SMEStreet Gyan Manch Feature: Credit Linked Capital Subsidy Scheme for Technology Upgradation

In this report of SMEStreet Gyan Manch would like to showcase what all MSMEs must know about Credit Linked Capital Subsidy Scheme for Technology Upgradation.

SMEStreet Edit Desk
29 Sep 2023 Updated On Oct 19, 2023 13:45 IST
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SMEStreet Gyan Manch, MSME Schemes, Credit Linked Capital Subsidy Scheme for Technology Upgradation, Credit Linked Scheme, CLCSS

SMEStreet Gyan Manch Report

The Credit Linked Capital Subsidy Scheme for Technology Upgradation (CLCSS) is a government initiative in India aimed at promoting technology upgradation and modernization of small and medium enterprises (SMEs) in various sectors. The scheme is primarily designed to encourage SMEs to invest in improving their manufacturing processes and productivity by adopting modern technology and machinery.

Key features of the CLCSS include:

Subsidy for Technology Upgradation: Under this scheme, eligible SMEs can receive a subsidy on the capital expenditure incurred for upgrading their technology and machinery. The subsidy helps reduce the financial burden on SMEs, making it more affordable for them to invest in modernization.

  • Credit-Linked: The subsidy is linked to term loans and working capital loans obtained by SMEs from eligible financial institutions. The government provides a subsidy to these financial institutions, which is then passed on to the SMEs in the form of reduced interest rates or a direct subsidy on the loan amount.
  • SME Eligibility: Small and medium enterprises in sectors such as manufacturing and service enterprises are eligible to apply for the CLCSS. These enterprises must meet specific criteria related to their size, investments, and technology adoption plans to qualify for the scheme.
  • Technology Categories: The scheme covers various technology sectors and sub-sectors, including agro-processing, textiles, food processing, chemicals, and more. SMEs can choose to upgrade technology in any of these sectors, provided they meet the eligibility criteria.
  • Capacity Building: The CLCSS also focuses on capacity building and skill development by providing support for training and awareness programs related to modernization and technology adoption.
  • Application Process: SMEs interested in availing the benefits of CLCSS typically apply through designated nodal agencies or financial institutions. These agencies assess the eligibility of the SMEs and facilitate the disbursement of subsidies.
  • Subsidy Amount: The subsidy amount varies based on the technology category and the extent of modernization. The government periodically revises the subsidy rates and guidelines to align with the changing needs of the SME sector.

The CLCSS is an important scheme in India's efforts to enhance the competitiveness of its small and medium enterprises by encouraging them to upgrade their technology and infrastructure. It helps SMEs access affordable financing for technological advancements, which, in turn, can lead to increased productivity, improved product quality, and greater competitiveness in the global market. It's worth noting that the specific details and eligibility criteria for the CLCSS may evolve over time, so interested parties should consult the latest government guidelines and announcements.

How Credit Linked Capital Subsidy Scheme for Technology Upgradation Scheme is Benefiting Indian MSMEs ?

The Credit Linked Capital Subsidy Scheme for Technology Upgradation (CLCSS) has been beneficial to Indian Micro, Small, and Medium Enterprises (MSMEs) in several ways:

  1. Modernization and Technological Upgradation: One of the primary objectives of CLCSS is to encourage MSMEs to invest in modern machinery and technology. By providing subsidies, the scheme makes it financially feasible for MSMEs to upgrade their manufacturing processes, which leads to increased efficiency, improved product quality, and reduced production costs.
  2. Enhanced Competitiveness: Through technological upgradation, MSMEs become more competitive in both domestic and international markets. They can produce goods and services more efficiently and in line with international quality standards, which helps them compete effectively with larger enterprises.
  3. Increased Productivity: Upgraded technology often results in increased productivity. MSMEs can produce more goods or services in less time, leading to higher production volumes and potentially greater revenue.
  4. Cost Reduction: The adoption of modern technology can help MSMEs reduce their operating costs by minimizing wastage, energy consumption, and labor requirements. This can improve profit margins and overall financial sustainability.
  5. Access to Financing: CLCSS is credit-linked, meaning it provides an incentive for MSMEs to secure loans for technology upgradation from eligible financial institutions. The government subsidizes a portion of the interest on these loans, making them more affordable for MSMEs.
  6. Skill Development: The scheme also supports capacity building and skill development in MSMEs. Training programs are conducted to help employees adapt to new technologies and improve their skills, ensuring that the workforce can effectively operate and maintain the upgraded machinery.
  7. Diversification of Product Offerings: With improved technology, MSMEs may have the opportunity to diversify their product offerings or enter new markets, expanding their business prospects and reducing dependence on a single product or customer.
  8. Job Creation: As MSMEs grow and become more competitive, they often require additional labor. This can lead to the creation of new job opportunities, contributing to employment generation and economic development.
  9. Reduced Environmental Impact: Modern technology can also help MSMEs adopt environmentally friendly practices, such as reducing waste and energy consumption. This aligns with sustainability goals and regulatory requirements.
  10. Supporting Government Initiatives: The CLCSS aligns with the Indian government's broader objectives of fostering economic growth, promoting entrepreneurship, and boosting the manufacturing sector's contribution to GDP.
  11. Inclusive Growth: By focusing on MSMEs, the scheme supports inclusive economic growth by empowering smaller enterprises to compete in the market and contribute to the overall development of the country.

In summary, the Credit Linked Capital Subsidy Scheme for Technology Upgradation plays a crucial role in empowering Indian MSMEs to improve their technological capabilities, become more competitive, and contribute to the country's economic growth. It addresses some of the common challenges faced by these enterprises, such as limited access to affordable financing and outdated technology, and helps them thrive in a dynamic business environment.

How MSMEs can Avail Credit Linked Capital Subsidy Scheme

Micro, Small, and Medium Enterprises (MSMEs) in India can avail the Credit Linked Capital Subsidy Scheme for Technology Upgradation (CLCSS) for their business by following these steps:

  1. Eligibility Check: MSMEs should first determine whether they meet the eligibility criteria for the CLCSS. Eligibility criteria typically include factors such as the size of the enterprise, the sector in which it operates, and its technology upgradation plans. These criteria may evolve over time, so it's important to check the latest guidelines issued by the relevant government authority.
  2. Identify the Appropriate Technology Category: The CLCSS covers various technology sectors and sub-sectors. MSMEs should identify the specific technology category or sub-sector in which they plan to upgrade their machinery and equipment. The subsidy rates and guidelines may vary based on the chosen category.
  3. Prepare a Detailed Project Report (DPR): MSMEs need to prepare a comprehensive project report that outlines their technology upgradation plans. This report should include details of the proposed machinery and equipment, the estimated cost of the project, and the expected outcomes, such as increased productivity or cost reduction.
  4. Seek Financing: To avail the CLCSS subsidy, MSMEs should obtain term loans or working capital loans from eligible financial institutions. These institutions are typically banks and non-banking financial companies (NBFCs) that have been approved by the government to disburse CLCSS-linked loans. The loans should be obtained specifically for technology upgradation purposes.
  5. Submit the Application: MSMEs should approach the designated nodal agency or financial institution that administers the CLCSS in their region. They need to submit their project report, loan application, and other required documents to this agency or institution.
  6. Loan Approval: Once the application is submitted, the financial institution assesses the project's viability and creditworthiness of the MSME. If approved, the loan is sanctioned, and the enterprise can proceed with technology upgradation.
  7. Disbursement of Subsidy: The subsidy under CLCSS is typically provided as a reimbursement to the financial institution after the technology upgradation project is completed and verified. MSMEs must ensure that they meet all the requirements and milestones specified in the scheme guidelines to claim the subsidy.
  8. Completion of Technology Upgradation: MSMEs should complete the technology upgradation project as per the approved project plan. It's important to maintain all necessary records and invoices related to the project for verification purposes.
  9. Verification and Subsidy Disbursement: After the project is completed, the designated agency or financial institution will verify the project's implementation. Upon successful verification, the subsidy amount is disbursed to the financial institution, which then reduces the loan amount or interest rate for the MSME.
  10. Compliance and Reporting: MSMEs should comply with any reporting and compliance requirements specified under the CLCSS. This may include periodic reporting on the project's progress and outcomes.

It's crucial for MSMEs to stay updated with the latest guidelines and contact the appropriate authorities or institutions in their region to initiate the application process. The specific procedures and documentation requirements may vary by location and may evolve over time, so seeking guidance from local authorities or financial institutions is essential for a successful application under the CLCSS.

How to Apply

Through Member Lending Institutions (Banks and NBFCs) and for detailed guidelines please visit

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