About UPFC

The scheme aims to facilitate technology up-gradation of SSI units in the specified products / sub-sectors by providing 12% capital subsidy for induction of proven technologies approved under the scheme.

2. Scope of the Scheme

To begin with, the scheme would cover the following products / sub-sectors in the SSI:-

(i) Leather and Leather products including footwear and garments;

(ii) Food Processing (including Ice-cream manufacturing);

(iii) Information Technology (hardware);

(iv) Drugs and pharmaceutical;

(v) Auto parts and components;

(vi) Electronic Industry particularly relating to design and measuring;

(vii) Glass and Ceramic items including tiles;

(viii) Dyes and intermediates;

(ix) Toys;

(x) Tyres;

(xi) Hand Tools;

(xii) Bicycle parts;

(xiii) Foundries-Ferrous and Cast Iron and

(xiv) Stone Industry (including Marble Mining industry)

As the scheme progresses, the above list of products/sub-sectors may be expanded with the approval of the Governing and Technology Approval Board [GTAB] constituted under this scheme.

3. Eligible Primary Lending Institutions (PLIs)

Eligible scheduled commercial banks, National Small Industries Corporation (NSIC) and State Financial Corporations (SFCs)

4. Eligible Borrowers

Sole Proprietorships, Partnerships, Cooperative Societies, Private and Public Limited Companies in SSI Sectors.

5. Type of units to be covered under the scheme

(i) Existing SSI units registered with the State Director5ate of Industries which upgrade with the state-of-the-art technology, with or without expansion.

(ii) New SSI units which are registered with the State Directorate of Industries and which set up their facilities only with the appropriate eligible and proven technology duly approved by the GTAB. As regards Marble mining industry PLIs may decide on the appropriate technology for upgradation so long as the units remain within the ambit of SSI.

6. Eligibility Criteria

(i) Capital subsidy under the scheme shall be available only for such projects where term loans have been sanctioned by the eligible PLIs [eligible Scheduled Commercial Banks, NSIC and SFCs] on or after October 1, 2000.

(ii) Cases covered under Refinance Scheme for Technology Modernisation Fund [RTDM] of SIDBI sre also eligible for capital subsidy under the proposed scheme subject to the project also conforming to the norms stipulated under CLCSS.

7. Definition of Technology Upgradation

(i) Technology upgradation would ordinarily mean induction of state-of the – art or near state-of-the-art technology. In the varying mosaic of technology obtaining in more than 7500 products in the India small scale sector, technology upgradation would mean a significant step up from the present technology level to a substantially higher one involving improved productivity, or /and improvement in the quality of products or/ and improved environmental conditions including work environment for the unit. It would also include installation of improved environmental conditions including work environment for the unit. It would also include installation of improved packaging techniques as well as anti-pollution measures and energy conservation machinery. As regards the appropriate technology for upgradation of marble mining industry, the eligible PLIs may decide the same so long as the init remains within the ambit of the SSI definition and is eligible for financial assistance under CLCSS. Further, Lubricants manufacturing units in need of introducing facilities for in-house testing and on-line quality control and equipment for the purpose would quality for assistance, as the same is a case of technology upgradation. A list of proven technologies is furnished in Appendix – I.

(ii) Replacement of existing equipment / technology with the same equipment technology will not quality for this scheme, nor would the scheme be applicable to units upgrading with second hand machinery.

8. Duration of the Scheme

The scheme will be in operation for a period of five years from October 1, 2000 to September 30, 2005, or till the time sanctions of capital subsidy by the Nodal Agency reach Rs. 600 crore, whichever i is earlier.

9. Nodal Agency

Small Industries Development Bank of India (SIDBI) WILL ACT AS THE nodal agency.

10. Cap on amount of Subsidy

i) The financial assistance by the eligible PLIs for technology upgradation will be need based. However, the 12% capital subsidy support would be limited to the loan amount indicated below:

S.No.	Existing Investment Limit	Maximum calling of loan eligible for support *	Maximum subsidy available under the scheme
1.	Tiny units with investment in plant & machinery less than Rs. 10 lakh	Rs. 8 lakh	Rs. 0.96 lakh
2.	Tiny units with Investment in plant & machinery between Rs. 10 lakh to Rs. 25 lakh	Rs. 20 lakh	Rs. 2.40 lakh
3.	Small units with investment in plant & machinery above Rs. 25 lakh	Rs. 40 lakh	Rs. 4.80 lakh

[* the eligible subsidy would be calculated on the actual loan amount or maximum ceiling on loan eligible for subsidy, whichever is lower.]

ii) Value of Plant & Machinery being acquired under the scheme will be determined by its purchase price.

iii) Capital subsidy under this scheme will not be admissible for loan amount exceeding the limits indicated above.

11. Working Capital Requirements

Since success of the technology upgradation scheme, to a large extent, depends upon the availability of adequate working capital, lending institutions would like to be assured that the borrowing units have made adequate arrangements for meeting the working capital requirements. Commercial banks should also accord priority in providing adequate working capital support to the assisted units.

12. Other conditions for loans

(i) Promoters’ contribution, security, debt-equity ratio, up-front fee, etc will be determined by the lending agency as per its existing norms.

(ii) Entrepreneurs availing credit linked capital subsidy for technology upgradation shall not avail any other benefit including interest Subsidy, under any other schemes of the Central Government.

(iii) Units in the North-Eastern Region which are availing financial incentives/ subsidy from the Government in the Region would, however, be eligible for subsidy under CLCSS.

(iv) One of the main requirements for sanction of assistance under the technology upgradation scheme will be availability of competent management to the unit concerned to carry out the upgradation programme and to manage the operation of the unit efficiently. Towards this end, the lending agencies may stipulate conditions as may be considered necessary.

13. Procedural Aspects

i) All the eligible PLIs [except NSIC] will have to execute a General Agreement for availing capital subsidy under the scheme, irrespective of the fact whether refinance is availed by them or not. However, it may be clarified that NSIC may avail capital subsidy under the scheme on the basis of execution a separate General Agreement.

ii) After sanction of the assistance, eligible PLIs will get an agreement executed by SSI unit concerned on behalf of Government of India. A copy of the draft agreement to be executed by the eligible PLIs with the SSI unit is furnished in Annexure –III.

iii) The eligible PLIs would obtain application for assistance under CLCSS in the prescribed form [Appendix- II].

iv) The eligible PLIs shall furnish subsidy forecast on quarterly basis, through their HO, which will act as a nodal office, to RO/BO of SIDBI located in the region. The subsidy forecast information for every quarter on or before 1^st March for April-June quarter, on or before 1^st June for July-September quarter, on or before 1^st September for October-December quarter and on or before 1st December for January-March quarter, may be furnished as per prescribed format [Appendix –III]

v) The eligible PLIs would release the subsidy amount to the beneficiary unit along with the first disbursement of loan sanctioned for Technology Upgradation under the scheme.

vi) The eligible PLIs shall furnish details of release of subsidy to the beneficiary units, together with the request for replenishing advance money placed with PLIs for release of subsidy, on quarterly basis on March 1, June 1, September 1 and December 1, PLIs request for replenishment of advance money for subsidy, however, would be entertained by SIDBI only on receipt of complete details of subsidy released to the beneficiary units, as per Appendix –IV & IV –A.

vii) The eligible PLIs shall be responsible for ensuring eligibility for sanction of subsidy to the SSI units in terms of Gol guidelines under the scheme, disbursal and monitoring of the assisted units.

14. Other Parmeters

i) The Governmental assistance cannot be utilized for the purposes other than for which it has been sanctioned. The eligible PLIs shall have to strictly follow this norm and no deviation would be permitted.

ii) In case, it is found that capital subsidy from the Government has been availed on the basis of any false information, the industrial unit shall be liable to refund the Government capital subsidy availed, along with interest to be charged from the date of disbursal to the date of refund. The rate of interest shall be the prime lending rate of PLIs concerned at the time of invoking this penal clause.

iii) The eligible PLIs shall, therefore, incorporate suitable conditions in respect of points at (ii) above in their security documents entered into with the init, which would give necessary authorization to proceed legally in such eventualities.

iv) The credit risk under the scheme will be borne by the eligible PLIs and as such they will have to make their own commercial judgement while appraising the project. The credit decision of the eligible PLIs will be final.

v) There shell not be any binding obligation on the part of SIDBI to obtain sanction from Gol for the governmental financial assistance in respect of the proposals which are covered under CLCSS.

vi) SIDBI shall have the right to inspect the books of eligible PLIs and the loan accounts irrespective of whether refinance is availed or not from SIDBI under the Scheme and /or call for any other information as may be required by Gol from time to time.

vii) SIDBI shall have the right to recall from the eligible PLIs the entire amount of the Government capital subsidy in respect of their assisted units whether or not the eligible PLIs have recovered the said subsidy from their units, if SIDBI comes to the conclusion that any of the acclunts do not conform to the policies, procedures and guidelines laid down by SIDBI/Gol under CLECSS, from time to time.

15. Monitoring of the scheme

The scheme will be monitored by a Governing and Technology Approval Board [GTAB]. The Secretary (SSI & ARI) will be the Chairperson of the Board and the Development Commissioner (SSI) will be its Member Secretary. The GTAB would also periodically review the functioning of the scheme.