10 Government Schemes especially for Startups

The Government of India (GoI) and governments of several states have introduced schemes to finance and support startups. The GoI formulates provisions to alleviate the conditions of startups in its financial budget. Government schemes can be availed by startups if they fall under the definition of a startup provided by the GoI. The process of recognition as a “startup” can be availed through an online application.

Following are some of the important schemes launched by the GoI to assist startups in sustaining growth and marketability:

1. Newgen Innovation and Entrepreneurship Development Centre (Newgen Iedc)

The NewGen Innovation and Entrepreneurship Development Centre (NewGen IEDC) is being promoted in educational institutions to develop institutional mechanism to create entrepreneurial culture in S&T academic institutions and to foster techno-entrepreneurship for generation of wealth and employment by S&T persons. The NewGen IEDCs are established in academic institutions (science colleges, engineering colleges, universities, management institutes) having requisite expertise and infrastructure.  

Objective of the Scheme

• To channelize the knowledge and the energy of youth towards becoming active partners in the economic development process                                                                                               

• To catalyze and promote development of knowledge-based and innovation-driven enterprises and promote employment opportunities amongst youth specially students                                      

• To inculcate a culture of innovation driven entrepreneurship                                                         

• To act as an institutional mechanism for providing various services including information on all aspects of enterprise building to budding S&T entrepreneurs. 

Eligibility: The parent institution should have required expertise and infrastructure. This includes a minimum dedicated space of about 5,000 square feet to establish a NewGen IEDC, library, qualified faculty, workshops, etc.

Funding: The NSTEDB startup scheme by the GoI will provide a limited, one-time, non-recurring financial assistance on year-to-year basis, up to a maximum of 25 lakh INR. Also, non-recurring grants would be provided for supporting working capital cost.

2. Modified Special Incentive Package Scheme (M-Sips)

In order to promote large scale manufacturing in the country, M-SIPS was announced by the Government in July, 2012 to offset disability and attract investments in Electronics System Design and Manufacturing (ESDM) Industries. The scheme provides incentive for investments on capital expenditure- 20% for investments in Special Economic Zones (SEZs) and 25% in non-SEZs. The Scheme was revised vide notification dated 03-08-2015 which was further amended vide notification dated 30-01-2017. The Scheme was closed to receive new application on 31 December, 2018.

Salient Features of the Scheme

1. Capital Subsidy – 20% for investments in Special Economic Zones (SEZs) and 25% in non-SEZs.
2. Incentives for both new units and expansion units.
3. Incentives for a period of 5 years from the date of approval of application.
4. Incentives for 44 categories/verticals across the value chain (raw materials including assembly, testing, packaging and accessories, chips, components).
5. Minimum investment threshold for each product category/ vertical (from Rs 1 crore for manufacturing of accessories to Rs 5000 crores for memory semiconductor wafer fabrication unit.
6. Unit to be in Industrial Area notified by Central/State Govt.

Eligibility: New or existing expanding projects engaged in electronic manufacturing.

Funding: The scheme provides capital subsidy of 20% to SEZ and 25% to non-SEZ for enterprises engaged in electronic manufacturing. Reimbursement of excise duty for capital equipment in non-SEZ units or CVD is also provided. The scheme is available for those categories where investment threshold is of 1 crore INR to 5000 crore INR.

3. Credit Guarantee Fund Scheme for Micro and Small Enterprises

Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is jointly set up by Ministry of Micro, Small & Medium Enterprises (MSME), Government of India and Small Industries Development Bank of India (SIDBI) to catalyse flow of institutional credit to Micro & Small Enterprises (MSEs). Credit Guarantee Scheme (CGS) was launched to strengthen credit delivery system and to facilitate flow of credit to the MSE sector, create access to finance for unserved, under-served and underprivileged, making availability of finance from conventional lenders to new generation entrepreneurs. Over the past 20 years, CGTMSE has been instrumental in providing guarantee cover to collateral and/or third party guarantee free credit facilities extended by eligible Member Lending Institution [MLIs] to MSEs.

Eligibility: MSMEs

Funding: The credit facility covers both term loan as well as working capital facility up to 1000 crore INR per borrowing unit. The guarantee is extended to both new and existing enterprises without any collateral security or third-party guarantee.

4. Performance & Credit Rating Scheme

Small-scale industries occupy an important position in the development of our economy. Credit rating SSI will encourage them to increase productivity as good credit rating will enhance their acceptability in market. Rating agencies have different schemes to rate different SSIs. All recognised MSMEs are eligible for the scheme.

This scheme seeks to establish independent, trusted third party opinion on capabilities and credit-worthiness of MSEs, and makes credit available at attractive interest rates and will ensure better productivity. Under this scheme (as per the turnover of the MSE) a percent of Rating Agency charges are reimbursed by Ministry of SSI.

Benefits

The major benefits accruing under the scheme to the rated units include:

1. Rating is an independent, trusted third party opinion on capabilities and credit worthiness of MSEs.
2. Rating enables MSE units to ascertain the strengths and weaknesses of their existing operations and take corrective measures to enhance their organizational strength.
3. Good rating enables MSEs to access to funds at cheaper rates and better terms,
4. Rating facilitates prompter credit decisions from Banks on proposals of MSEs.
5. Good rating enhances the acceptability of the MSEs with their customers and buyers.
6. Facilitate buyers in capability & capacity assessment of MSEs before finalizing purchase contracts.

Eligibility: Recognised MSMEs

Funding: This scheme seeks to establish independent, trusted third party opinion on capabilities and credit-worthiness of MSEs and makes credit available at attractive interest rates ensures better productivity. Under this scheme (as per the turnover of the MSE) a percent of Rating Agency charges is reimbursed by Ministry of SSI. Fee to rating agency is based on turnover of the SSI. The turnover of SSI is categorised into three slabs. Based on the slab into which the SSI falls, specific percent of rating fee can be availed from ministry.

5. Raw Material Assistance

Raw Material Assistance Scheme aims at helping MSMEs by way of financing the purchase of Raw Material. This gives an opportunity to MSMEs to focus better on manufacturing quality products.

 The objective of the scheme is to help MSMEs to procure raw materials by financing. Both indigenous as well as imported materials are covered under the scheme. This helps MSMEs improve product quality.

Benefits of the Scheme

• Facilitating procurement of Raw Material with credit support up to 180 days
• MSMEs helped to avail Economics of Purchases like bulk purchase, cash discount etc.

The Process

1. Duly filled application form is to be submitted along with the Application
2. Preliminary appraisal and Unit inspection is carried out by NSIC.
3. Sanction of Limit to the Unit.
4. Signing of agreement between NSIC and Unit.
5. Disbursement of assistance to the unit.

Eligibility: Entrepreneurs of micro, small and medium scale industries having Udyog Aadhar are eligible.

Funding: MSMEs are helped to avail cash discounts and bulk purchases. The financial assistance is up to 180 days. The rate of interest varies based on type of industry (Micro/small/ Medium) and the outstanding dues over specified number of days.

6. Scheme of Fund for Regeneration of Traditional Industries (SFURTI)

The aim of the scheme is to organize Traditional Industries and Artisans into clusters and to provide sustainable employment, enhance marketability of products and to equip them with improved skills, better tools and facilities.

Objective of the Scheme

1. To organize the traditional industries and artisans into clusters to make them competitive and provide support for their long term sustainability
2. To provide sustained employment for traditional Industry artisans and rural entrepreneurs
3. To enhance marketability of products of clusters by providing support for new products, design intervention and improved packaging, and also the improvement of marketing Infrastructure
4. To equip traditional artisans of the associated clusters with improved skills and capabilities through training and exposure visits
5. To make provision for common facilities and improved tools and equipment for artisans
6. To strengthen the cluster governance systems with the active participation of the stakeholders, so that they are able to gauge the emerging challenges and opportunities and respond to them in a coherent manner
7. To build innovative and traditional skills, improved technologies, advanced processes, market intelligence and new models of public-private partnerships, so as to gradually replicate similar models of cluster- based regenerated traditional Industries

Eligibility: NGOs, Government or semi-Government bodies, and Panchayat Raj institutions can avail the scheme for cluster improvement.

Funding: The financial assistance provided for any specific project shall be subject to a maximum of 8 crore INR to support Soft, Hard and Thematic interventions.

7. ASPIRE EN

A Scheme for Promotion of Innovation, Rural Industries and Entrepreneurship (ASPIRE) is an initiative of Government of India and promoted by the Ministry of Micro, Small and Medium Enterprises (MSME). It was launched to set up incubation centres and network of technology centres for enhancing entrepreneurship across India. It seeks to promote start-ups for innovation in the agro-industry.

The scheme is introduced with the aim of promotion of innovation in rural industry and entrepreneurship. It was launched with aspiration to:

• Set up a network of technology centres
• Promote startups for innovation
• Entrepreneurship in agriculture industry. This incentive is referred to as Fund of Funds.

Objectives of ASPIRE Scheme

1. Creation of new jobs and reducing unemployment
2. Grassroots economic development at the district level
3. Promoting entrepreneurship culture in India
4. Facilitating innovative business solutions for meeting the social needs of the people
5. Promoting innovation for further strengthening the competitiveness in the MSME sector

Eligibility: MSMEs

Funding: The fund will be used for automation of agricultural practices, value addition to agriculture and forest produce, recycling of agricultural waste and to introduce business models for local rural employment. Fund of Funds will be maintained by SIDBI with a corpus of 60 crore INR.

8. Infrastructure Development Program- Cluster Development Programme

This scheme is launched to create and upgrade infrastructural facilities in the new and existing industrial areas and clusters of MSEs, to set up common facility centres, expand build capacity of MSMEs by forming self-help groups, consortia and to support sustainability by improving skills, market and capital. The Ministry of Micro, Small and Medium Enterprises (MSME), Government of India (GoI) has adopted the cluster development approach as a key strategy for enhancing the productivity and competitiveness as well as capacity building of Micro and Small Enterprises (MSEs) and their collectives in the country. A cluster is a group of enterprises located within an identifiable and as far as practicable, contiguous area and producing same/similar products/services. The essential characteristics of enterprises in a cluster are (a) Similarity or complementarity in the methods of production, quality control and testing, energy consumption, pollution control, etc (b) Similar level of technology and marketing strategies/practices (c) Channels for communication among the members of the cluster (d) Common challenges and opportunities.

Objectives

1. To support the sustainability and growth of MSEs by addressing common issues such as improvement of technology, skills and quality, market access, access to capital, etc.
2. To build capacity of MSEs for common supportive action through formation of self help groups, consortia, upgradation of associations, etc.
3. To create/upgrade infrastructural facilities in the new/existing industrial areas/ clusters of MSEs.
4. To set up common facility centres (for testing, training centre, raw material depot, effluent treatment, complementing production processes, etc).

Eligibility: MSMEs

Funding: Financial Assistance under various categories are:

• Maximum 2.5 lakh INR for preparation of diagnostic study report with GoI
• Maximum 5 lakh INR for preparation of technical feasibility and viability project report
• For a project of 25 Lakh INR in every cluster, grant of 75% of sanctioned amount

9. Market Development Assistance (MDA)

Export Promotion continues to be a major thrust area for the Government. In view of the prevailing macro economic situation with emphasis on exports and to facilitate various measures being undertaken to stimulate and diversify the country’s export trade, Marketing Development Assistance (MDA) Scheme is under operation through the Department of Commerce  to support the under mentioned activities:

1. Assist exporters for export promotion activities abroad
2. Assist Export Promotion Councils(EPCs) to undertake export promotion activities for their product(s) and commodities ;
3. Assist approved organization/trade bodies in undertaking exclusive nonrecurring innovative activities connected with export promotion efforts for their members ;
4. Assist Focus export promotion programmes in specific regions abroad like FOCUS (LAC), Focus (Africa), Focus (CIS) and Focus (ASEAN +2) programmes ; and
5. Residual essential activities connected with marketing promotion efforts abroad.

The aim of this scheme is to increase participation of representatives of participating units. It has three forms:

• Participation in international exhibitions and fairs
• Financial assistance for using Global Barcode standard (GS1) 3. Recognised importance of barcoding and financial assistance through DC.

Eligibility: MSMEs

Funding: The scheme offers funding up to 75% in respect of air fare for participation by MSME entrepreneurs in overseas fairs/trade delegations. The scheme also has provision of funding for producing publicity material (up to 25% of costs), sector specific studies (up to 2 lakh INR) and for contesting anti-dumping cases (50% up to 1 lakh INR)-for individual MSMEs & associations.

10.  National Awards (Individual MSES)

The ministry selects from among enterprises and entrepreneurs, recognising their efforts and contributions to MSMEs. The MSME must be in continuous production or in service for the last four years.

Scheme Highlights

1. Selected Natioanl awardee is facilitated with cash prize of INR 1 Lakh, INR 0.75 Lakh , INR 0.50 Lakh in order of ranking
2. Special National Award for women – cash prize of INR 1lakh
3. Special National Award for SC/ ST Entrepreneur- cash prize of INR 1lakh
4. Special National Award to NER Entrepreneur- cash prize of INR 1lakh
5. Special Recognition Award to MSMEs scoring marks above 80% and 50% in case of NER- cash prize of INR 0.20 lakh

Eligibility: Entrepreneurs of MSMEs having permanent registration number or have filed Entrepreneurs Memorandum to respective authorities. MSME should have been in continuous production since last four years.

Funding: Benefits in the form of cash is awarded to the winners. MSMEs from different categories like women entrepreneurs, SC/ST category, NER Entrepreneurs are selected for the award. Cash prize up to 1 lakh INR is awarded to winners.

Process and Required Documents

Eligible enterprises may send nominations in the prescribed proforma (may download from the Ministry of MSME website) to Director, MSME-DI of the state where their MSME is registered/they have filed Entrepreneurs’ Memorandum (EM).