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Technology and Quality Upgradation Support to MSMEs


Technology and Quality Upgradation Support to MSMEs

The Technology and Quality Upgradation have emerged as the two important elements for enhancing the competitiveness of any manufacturing industry. The large industries have both adequate information about the global markets and access to funds, which enable them to implement strategies for continuous technology and quality up-gradation. On the other hand, MSMEs, with limited information and access to funds, typically think short term. They tend to minimize capital investment with the objective of keeping the cost low. This approach has brought many Indian MSME suppliers to the lower end of the global value chain and ultimately made them uncompetitive as the suppliers of stand-alone products. The Technology and Quality Upgradation support for MSMEs is one among the program of the ten initiatives announced by the National Manufacturing Competitiveness Programme (NMCP) which aims to improve the MSME sector.


The Technology and Quality Upgradation Support program aims at enhancing the competitiveness of the MSME sector by improving Energy Efficiency and quality of the products. The Cost of energy is an important component of the cost structure in any manufacturing process. Besides curtailing the cost of energy, which is a significant component in the cost structure of almost any manufacturing/production activity, energy efficiency also reduces global warming. As more than 90% of energy consumption originates from fossil fuels, this involves the generation of huge quantity of Green House Gases (GHG) leading to change in the global atmosphere.

As such, to reduce production costs and remain competitive, MSMEs need to focus on economising on energy use. To conserve the crucial energy resources, the Government of India enacted the Energy Conservation Act, 2001. The Act brought every sector of the economy under the purview of energy conservation and efficient management. While the major consumers of energy, namely, the large companies and undertakings have been mandated to report the extent of conservation of energy achieved in their annual reports, the small and medium enterprises have no such statutory mandate. An important goal of the present scheme is to encourage and support energy efficiency by the Micro, Small & Medium Enterprises.

Major Activities under the Scheme

In order to achieve the above-mentioned objectives, the NMCP in accordance with the Government of India has evolved with a comprehensive program as below:

  • Capacity Building of MSME Clusters in Energy Efficient Technologies (EET)
  • Assistance in Implementation of EET Projects
  • Carbon Credit Aggregation Centres (CCA) in Clusters
  • Assistance in Product Certification
  • Impact Studies and Administration

Capacity Building of MSME Clusters in EET

The program of “Capacity Building” is making the MSMEs adapt for the capacity building in infrastructure by conducting awareness programs, supporting energy audits and promoting replication of EET models. The industries are apprised with the reason for EETs, availability of energy-efficient equipment, and benefits of EETs as part of awareness programs. Following improvements are expected out of this program:

  • Awareness of energy efficiency in the existing manufacturing processes
  • Nature of Energy audits of MSME sector
  • Adoption of energy-efficient technologies by MSMEs

The implementation of this program is mainly by the Petrol Conservation and Research Agency (PCRA), Bureau of Energy Efficiency (BEE), IITs, The Energy and Resource Institute (TERI), state governments and other government agencies which are funded through central government and state government budgetary allocations based on the detailed project report (DPR). An amount of Rs.75,000 will be provided as assistance for awareness programs.

Assistance in Implementation of EET Projects

The implementation of energy-efficient technologies to the MSMEs are viable to MSMEs through funding assistance through banks, financial institutes, SIDBI for which the DPRs had to be approved by the steering committee. The banks and SIDBI will work together to provide loans to MSMEs. The project cost to the maximum amount of 10 lakhs will be provided as part of this program where the cost includes the cost of machines, sales and excise tax, transportation and transit insurance cost, import-related duty etc.

The Central government will provide 25% of the project cost as a subsidy and the remaining amount will be covered by the loan from banks, financial institutions and SIDBI. The funds are released on ensuring the minimum contribution as required by the funding agency are met by the MSME unit. The eligibility of MSMEs will include the basic compliance as prescribed by the ministry, licenses if any, infrastructure, documents if any and others.

Carbon Credit Aggregation Centres (CCA)

As this program is encouraged to take up in groups which could be formed as clusters, the Carbon Credit Aggregation Centres (CCA) are identified and developed in the Clusters where the program on EET is already implemented. The CCA centres are set up as special purpose vehicles (SPVs) with coordination of associations, technical institutions, NGOs, etc. The handholding of CCA centres used to be carried out by the expert agencies. The assistance from GoI will be extended only till the stage of obtaining approval from the Government.

The central government will provide a maximum amount of Rs.15 lakh or 75% of expenditure for establishing centres. The remaining expenditure has to be met by MSMEs. The assistance will be released in 5 instalments starting with a 20% of the amount and remaining amount will be released based on the progress of the project.

Assistance in Product Certification

This program will encourage the MSMEs to acquire product certification licenses from either national/international bodies. The national certification program from BIS, BEE, etc. or International certifications from ANSI, CE, UL, etc. are few institutes issuing certifications for which the financial assistance are provided. These certifications on quality enhance the MSMEs to compete globally. The assistance will be provided only till the first product get licensed.

The financial assistance of Rs.1.5 lakh for national license and Rs.2 lakh for the international license will be provided as a subsidy. The MSMEs can opt this scheme only once and applicable for the below components:

  • Application fee
  • License fee
  • Testing charges applicable to license
  • Inspection fee of the certification body

Adoption of Energy-efficient Technologies by MSMEs

The program has to be monitored during and after implementation with impact studies, evaluations, mid-term reviews, etc. Administrative expenditures including fees, etc. to be paid to the implementing or other agencies, if not included elsewhere in the scheme, may also be sanctioned from the budget allocated under this activity. The fee will be decided by the steering committee based on the DPRs and the scope of the work involved.

For more details, contact:

Development Commissioner
Micro, Small & Medium Enterprises
Government of India
Nirman Bhavan, New Delhi-110 108