ABSTRACT

Small Industries - Payment of Back ended interest subsidy for term loans obtained for Technology Upgradation / Modernisation, term loan obtained under NEF Schemes, NSIC - SIDCO Consortium loan, Composite term loan and loans obtained by Tiny Industries under Credit Guarantee Fund Trust Scheme from any bank or financial institution and term loan obtained for ISO certification R & D resulting in Registration of Patent and Intellectual property rights - Guidelines approved - Amendment - Issued.

SMALL INDUSTRIES (DEV.2) DEPARTMENT

G.O.(Ms).NO. 99                                                   DATED: 14.11.2005

READ:-

G.O.Ms.No.131, Small Industries (Dev.1) Department, dated 9.12.2003.

From the Managing Director, Tamil Nadu Industrial Investment Corporation DO Letter No. TIIC/MD/DO/2004-05 dated 10.9.2004.

From the Managing Director, Tamil Nadu Industrial Investment Corporation DO Letter No. TIIC/MD/Proj/Subsidy/2004-05 dated 11.10.2004.

From the Industries Commissioner and Director of Industries and Commerce Letters PC No.11405/KC1/2004 dated 20.10.2004 and dated 19.11.2004.

From the Chairman, TIIC DO Letter No.TIIC/CMD/DO/2005-06 dated 6.6.2005.

From the Industries Commissioner and Director of Industries and Commerce Lr.RC.No.22751/KC1/2005 dated 7.7.2005.

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ORDER:

In the Government Order first read above Government have approved the guidelines for implementation of the scheme for payment of back ended interest subsidy not exceeding 3% above PLR for loans obtained for Technology Upgradation / Modernisation, term loan obtained under NEF Schemes, NSIC - SIDCO Consortium loan, Composite term loan and loans obtained by Tiny Industries under Credit Guarantee Fund Trust Scheme from any bank or financial institution and term loan obtained for ISO certification, R & D resulting in Registration of Patent and Intellectual Property Rights and sanctioned expenditure for these schemes.

2. In the letter fifth read above, the Chairman, Tamilnadu Industrial Investment Corporation Limited has stated that as a developmental financial institution, Tamilnadu Industrial Investment Corporation Limited does not have a PLR. However, it is found that the 10.5% base rate prescribed for sanction of the interest subsidy is unworkable for Tamilnadu Industrial Investment Corporation Limited and consequently, beneficiary units are not able to get the entire 3% benefit of the interest subsidy on the lending rate contemplated as a benefit to SSI's under the scheme and the concept of PLR should not be insisted upon in the case of Tamilnadu Industrial Investment Corporation Limited as it is a term lending agency which offers loans at a fixed rate for a longer term i.e. 7 years to 9 years, unlike the banks which invariably adopt a floating rate concept for shorter terms and have access to low cost deposits as well as savings and current account balances as sources of funds. The SSI units covered under the scheme are provided with term loan assistance by Tamilnadu Industrial Investment Corporation Limited at 11% by availing refinance from SIDBI and through borrowings from other institutions / Banks. TIIC's lending rate has been fixed at 11% taking into consideration the average current cost of borrowings of Tamilnadu Industrial Investment Corporation Limited which works out to approximately 8% plus other administrative costs. Hence, the SSI units being assisted by Tamilnadu Industrial Investment Corporation Limited may not be able to get the entire 3% back ended interest subsidy announced by the Government as a measure of support, if the subsidy rate is linked with the base lending rate of 10.5%. He has therefore suggested that for the schemes implemented by Tamilnadu Industrial Investment Corporation Limited as Nodal agency instead of PLR or 10.5% as fixed in G.O. first read above, the lending rate of 11% fixed by Tamilnadu Industrial Investment Corporation Limited for SSI units may be taken as the basis for determining the back ended interest subsidy. Thereby, all units going in for modernisation or technology upgradation or availing financial assistance under the NEF Scheme, will be extended loans by Tamilnadu Industrial Investment Corporation Limited at its cost of borrowing of 8% availing of the 3% back ended interest subsidy.

3. The Industries Commissioner and Director of Industries and Commerce has also suggested that the above request of the Tamilnadu Industrial Investment Corporation Limited may be considered by Government.

4. The Government after careful examination of the proposal of Tamilnadu Industrial Investment Corporation Limited have decided that

(a) Back ended interest subsidy at 3% may be allowed for the term loan obtained from TIIC for technology upgradation and modernisation scheme, National Equity Fund Scheme and for ISO Certification, Research and Development resulting in Registration of Patent Right and intellectual Property Rights. After providing for the said back ended interest subsidy at the rate of 3% the net lending rate of TIIC should not be below 7.5% (10.5 – 3%)

(b) (i) In respect of term loan obtained from Banks for the above mentioned schemes, if the lending rate to the borrower is above P.L.R., the back ended interest subsidy will be the difference between the lending rate and P.L.R or 2% whichever is lower.

(b) (ii) For the term loans obtained from banks, in case the lending rate is below PLR, the back ended interest subsidy will be the difference between the PLR and lending rate or 3% whichever is lower.

5. Accordingly the following amendments are issued to the G.O.Ms.No.131, Small Industries Department, dated 9.12.2003

AMENDMENT - I

For the existing para 8, the following shall be substituted:-

8. "The SIDCO shall be the Nodal agency only for implementation of back ended interest subsidy scheme for loans obtained under NSIC-SIDCO consortium and loan obtained by Tiny Industries under CGFT scheme referred to in para 6 above. For other schemes, referred to in para 4, 5 and 7 above Tamilnadu Industrial Investment Corporation Limited shall be the Nodal Agency. It is clarified that for the schemes implemented by Tamilnadu Industrial Investment Corporation Limited as nodal agency, the back ended interest subsidy is 3%. After providing for the said back ended interest subsidy at the rate of 3% the net lending rate of Tamilnadu Industrial Investment Corporation Limited should not be below 7.5% (10.5.- 3%). For NSIC-SIDCO consortium loan and loan obtained by Tiny Sector under CGFT Scheme implemented by Tamil Nadu Small Industries Development Corporation Ltd., as nodal agency, back ended interest subsidy is 3% above 10.5% or actual rate of interest minus 10.5% whichever is less, since NSIC does not maintain PLR.

AMENDMENT - II

For the existing para under the caption ‘Quantum of subsidy' in the annexure to G.O.Ms.No.131, Small Industries Department, dated 9.12.03 the following shall be substituted:-

(a) For the schemes implemented by Tamilnadu Industrial Investment Corporation Limited as nodal agency, the back ended interest subsidy is 3%. After providing for the said back ended interest subsidy at the rate of 3% the net lending rate of Tamilnadu Industrial Investment Corporation Limited should not be below 7.5% (10.5.- 3%).

(b) (i) In respect of term loan obtained from Banks for the above mentioned schemes, if the lending rate to the borrower is above P.L.R., the back ended interest subsidy will be the difference between the lending rate and P.L.R or 2% whichever is lower.

(b) (ii) For the term loans obtained from Banks in case the lending rate is below PLR, the back ended interest subsidy will be the difference between the PLR and lending rate or 3% whichever is lower.

This order issues with the concurrence of Finance Department vide its U.O.No.3879/FS/2005-1, dated 14.11.2005.

(BY ORDER OF THE GOVERNOR)

RAMESHRAM MISHRA

SECRETARY TO GOVERNMENT

To

The Industries Commissioner and Director of

Industries and Commerce, Chennai -5.

The Managing Director, Tamilnadu Industrial

Investment Corporation Limited, Chennai -35.

The Managing Director, Tamilnadu Small

Industries Development Corporation Limited, Chennai -16.

The Regional Director, NSIC, Anna Salai, Chennai -2.

The Accountant General, Chennai - 6/18/35.

The Accountant General, Chennai - 6/18/35(By name)

The State Level District Lead Banks.

Copy to:-

The Chief Minister's Office, Chennai -9.

Senior Personal Assistant to Minister (Rural Industries), Chennai -9.

The Finance Department, Chennai -9.

The Industries Department, Chennai -9.

All Sections in Small Industries Department, Chennai -9.

SF/SC.