Credit Linked Capital Subsidy And Technology Upgradation Scheme

A large section of our Micro and Small Enterprises (MSEs) continue to run their business with outdated machinery and very minimal or zero technological advancements in their core business operation. It makes Indian products less competitive in the global market.

As many cheaper alternatives of similar products are readily available in the market to persuade the end consumer, there is an urgent need for state-of-the-art technological upgradation. Upgradation must be done at the manufacturing process level, and machinery at the industrial plant is critical for MSEs to remain competitive and reduce production costs.

At the institutional level, the Government of India is facilitating modernization in the MSME sector by providing Credit Linked Capital Subsidy Scheme and Technology Upgradation Scheme (CLCS-TUS). This scheme covers a wide variety of business sectors, including Micro and Small enterprises of the Coir business sector, Khadi & Village Industries. 

Earlier, the Ministry of Micro, Small, and Medium Enterprises had three different schemes with the target of bringing modernization in MSME business operations; the three schemes are:

  1. Credit Linked Capital Subsidy Scheme (CLCSS)
  2. Technology & Quality Upgradation Support to MSMEs (TEQUP)
  3. Technology Acquisition and Development Fund (TADF) Scheme.

As all three schemes were operating with a similar objective, the government has brought in both the TEQUP and TADF schemes within the Credit Linked Subsidy. 

Before we get into further details about the scheme, it is necessary to understand the type of technological upgradation mentioned under the scope of this scheme.

What is Technological Upgradation under CLCS-TUS?
Under the CLCS-TUS, the term technological upgradation means adapting to the state-of-the-art or near state-of-the technology in the core business operation that will lead to a significant increase in the production quantity, quality of the product, and improvement environmental impact with inclusive working environement. 

The role of technological upgradation can be of any of the following improvements:

  1. Installing improved packaging techniques
  2. Anti-pollution measures 
  3. Energy conservation measures
  4. Managing cost-of-acquisition of in-house testing facility
  5. On-line quality control to meet the requirement of the beneficiary unit


  • An MSEs unit replacing the old machinery and technology with the new equipment will not be considered technological upgradation under this scheme. 
  • The CLCS-TU Scheme is not applicable for micro and small business units that are upgrading their manufacturing unit with second-hand machinery. 

Objectives of the CLCS-TU Scheme:
The primary objective of this scheme is to make our MSMEs adopt modernization in all aspects of their manufacturing process and remain competitive and on par with the international quality standard for the produced goods. 

To do that, the scheme offers a capital subsidy of 15% of the total cost of machinery up to a maximum subsidy limit of Rs. 15 lakhs. 
On the total credit availed by the business, it should be updated with well-established and improved technologies as per specified sub-sectors/products approved under this scheme.

Under this scheme, the maximum approved machinery investment is Rs. 1 crore.

Eligibile Criteria For CLCS-TU Scheme:

  1. All new and existing Micro and Small enterprises (MSE) with valid Udyog Aadhar numbers (UAN) and entry into the MSME data bank are eligible for CLCSS. 
  2. The applicant business formation can be 
  • Sole Proprietorship Firm
  • Co-operatives And Societies
  • Private Limited Company registered under the Companies Act, 2013
  • Limited Liability Partnership firm, LLP Act, 2008
  • The MSEs unit with 51% majority shareholding rights in the hands of a business owner from a Scheduled Caste/Scheduled Tribe or Women are eligible under this scheme. 
  • If a business is moving from small-scale to medium-scale enterprises with financial assistance under Credit Linked Capital Subsidy Scheme, they are eligible. 
  • Priority focus will be given to businesses owned by people belonging to SC/ST category, women entrepreneurs. Other than them, entrepreneurs in the Hill States (Jammu & Kashmir), Uttarakhand, Himachal Pradesh, North-east region States, Islands - Andaman & Nicobar and Lakshadweep and districts classified as Aspirational Districts/LWE districts are also given some particular focus.
  • Micro and Small Enterprises obtaining credit subsidies under the CLCS scheme can also apply for other types of subsidy except other technological upgradation subsidies provided by the central government.
  • CLCS Scheme for technological upgradation can be availed only for making a purchase of benchmarked machinery for the benefit of improving business productivity. 

CLCS-TU Scheme Is Not Eligible For The Following Purpose:

  1. For purchasing Fabricated, second-hand machinery or in-house fabricated hand plant or equipment.
  2. Business investments for buyer credit, seller credit, leasing or hire purchase, and usance credit are not eligible for the CLCS scheme.


In total, 12 nodal banks/agencies, including NABARD and SIDBI, can implement the Credit Linked Capital Subsidy to enable SMEs to optimize their business with technological upgradation.

Here is the list of banks and agencies that can implement the CLCS-TU scheme:

  1. Small Industries Development Bank of India (SIDBI)
  2. State Bank of India (SBI)
  3. Indian Bank
  4. Bank of India
  5. Canara Bank
  6. Punjab National Bank
  7. Andhra Bank
  8. Tamil Nadu Industrial Investment Corporation
  9. Punjab National Bank
  10. Corporation Bank
  11. National Bank For Agriculture And Rural Development (NABARD)

Other than the banks mentioned above and agencies, all nationalized banks will be eligible to implement the CLCS Scheme after signing MoU with the DC-MSME. 

All nationalized banks acting as nodal banks would consider proposals; only their respective bank branches approve their credit. In the case of other Primary Lending Instruments (PLI), NABARD and SIDBI would be the agency disbursing credit-linked capital subsidies under this scheme.

Performance Impact of the Credit Linked Capital Subsidy Scheme (CLCSS):

As I write this article, Rs.216.42 Crore has been disbursed under this scheme in the current financial year 2022-23.

Financial Year

Total Subsidy Released

( Rs. Crore) 

Total no.of SMEs Benefited 




















Sectors Approved under Credit Linked Capital Subsidy Scheme for Technology Upgradation:
Since its launch, the scheme has been expanded by including new sectors/sub-sectors to widen the scope of this scheme. Currently, the scheme provides a subsidy to 51 sectors. They are:

  • Dyes and Intermediates
  • Common Effluent Treatment Plant
  • Bio-tech Industry
  • Food Processing (including Ice Cream manufacturing)
  • Plastic Moulded/ Extruded Products and Parts/ Components
  • Corrugated Boxes
  • Drugs and Pharmaceuticals
  • Poultry Hatchery & Cattle Feed Industry
  • Industry based on Medicinal and Aromatic Plants
  • Rubber Processing, including Cycle Rickshaw Tyres
  • Dimensional Stone Industry (excluding Quarrying and Mining)
  • Glass and Ceramic Items, including Tiles
  • Leather and Leather Products, including Footwear and Garments
  • Information Technology (Hardware)
  • Wires & Cable Industry
  • Electronic equipment viz tests, measuring and assembly/ manufacturing, Industrial process control; Analytical, Medical, Electronic Consumer & Communication equipment, etc. 
  • Fans & Motors Industry
  • General Light Service(GLS) lamps
  • Mineral Filled Sheathed Heating Elements
  • Transformer/ Electrical Stampings/ Laminations /Coils/Chokes, including Solenoid coils
  • Forging & Hand Tools
  • Auto Parts and Components
  • Gold Plating and Jewellery 
  • Toys 
  • Bicycle Parts
  • Steel Furniture
  • Combustion Devices/ Appliances
  • Foundries - Steel and Cast Iron
  • General Engineering Works 
  • Locks 
  • Non-Ferrous Foundry 
  • Agricultural Implements and Post-Harvest Equipment 
  • Wooden Furniture 
  • Mineral Water Bottle 
  • Ferric and Non-Ferric Alum 
  • Beneficiation of Graphite and Phosphate 
  • Readymade Garments
  • Khadi and Village Industries 
  • Coir and Coir Products
  • Paints, Varnishes, Alkyds, and Alkyd products
  • Steel Re-rolling and Pencil Ingot making Industries 
  • Zinc Sulphate 
  • Cosmetics 
  • Welding Electrodes
  • Sewing Machine Industry 
  • Industrial Gases 
  • Printing Industry
  • Machines Tools 
  • Copper Strip Industry
  • Pesticides Formulation
  • Sport Goods

SMEs are facing problems sourcing financial credit to upgrade their business and scale their profit. One essential upgradation needed for SSI is technological upgradation in terms of process, machinery, etc. Only by carrying out significant upgradation work can our SMEs improve their production quality and quantity and get it done cost-effectively. That's how India's Small and medium businesses can stay competitive in the international market and become a top exporting nation. If you are looking for a credit subsidy for capital investment for upgrading to state-of-the-art machinery- CLCS-TU Scheme is the best fit.

Author : Dharani

Date     : 01-Nov-2022