The J&K Bank’s Technology Up-gradation Fund Scheme introduced this week gives micro and small enterprises not just capital to upgrade their units, but would also help utilize central schemes. Shazia Yousuf reports.
The J&K Bank has launched a Technology Up-gradation Fund Scheme for existing micro and small enterprises who can now avail loans to replace outdated machinery at 75 to 125 basis points less than prime lending rate.
The scheme billed to bring efficiency in the overall operations of the units, covers the replacement of existing outdated machinery and capacity addition with installation of latest machinery. However, it does not provide for technological upgrade by second hand machinery or replacement of existing processes with the same machinery.
The existing micro and small units registered with the Directorate of Industries or the relevant registered authority operational in J&K for not less than three years can avail the scheme with the condition that the acquirement of technological upgrade should not change the status of the unit.
The aim, the bank says, is to change the technological frontier at state level and to increase efficiency.
“We haven’t seen any major technological shift in the last twenty years, the reason being the industrial units using obsolete and outdated technological methods. MSME’s(Micro small and medium enterprises) here show very stunted growth and have always had difficulty in finding right technology, even if they find one, there is no financing,” said chairman of the J&K bank Haseeb A Drabu while launching the scheme.
The scheme finances the cost of new and removal expenses of old machinery. It also makes the finance available for the installation, operative and administration expenses.
Barring a few modifications, the industry sees the scheme as having lot of potential to revolutionise the sick industrial sector of Jammu and Kashmir.
“It was actually FCIK that demanded a technological up gradation scheme from J&K bank. The two decade long turmoil has hit the industry hard and the scheme came on right time when it was much needed. It has a potential to revive the sick industries,” says Shakeel Qalandar, president Federation Chamber of Industries Kashmir (FCIK).
“The machinery installed two decades back have become outdated and obsolete. When they will be replaced by the new ones, industrial units will have more competitive edge in quality production,” Qalandar adds.
Qalandar, however, wants a slight modification in the scheme which does not cover a unit that makes jump from a Micro/Small to Medium sector by upgradation. “The bar should be there but only for the medium- large transition. However from micro/small to medium, the transition can happen automatically and that should be allowed. Otherwise it will not be feasible for many units,” explains Qalandar.
The scheme asks for a margin money of 10 per cent, has repayment period of eight years including moratorium on repayment for a year, and carries interest rates 1.25 percent and 0.75 less than PLR, for Micro and small enterprises respectively. The women entrepreneurs get a discount of 0.5% on interest.
“When we talk of margin and other figures the scheme seems very convenient, however the problem which I find in it is of security. Credit Guarantee fund scheme should be made one crore,” opines another industry expert, Afaq Qadri. The scheme has a CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises) for loans up to 50 lacs only.
“And the product has been launched for the sick industrial units so the bank should make liberal funding and minimise those lengthy procedures and formalities a customer has to undergo for getting any financial assistance from a bank. It is good, provided it comes on the ground and only then we can find the loopholes if there are any,” Says Anil Suri, industry chieftain in Jammu.
The bank has launched the scheme with a corpus of Rs 50 crore. However, the amount of money that would go into the scheme depends on the adaptability MSE’s show to the scheme. Records with the industries department show 50 thousand MSE’s are registered in which around 5000 require technological up gradation.
The scheme will also help entrpeneurs access the central schemes that they could not for lack of finance so far. A centrally sponsored technological up gradation scheme for MSME’s is operational wherein industrial units would be provided with 15 percent upfront capital subsidy besides the units being entitled for capital investment subsidy of 30 percent on their expansion under modified central industrial package.
“The only problem however was that of finance which now has been solved by J&K Bank. Now government has schemes and bank money, nothing should stop MSME’s to raise their standard and improve economy of state,” said S S Salathia, Minister for industries and Commerce at the launch of product.
The bank, however, sees the new scheme as a challenge and seeks state intervention for its smooth functioning, “Financing technology is a big challenge, there is no tangible security in it. Only legal work by the government can make it powerful,” Drabu said.