Interest Subsidy (For Micro, Small, Medium and Large New Industries) under Motivation of Entrepreneurs to Start Industries and Fiscal Assistance to Industries

What is the Interest Subsidy for new industries in Puducherry?

Interest Subsidy is a component of the incentive package "Motivation of Entrepreneurs to Start Industries and Fiscal Assistance to Industries, Various Incentives", run by the Industries and Commerce Department, Union Territory of Puducherry. The package was framed under the New Industrial Policy 2016 and the present set of incentives came into force with effect from 1 April 2017, covering the whole Union Territory, Puducherry, Karaikal, Mahe and Yanam.

The component works on a simple principle. An industrial unit that borrows to build a factory, buy machinery or fund its working capital pays interest every year, and that interest is a real drag on a young unit's cash flow. Under this incentive the Union Territory reimburses 25 per cent of the annual interest amount paid, subject to a ceiling of Rs 5,00,000 per annum.

The subsidy is admissible from the date of commencement of commercial production, and runs for five years in the Puducherry and Karaikal regions and seven years in Mahe and Yanam. The longer window for Mahe and Yanam reflects the standard treatment of those two smaller, geographically separated regions across the whole Puducherry incentive package.

Who is eligible for the Interest Subsidy?

Your unit can claim if:

• Your unit is a micro, small, medium or large industry in the Union Territory of Puducherry. This component is not restricted to MSMEs.
• The investment was made on or after 1 April 2017.
• Your unit has availed a loan from a financial institution; PIPDIC, any other government corporation, a scheduled bank or a co-operative bank.
• The loan is towards the creation of fixed assets and/or working capital.
• Your unit gives at least 60 per cent of its total employment to people of the Union Territory of Puducherry, maintained for the period specified in the affidavit filed with the claim.
• You undertake not to transfer or dispose of the fixed assets, including plant and machinery, until five years from the date of application or of disbursement, whichever is later.

Additional investments made after the first claim are also eligible for subsidy, up to the ceiling limit.

You are not eligible, and cannot apply, if:

• Your unit is self-financed with no institutional loan. The subsidy is calculated on interest actually paid to a financial institution, so a unit with no borrowing has nothing to claim.
• Your borrowing is from a moneylender, a private individual or a non-recognised lender rather than from PIPDIC, a government corporation, a scheduled bank or a co-operative bank.
• The investment predates 1 April 2017, placing it outside the current order.
• Your unit's local employment is below 60 per cent of total strength.
• You are an individual seeking a personal loan subsidy. This is an industrial incentive attached to a registered industrial unit, not a retail interest subvention scheme.
• The claim window has closed, see the deadline section below.

If two or more industrial undertakings are set up by the same proprietor, common partners or a common board of directors or shareholders, they are treated as separate entities for the subsidy, provided their locations are different and their licences, clearances and registrations are held separately.

How much interest subsidy is paid?

The subsidy is released through the financial institution, so it reaches the unit as a credit against the loan account or as funds applied to additional fixed assets or working capital. It is not handed over as free cash. The Government of Puducherry periodically issues expenditure sanction orders granting interest subsidy to batches of industrial units in the Puducherry region, and those orders are published on py.gov.in.

What documents are required?

How to apply for the Interest Subsidy

1. Obtain the common application form for subsidies published by the Directorate of Industries and Commerce, Puducherry, at industry.py.gov.in/common-application-subsidies.
2. Collect the interest evidence from your lender, a certificate or loan account statement showing exactly how much interest was debited and paid in the financial year you are claiming for. This is the figure on which the 25 per cent is worked out, so an approximate statement will hold up the claim.
3. Fill the form completely and attach self-attested copies of the loan sanction letter, interest statement, commencement of production certificate, unit registration, local-employment affidavit and the declaration that no other agency has subsidised the same loan.
4. Submit the signed application to the Directorate of Industries and Commerce at Industrial Estate, Thattanchavady, Puducherry 605009, or to the regional office at Kottucherry in Karaikal, or the Civil Station offices in Yanam and Mahe.
5. Take an acknowledgement showing the date and time of submission and a reference number.
6. Repeat the claim each year for which the subsidy is admissible. The incentive runs for five or seven years, but it is paid against interest actually paid in each year, so the claim is annual rather than one-time.

What happens after you apply?

The Directorate of Industries scrutinises the claim on merit to determine the quantum of subsidy admissible, and the case is then placed before the State Level Committee. The Committee examines each case on its merits, decides whether the unit qualifies for the incentive, and recommends the amount. Sanction is issued as a formal expenditure sanction order and the money is routed through the lending institution.

By when must the claim be filed?

• New units: within one year of obtaining Entrepreneurs Memorandum Part-II, permanent registration, or the commencement of production certificate.
• Existing units — within one year of completing expansion, diversification or modernisation.

There is no annual advertisement or single closing date for the package; the window is tied to your own unit's milestones.

Common reasons interest subsidy claims fail

• No interest certificate from the bank, so the 25 per cent cannot be computed.
• Loan used for a purpose outside fixed assets and working capital, such as refinancing an unrelated liability.
• Commencement of production date not documented, which makes the start of the five- or seven-year period impossible to fix.
• Local employment below 60 per cent, or the affidavit missing.
• Claim filed after the one-year window.
• Assets disposed of within the five-year lock-in, which can trigger recovery of subsidy already paid.

Other incentives you may claim alongside

The same umbrella package offers capital investment subsidy on land, building, plant and machinery, reimbursement of net SGST for five to seven years, 100 per cent stamp duty exemption on purchase, lease, mortgage and hypothecation of land and buildings, a power subsidy of 50 paise per unit, generator subsidy of 50 per cent up to Rs 5 lakh, employment or wage subsidy, quality certification subsidy, technology acquisition assistance and market development support. All are claimed on the same common application form, and the department's fast track single window system undertakes to issue industrial permissions, licences, clearances and no objection certificates within 30 days of application.

Help and grievance redressal

• Directorate of Industries and Commerce, Industrial Estate, Thattanchavady, Puducherry 605009 to +91-413-2248476, 2248168, 2248320
• Karaikal; Assistant Director, Rural Industrial Estate, Kottucherry; +91-4368-265438
• Yanam: +91-884-2321257; Mahe: +91-490-233235
• Grievance redressal; industry.py.gov.in/grievance-redressal-mechanism

How to check your application status

The Interest Subsidy claim does not have an online tracking dashboard, so status has to be confirmed directly with the office where the claim was filed.

• Use your acknowledgement reference. Every claim submitted at the counter is given an acknowledgement slip with a date and reference number. Quote this number in any follow-up, whether by phone, letter or in person, since claims are tracked manually against this reference rather than a portal login.
• Call the office that received your claim. For claims filed in Puducherry region, contact the Directorate of Industries and Commerce at Industrial Estate, Thattanchavady on +91-413-2248476, 2248168 or 2248320. For Karaikal, call the Assistant Director at the Rural Industrial Estate, Kottucherry on +91-4368-265438. For Yanam, call +91-884-2321257, and for Mahe, +91-490-233235.
• Ask specifically where the file stands. A claim moves through three broad stages: scrutiny by the Directorate to work out the eligible quantum, review by the State Level Committee, and, once recommended, issue of the expenditure sanction order. Asking which of these three stages your file is at gives a clearer answer than a general "has it been approved" question.
• Watch for the expenditure sanction order. Sanctioned claims are notified through periodic expenditure sanction orders issued by the Government of Puducherry, and these are published on py.gov.in. A unit can check whether its name appears in a recent order as independent confirmation that the claim has been cleared.
• Follow up in writing if a call does not resolve it. A written reminder addressed to the Directorate, referencing the acknowledgement number and the date of submission, creates a paper trail and is useful if the claim needs to be escalated.
• Use the grievance redressal channel for unresolved delays. If the claim has been pending well beyond a reasonable processing time with no response from the regional office, raise it through the department's grievance redressal mechanism at industry.py.gov.in/grievance-redressal-mechanism rather than only repeating phone calls.
• Confirm disbursal with your lender, not just the Directorate. Since the subsidy is routed through the financial institution rather than paid directly to the unit, the bank or PIPDIC loan account is the place to confirm that a sanctioned subsidy has actually been credited or adjusted against the loan.