MSME associations welcome the launch of tech upgradation scheme

Representational Image. A worker cuts metal inside a workshop manufacturing metal pipes in Mumbai.

Associations representing micro, small and medium enterprises have welcomed the launch of Special Credit Linked Capital Subsidy Scheme for the services sector.

The tech upgradation scheme was launched by Union Minister for MSME, Narayan Rane on Novemeber 19.

"The scheme will help in meeting the technology-related requirements of enterprises in the services sector and has a provision of 25 per cent capital subsidy for procurement of plant and machinery and service equipment through institutional credit to the SC-ST MSEs without any sector-specific restrictions on technology up-gradation," according to an official statement.

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, say industry officials and trade bodies.

"This is a welcome move as the MSMEs were the most impacted due to the pandemic. At this point, any scheme that incentives the MSMEs to scale up and use better technology is a step in the right direction. We are happy that the government relaunched it," said Ramamurthy, member, All India Council of Association of MSMEs (AICA) which represents 170 MSME associations across the country.

The government has discontinued the Credit Linked Capital Subsidy Scheme for Technology Upgradation scheme that was operational till March 2021.

The scheme 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.

The scheme's suspension came 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.

"It is a move in the right direction as the scheme will help the MSME sector, which was experiencing a drop in domestic demand after the pandemic.   This credit scheme will surely help minimize the credit gap that is prevalent for the MSME sector, and also boost the endeavors towards innovation," said Yogesh Pawar, Chairman Association of Inspiring Syndicate of Entrepreneurs. 

An official from a Delhi-based MSME Association, who did not wish to be named, said, "Very few MSMEs in India can afford new modern technology as it is very expensive. The scheme is very much needed to equip the small industries with latest technology because it will help them be competitive in the global markets."