Technology plays a crucial in the success of small enterprises, especially in the manufacturing sector. To make products that meet global and national standards, micro, small and medium enterprises have to invest in machinery and equipment. With machinery costs running in lakhs of rupees, it’s difficult for MSMEs to generate the capital to invest in equipment and upgrade existing technology.

This is where – the revolutionary CLCSS (Credit Linked Capital Subsidy Scheme) comes into the picture. Here, in this guide, you can find out all about the CLCSS – what is it, benefits offered, eligibility criteria, how to apply and more.

What is the CLCSS? 

The Credit Linked Capital Subsidy Scheme, shortly referred to as the CLCSS is an innovative credit product launched by the Ministry of Micro, Small and Medium Enterprises. The primary objective of this scheme is to aid the technology up-gradation of micro and small enterprises, especially in rural and semi-urban areas. 

A large number of small-scale industries in India still work with out-dated technology. They are unable to upgrade their machinery due to non-availability of funds. The CLCSS helps small-scale industries upgrade their equipment and plant machinery by offering capital subsidies on purchase of machinery. 

Key Features of the CLCSS

  • Under the CLCSS, businesses can avail up to 15% subsidy (with a maximum limit of up to Rs. 1 crore) on investment in eligible machinery. 

  • The subsidy of 15% is available only to businesses that have invested in eligible plant machinery by using term loans borrowed from the pre-approved list of PLIs (Public Lending Institutions). 

  • Industries that are transforming from small scale to medium scale due to sanction of additional loans under the CLCSS are also eligible for the subsidy. 

The Revised CLCSS Scheme for 2019

In September 2019, Nitin Gadkari, the Union MSME minister announced certain changes to the existing CLCSS scheme. The revised scheme will play a crucial role in increasing the contribution of MSMEs to the GDP from the current 29% to 50% in the next few years. Additionally, it will also help in boosting exports from the MSME sector from the current 40% to 50%. 

The revised scheme offers an up-front subsidy of up to Rs. 1 crore (15% of the investment costs) for purchase of machinery and equipment. 

The Cabinet Committee on Economic Affairs allocated funds worth Rs. 2900 for the CLCSS scheme in February. There is no upper limit on the subsidy disbursal for a year, and all eligible MSMEs can apply for the scheme. 

As per the revised scheme, an additional 10% subsidy is offered to entrepreneurs belonging to SC/ST categories and hailing from the “117” aspiration districts that belong to North-eastern states and other hilly terrains in the country.

Additional Reading: Government Loans For Small Scale Businesses

Who is eligible for the CLCSS? 

  • Micro and small enterprises belonging to the 51 sub-sectors mentioned by the Ministry of MSME are eligible for capital subsidy. 

  • The subsidy is available to both existing and new enterprises. 

  • The subsidy is available to small and micro enterprises in rural and urban areas. 

  • This scheme is available to all micro and small enterprises having a valid UAM number. It can include sole-proprietorships, partnerships, private limited companies including khadi, tiny industries, cottage industries, coir units, village industries and more. 

If you’re looking to upgrade the equipment for your plant or industry, make sure to check out if you’re eligible for this scheme to avail the 15% subsidy. 

Benefits of the CLCSS

The scheme offers various benefits to small-scale industries including:

  • Helps in the up-gradation of technology of small-scale industries belonging to the various sectors/product categories as notified by the MSME Ministry. 
  • It offers 15% subsidy for purchasing eligible plant equipment and machinery. This helps in reducing the overall loan burdens of micro and small enterprises. 
  • It aids in the growth of rural industries that can now manufacture high-quality products. 

Products and Industries covered under the CLCSS

 Drugs and pharmaceuticals  Glass and ceramic items including tiles  Bio-tech industry  Food processing  Rubber processing including manufacture of tyres
 Wooden Furniture  Cosmetics  Machine Tools  Fans and motors  Dyes and Intermediates
 Printing Industry  Zinc Sulphate  Steel furniture  Toys  Mineral water bottle
 Wires and cables  Auto industry components  Readymade garments  Pencil ingot making industries  Steel rolling
 Locks  Paints and varnishes  Sports goods  Agricultural equipment  Forging and hand tools
 Bicycle parts  Industrial gases  Poultry, cattle feed and hatchery industry  Gold plating and jewellery  General engineering works
 Leather and leather products  Coir products  Common effluent treatment  plants  Welding electrodes  Sewing machine industry
 Industry-based on medicinal and aromatic plants  Transformers, coils, chokes, electrical stampings, etc.  Heating elements  Hardware for information technology  Plastic moulded components

For a complete list of the eligible products and industries, refer to the official website of the Ministry of MSME. 

How to apply for the CLCSS? 

Online application and tracking has been introduced from 2013 for the CLCSS. Eligible beneficiaries are required to apply for the CLCSS subsidy from Primary Lending Institutions (PLI) where they have availed term loans. 

The beneficiary will be required to fill out an application form that is available with the PLI. The completed application is uploaded to the online portal by the PLI. The uploaded application is sent to the attached nodal agency, which recommends the application to the Office of DC (MSME). 

On verification, the office of DC (MSME) sanctions the release of the subsidy. Once all the required verifications are done, the Internal Finance Wing releases the funds to the Nodal Agencies, from where it is passed on the PLI of the beneficiary. 

*However, note that the scheme at present is under revisal by the Ministry of MSME which will release official details soon. 

Documents Required for CLCSS

Eligible micro and small industries have to submit the following documents for availing the CLCSS subsidy.

  • PAN card of the individual and the business

  • Aadhaar Card/Voter ID (for identity proof)

  • Personal address proof

  • Business address proof 

  • Recent passport size photographs

  • Proof of business like partnership deep, company registration, etc

Apart from these documents, the scheme beneficiary may have to provide other KYC documents as required. 

At present, there are 12 nodal agencies that oversee the distribution of subsidies. The nodal agencies include

  1. SIDBI (Small Industries Development Bank of India)

  2. NABARD (National Bank for Agriculture and Rural Development)

  3. Indian Bank

  4. Bank of India

  5. State Bank of Bikaner and Jaipur 

  6. Bank of Baroda

  7. Canara Bank

  8. Corporation Bank

  9. State Bank of India

  10. Andhra Bank

  11. Punjab National Bank

  12. Tamilnadu Industrial Investment Corporation

End Note

Upgrade Equipment & Machinery of your Small-scale Industry with CLCSS

Avail the subsidies offered by the CLCSS and upgrade plant equipment and machinery. Check out if your primary lending institution is covered under the CLCSS scheme before applying for a term loan. If you need further help on choosing the right lender for your small business loan, get in touch with our loan experts at CreditMantri.