The first step in the process of manufacturing any product is acquiring the raw material and building inventories. The consistency in purchasing of raw material should not get hampered as this is going to impact the whole chain of operations of any industry.
In this blog of MSME TALK, we have talked about the Government’s “NSIC Raw Material Assistance Scheme” that will help to foster, promote, and aid the growth of the micro, small, and medium enterprises (MSME) in India by financing their raw material requirements.
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Raw Material Assistance Scheme aims at helping MSMEs by way of financing the purchase of Raw Material (Both indigenous & imported). This gives an opportunity to MSMEs to focus better on manufacturing quality products.
NSIC facilitates MSMEs in procurement of various types of raw materials in both ways i.e. against advance payment and also on credit, as per the requirement of MSMEs. Any MSME in the manufacturing segment with a Udyog Aadhar Memorandum (UAM) can apply for the scheme.
The scheme benefits will be extended for the following:
- Procurement of raw materials viz., Aluminum, Zinc, Copper, Iron & Steel, Paraffin wax, Coal, Polymer products etc., by signing Memorandum of Understanding with the bulk manufacturers.
- Godwon operation of bulk manufacturers.
- Procurement of other Raw Materials from the suppliers / manufacturers (other than as mentioned in above 2 points) on the specific request of MSMEs.
Benefits of the scheme:
- Availing credit for buying raw materials/inventory, thereby enabling MSMEs to execute the orders in hand.
- Discounts received under bulk supplies arrangements are shared with MSMEs, enabling them to reduce cost of purchase of materials.(Economies of scale)
- NSIC takes care of all the procedures, documentation & issue of Letter of credit in case of imports.
- Facilitating procurement of Raw Material with credit support up to 180 days
The Process:
- Duly filled application form is to be submitted along with the Application
- Preliminary appraisal and Unit inspection is carried out by NSIC.
- Sanction of Limit to the Unit.
- Signing of agreement between NSIC and Unit.
- Disbursement of assistance to the unit.
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Rate of Interest and fee details:
Rate of interest in respect of assistance availed on or after 01.11.2022
Processing Fee :
Rate of interest charged, if repayment is not made within 180 days:
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Security required:
Security in the form of Bank Guarantee from Approved Banks.
How to apply:
Any MSME which needs raw material through NSIC may apply through prescribed application forms through https://www.nsic.co.in/schemes/raw-material-against-bg.aspx or may be obtained from any of the field offices.
FAQs:
- Who can avail assistance under the Scheme?
Any manufacturing MSME having Udyog Aadhaar Memorandum (UAM) can apply for the assistance under the Scheme
- Does NSIC facilitate procurement of raw materials for trading activities?
No.
- Is there any discount to women entrepreneurs under this scheme?
To enhance the participation of women entrepreneurs as exclusive discount of 20% shall be offered on annual processing fee during the year 2022-23 on NSIC’s Raw Material Assistance & Bill Discounting.
- Does NSIC facilitate MSMEs for raw material procurement against advance payment or on credit?
NSIC facilitates MSMEs in raw material procurement in both way i.e. against advance payment and also on credit, as per the requirement of MSMEs.
- How the limit is sanctioned for procurement of material on credit?
A limit is sanctioned keeping in view the raw materials requirements of the unit, financial position of the unit and available security of equivalent value in the form of bank guarantee.
- Whether there is any ceiling of the limit to be sanctioned under the Scheme?
There is ceiling of limit for single unit to Rs. 1000 Lakh engaged in manufacturing activities and Rs.600 lakh to the unit engaged in service activities. Ceiling of limit is Rs.2000 lakh for group of units engaged in manufacturing activities and Rs.1500 lakh for group of units engaged in service activities. In case of MSMEs engaged in infrastructure activities, maximum ceiling is Rs 500 lakh, either individual unit or group of units.
- What is the validity of the limits sanctioned under the Scheme?
One year. Thereafter, the limit can be renewed for one year provided conduct of the account was satisfactory during last year.
- How does NSIC provide credit support to MSMEs for procurement of raw materials?
The unit has to submit proforma invoice/ original invoice/ material receipt note with specific request to release the payment. The maximum assistance is provided upto 95% of the BG value.
- Whether payment is released to the MSME?
No. NSIC releases the payment to the supplier as requested by the MSME.
- What is the credit period of the assistance provided?
The credit is allowed for 90 days. However, it can further be extended on the request of MSME provided the unit serves interest, total outstanding is within BG limit and BG remains valid till extended period.
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