits from the schemes especially laid out for them. They don’t know what to expect, where to seek help from, and which way to go in case of any help that they require. To make it easier, Gaurav Kumar Rai, President, Association of Small, Progressive, Innovative & Rising Enterprises popularly known as ASPIRE points out some schemes that garment factories can avail in UP and Haryana. Though there a number of schemes and benefits, the article will cover four core areas – Quality, Productivity, Innovation and Market Development.

Schemes/incentives available for quality – In garment industry, or in any other industry for that matter, quality plays a crucial role in building long-term relationship with buyers. And, there are schemes for reimbursement available if a factory opts for investment to improve their quality related areas.

If a factory in Haryana goes for purchasing technology equipment that are meant for improving quality of the process or product, Haryana Government reimburses 50 per cent of the cost up to Rs. 20 lakh per year, while the reimbursement in UP will be up to Rs. 2 lakh per year on purchase of equipment for quality improvement.

Similarly, on ZED certification (Zero Defect Zero Effect), the Central Government has mandated an MSME will get 50-80 per cent subsidy of the cost of the certification. On acquiring quality certificates (such as ISO, TS, ZED, BIS etc.), Haryana Government reimburses 75 per cent of the total cost up to Rs 10 lakh and UP Government reimburses Rs. 2 lakh on the same.

Schemes/incentives available for productivity – Improving productivity is every factory’s aim and, to the delight of the MSME industry, the governments are giving subsidies and incentives on investment done for productivity improvement.

On deploying Energy Efficient Technology (EET) or any other modern technology by MSMEs, Central Government gives 15 per cent subsidy under CLCSS (Credit Linked Capital Subsidy Scheme). On the other hand, if any technology is imported, 50 per cent (up to Rs. 2 lakh) of the cost is subsidies. As far as Haryana is considered, the reimbursement amount on EET in units goes up to Rs. 20 lakh (up to 50 per cent) once in five years of the total cost and that’s enormous. For example – If a factory installs a CNC auto-cutting machine to improve productivity in cutting room that also saves energy as per standards, its 50 per cent cost will be covered under Haryana Government’s scheme.

For any investment related to lean manufacturing methods, that’s a proven concept for manufacturing excellence, Central Government does have scheme that says 80 per cent amount of the 18 months’ of complete trainings and implementation is under subsidy which is primarily the cost of lean manufacturing consultant!

Schemes/incentives available for innovation – Innovation is key for any business’s growth and it’s essential that factories invest in innovative techniques to further build capacities for value-added products. The Government is also supportive of the same.

Design development is one of the core areas to innovate products and it incurs cost. But, the set-up of the same comes with financial assistance from the Government. If MSMSs go for design lab set-up, they will get Rs. 40 lakh incentive from centre, while Haryana Government gives up to Rs. 5 crore subsidy on the same.

Schemes/incentives available for market development – Exhibitions and fairs are important mediums to get connected with the people and find business opportunities. The Central Government is quite upfront in its approach for MSME’s participation in overseas trade fairs, and hence it gives a lot of subsidies in various areas such as – 60 per cent of stall cost up to Rs. 1 Lakh; 50 per cent of air fare up to Rs. 50,000; and 60 per cent of total expenditure on marketing material or website up to Rs. 60,000.

In UP, 75 per cent of air fare; 50 per cent of stall cost; and marketing material up to 25 per cent will be reimbursed by the Government; while the reimbursement amount is 100 per cent in some cases in Haryana including the factories run by women/ SC/ ST entrepreneurs.