Benefits of Technology Upgradations for MSMEs in India

May 23, 2024
Updated on

Technology upgradation is an initiative that encourages entrepreneurs to adapt to modern technology to enhance their competitiveness in the global market. Micro, Small, and Medium Enterprises (MSMEs) play a vital part in the growth of an economy, which is why both the Central and State governments offer various technology upgradation funds and schemes for MSMEs to upgrade their businesses and grow, especially by adopting new technologies.

The technology and quality upgradation support for MSMEs is one of the ten initiatives outlined by the National Manufacturing Competitiveness Programme (NMCP). It aims at enhancing the competitiveness of the MSMEs sector in India by improving energy efficiency and quality of the products.

The Benefits of Technology Upgradation for MSMEs

1. Increased Energy Efficiency

A significant outcome of technology upgradation in small-scale companies is increased energy efficiency. The cost of energy, which is a substantial component of the cost structure of the manufacturing activity for MSMEs, which can be reduced by technology upgradation.

2. Adoption of Renewable Energy Sources

Global warming is reduced via energy efficiency. More than 90% of all energy used today comes from fossil fuels. This entails the production of significant amounts of greenhouse gases (GHG), which change the global atmosphere. The introduction of various green initiatives by the Indian Government to implement and adopt renewable energy sources will encourage MSME entrepreneurs to invest in the grade of legacy technology to green tech solutions.

3. Reduce Production Costs

A significant decrease in production costs can be achieved through adoption and upgradation of new technology resulting in energy saving and efficient management.

Major Programs Under this Scheme

Building MSME Clusters’ Capacity

“Capacity Building” is a programme that uses awareness campaigns to help MSMEs adapt to capacity building in infrastructure. It encourages the replication of EET (Energy Efficient Technologies) models and facilitates energy audits. As part of awareness activities, the industry is informed about the need for EETs, the availability of energy-efficient equipment, and the advantages of EETs. The improvements expected from this programme are listed below:

The Petrol Conservation and Research Agency (PCRA), the Bureau of Energy Efficiency (BEE), IITs, The Energy and Resource Institute (TERI), State governments, and other government agencies are primarily responsible for implementing this programme. These organizations are funded through budgetary allocations made by the federal government and state governments based on the detailed project report (DPR). A sum of Rs. 75,000 will be given as support for awareness campaigns.

Assistance with EET Project Implementation

The implementation of energy-efficient technology is feasible for MSMEs in India through funding support from banks, financial institutions, and SIDBI (Small Industries Development Bank of India), which requires the steering committee to approve the DPRs. The bank and SIDBI will collaborate to provide loans to MSMEs. This programme will cover the project cost up to a maximum of 10 lakhs, which includes the cost of the machines, sales and excise taxes, transportation and transit insurance costs, import-related duties, etc.

The Central government will subsidize 25% of the project’s cost, with the remaining 75% coming from bank loans, financial institution loans, NBFC loans and SIDBI loans. The funds are released once the MSME unit has made the minimum payment needed by the funding agency. MSMEs must meet the minimum requirements set forth by the government, as well as have the necessary infrastructure, documents, and permits, if applicable.

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Carbon Credit Aggregation Centers (CCA)

The Carbon Credit Aggregation Centers (CCA) are identified and developed in the clusters where the programme on EET is already implemented, as this programme is encouraged to be adopted by groups that could create clusters. With the coordination of associations, technical institutions, NGOs, etc., the CCA centers are established as special-purpose vehicles (SPVs). Expert agencies used to handle the supervision of CCA centers. The assistance from the government of India will be extended only till the stage of obtaining approval from the government.

A maximum of Rs. 15 lakh, or 75% of the cost, would be covered by the national government when centers are established. The remaining costs must be covered by MSMEs. The aid will be given in 5 installments, the first of which will be 20% of the total amount. The remaining amount will be released based on how well the project is going.

Assistance in Product Certification

Through this programme, MSMEs will be encouraged to get product certification licenses from national or international organizations. The national certification programmes from BIS, BEE, etc. or the international certifications from ANSI, CE, UL, etc. are only a few of the institutions that issue certifications and offer financial aid. These quality certifications make it easier for MSMEs to compete on a global scale. Assistance will be provided only till the first product receives the license.

As a subsidy, a sum of Rs. 1.5 lakh for national licenses and Rs. 2 lakh for foreign licenses will be provided. This programme is only available to MSMEs once, and it covers the following elements: 

  1. Application fee
  2. License fee
  3. Testing charges applicable to license
  4. Inspection fee of the certification body

Adoption of Energy-Efficient Technologies by MSMEs

Impact studies, assessments, midterm reviews, and other monitoring techniques must be used to monitor the programme both during and after implementation. The budget allotted for this activity may also be sanctioned to approve administrative expenditures, such as fees, etc., that must be paid to the implementing or other agencies if they are not covered elsewhere in the plan. Taking into account the DPRs and the volume of work required, the steering committee will decide on the fee.


The main goals of technology upgradation for MSMEs are to promote and support both product quality and energy efficiency. It helps reduce the cost of production, adopt a clean development mechanism and remain competitive in both the domestic and international markets.

Kinara Capital recognises the significant impact the MSME sector has on the Indian economy. The RBI registered Systemically Important NBFC in India provides fast and flexible unsecured business loans for MSME customers within 24 hours of completing the application process. MSME entrepreneurs can avail collateral-free machinery loans to purchase a new or secondhand machine. With minimum documentation and a flexible interest and EMI policy, small business owners can upgrade their technology to boost production capacity, improve product quality, invest in green tech and more.

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