Central govt. is considering to start Credit Guarantee Fund (CGF) and Interest Subvention Scheme (ISS) for electronic manufacturing companies. Union govt. will provide credit guarantee for term loans of upto Rs. 100 crore and interest subsidy on loans upto Rs. 1,000 crore for electronic manufacturers. This would be done under the new National Policy on Electronics in works.
Meity proposed that govt. will provide upto 50% guarantee cover of sanctioned loan amount under CGF scheme. The cover offered by the govt. is going to vary on case to case basis depending on investments.
ISS scheme is going to cover term loans for plant and machinery upto Rs. 1,000 crore per borrowing unit for 10 years to setup new or expand an existing electronics manufacturing unit.
Credit Guarantee & Interest Subsidy Scheme for Electronic Manufacturers
MeitY proposed Credit Guarantee Fund (CGF) and Interest Subvention Scheme (ISS) to boost electronics manufacturing ecosystem in the country under new National Policy on Electronics in works. Under CGF scheme, govt. will provide credit guarantee on term loans for projects upto Rs. 100 cr per borrowing unit. There would be no requirement for any collateral security and 3rd party guarantee to setup new electronics manufacturing unit or expansion of existing electronics manufacturing plant.
Meity is going to create a fund with the nodal agency to provide guarantee for the term loans. Meity will provide funds from its annual budgetary allocation to nodal agency for utilization under CGF and ISS schemes. Central govt. will create CGF with amount of Rs. 1,000 crore which would be contributed by the govt. and review of the scheme would be undertaken after 2nd year to assess the corpus size in relation to response from the targeted sector. As per the initial proposal, govt. will provide upto 50% guarantee cover of sanctioned loan amount.
Moreover, govt. will formulate interest subvention scheme (ISS) for electronics manufacturers. At present, the industry pay around 11% to 12% interest on term loans in India which are available at around 5% to 7% in other countries. Accordingly, industries demands an interest subvention of 4% to 6% from govt. on term loans. ISS scheme to promote electronics manufacturing by partially reimbursing interest on term loan availed by industry for plant and machinery.
ISS scheme will include all stage of value chain including raw materials, assembly, testing and packaging. Electronics Manufacturing Services (EMS) companies like Foxconn, Flex would also be eligible under the ISS scheme. This scheme will cover term loans for plant and machinery upto Rs. 1,000 crore per borrowing unit for 10 years to setup new or expand an existing electronics manufacturing unit.
Term loans worth more than Rs. 1,000 crore would also be eligible but interest reimbursement is only for loan amounting to Rs. 1,000 crore. Interest subsidy is going to remain available on installments paid after the starting of the commercial production in case the cabinet approves the proposal. India is moving forward to establish a globally competitive manufacturing ecosystem. This would help the achieving the PM Modi’s vision of making India a leader in the electronic manufacturing hub.
Interest subsidy on loans will encourage setting up of companies dealing in mobile handsets, its accessories, its component ecosystem and the entire electronics vertical. The credit default guarantee scheme will assist startups, entrepreneurs, SMEs to setup their own new business without any collateral to ensure that the companies prosper. Both these schemes will help the entire ecosystem to be more competitive in a global market.
Source : https://economictimes.indiatimes.com/news/economy/policy/government-plans-to-provide-credit-guarantee-interest-subsidy-on-loans-for-electronic-manufacturing-companies/articleshow/67528483.cms