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The government has discontinued the Credit Linked Capital Subsidy Scheme for Technology Upgradation, the Ministry of Micro, Small and Medium Enterprises said in a circular dated August 12.
Industry bodies have urged the government to revive the scheme that provided a capital subsidy of 15 percent on institutional finance of up to Rs 1 crore availed by MSMEs for upgradation of their plant and machinery with the latest technology.
One of the pressing issues that is impeding the growth of MSMEs in India is the lack of modern technology and equipment, thus making the small businesses unattractive in the export market, industry officials and trade bodies say.
Although the government has been saying that COVID-19 is an opportunity for MSMEs to go big on the Make-in-India initiative, MSMEs in India have lagged in the race for modern technology, they said.
MSME owners say they cannot afford expensive technology and their workforce lacks the skills to operate it, which makes small businesses continue with slow production methods and compromise on product quality.
The scheme's suspension comes right after it posted its best performance in five years.
The number of MSMEs which availed the technology upgradation scheme was the highest in FY21. As per the data available on the MSME dashboard, a total of 15,213 MSMEs were supported in FY21 against 7480 in FY20; 14,155 units in FY19; 4081 units in FY18 and 4011 MSMEs in FY17.
Further, the capital subsidy support provided was also the highest in FY21 at 1,102.57 crore.
"We speak so much about Atmanirbhar Bharat and other things, but if we do not have modern technology, how will the MSMEs compete and survive? Technology upgradation scheme is the need of the hour,” Ramamurthy, member, All India Council of Association of MSMEs (AICA) which represents 170 MSME associations across the country, told Moneycontrol.
"We will request the Ministry to relaunch the scheme," he added.
A senior official from a Delhi-based MSME Association, who did not wish to be named, said: "MSMEs in India cannot afford modern technology as it is expensive. The scheme was in fact very sought after by the MSMEs which wanted to upgrade their equipment. For our MSMEs to become competitive in the global market, technology upgradation is a must.”
He said the scheme may be received. “I have been in touch with several people at the Ministry and what I have learned is that the scheme has been suspended temporarily. The Ministry is looking to relaunch the scheme in a new form," the person added.