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Legal way implementation of interest subsidy program

Legal way implementation of interest subsidy program

The government has paved the legal way for the implementation of interest rate subsidy programs for micro, cottage and small enterprises, and medium-scale enterprises having a fixed capital of up to Rs 200m.

The government recently introduced a work procedure for the implementation of the Prime Minister’s Nepali Production and Consumption Enhancement Program, which was introduced through the budget for the fiscal year 2023/24.

According to the procedure, production-based, agriculture and forest-based small and cottage industries, and medium-scale industries with a fixed capital of up to Rs 200m will receive interest subsidies on business loans taken for producing or processing goods.

The government brought the program through the budget speech with the aim of promoting domestic production and consumption. “Micro, cottage, small and medium industries consuming domestic raw materials will be supported for processing, technology upgradation, as well as storage and marketing,” the budget for the fiscal year 2023/24 states.

According to the officials of the Ministry of Industry, Commerce and Supplies, Rs 500m has been allocated for the interest subsidy program in the current fiscal year. As per the working procedure, 60 percent of the budget will be used to provide interest subsidies, while the remaining 40 percent will be used for technology transfer to production-based, agriculture and forest-based micro, small and cottage industries as well as medium-scale industries with a fixed capital of up to Rs 200m through respective local units.

As per the working procedure, micro, cottage, small and medium-scale industries will receive a five percent interest subsidy. However, industries operated solely by women will get a six percent interest subsidy.

The government will select the eligible companies by setting specified standards. As per the work procedure, a program implementation unit at the ministry will seek applications from industry units by publishing a 21-day notice. Firms that have not enjoyed interest-subsidy programs from other agencies and have not been blacklisted by state agencies can apply for the interest-subsidy scheme. An evaluation committee headed by the chief of the unit will study the applications and recommend firms for the interest-subsidy.

Officials say the beneficiaries will be selected based on criteria like production capacity in the previous year, the number of employment generated, the percentage of local raw materials used, the percentage of exports, business continuity, and environmental impact mitigation measures adopted.

According to the ministry, 50 percent of the beneficiaries will be micro and cottage industries, while 35 percent should be small enterprises. Likewise, 15 percent of the beneficiaries should be medium-scale industries. The selected enterprises will have to sign an agreement within 15 days of selection.

Among the selected proposals, the industry receiving the highest score above 50 percent will be provided with this subsidy.

The subsidy amount will be deposited in the applicant’s bank account. For technology transfer, local units themselves will procure equipment for the selected firms.

Industries producing daily consumable goods based on domestic raw materials, industries processing and producing primary agricultural products (milk, vegetables, fruits, fish, meat, and grains), industries processing tea, coffee and spices, industries producing organic and biological fertilizers, industries processing herbs and producing Ayurvedic medicines, among others, are eligible for the program.