Motivation of Entrepreneurs and Financial Assistance for Rehabilitation of Sick Industries

What is the sick industries rehabilitation scheme in Puducherry?

Motivation of Entrepreneurs and Financial Assistance for Rehabilitation of Sick Industries is a scheme of the Industries and Commerce Department, Union Territory of Puducherry. The scheme addresses a narrow but real problem: a micro or small enterprise that has slipped into sickness usually cannot afford the very things that would tell it how to recover, a proper diagnostic study, expert advice on technology, marketing or finance, and affordable additional working capital. Puducherry's scheme subsidises all three.

According to the scheme guidelines published by the Industries and Commerce Department, the assistance has three distinct arms:

The interest subsidy is by far the largest arm: up to Rs 9,00,000 over three years — and it is paid through the financial institution, not into the entrepreneur's hands. For this scheme, financial institution means PIPDIC or any other government corporation, and scheduled banks including co-operative banks.

Applications are accepted offline only, in the prescribed form printed from the Directorate of Industries and Commerce, Puducherry.

Who is eligible for rehabilitation assistance?

Units that can claim:

• MSME units that hold Udyog Aadhaar Memorandum, Entrepreneurs Memorandum Part-II or permanent registration. Registration is the first gate; an unregistered workshop cannot claim.
• Units that meet the scheme's definition of a "sick" industrial enterprise. The scheme states that sickness is defined as follows at present and is revised as per RBI guidelines from time to time:
• a continuous decline in gross output compared with the previous two financial years;
• a delay of more than 12 months in repaying a loan taken from institutional sources;
• erosion in net worth due to accumulated losses to the extent of 50% of net worth during the previous accounting year.
• Other firms taking over a sick unit for rehabilitation, who are expressly made eligible.

Who is not eligible:

• Individuals seeking a personal benefit. This is an enterprise-level industrial assistance and individuals cannot apply for a personal payment.
• Large industries outside the MSME definition, since the eligibility condition is framed around UAM, EM Part-II or permanent MSME registration.
• Units in temporary difficulty that do not meet any of the three sickness tests. A single bad quarter is not sickness under this scheme.
• Units with no institutional finance at all, for the interest subsidy arm specifically, since that arm operates on additional finance disbursed by banks or financial institutions.
• Claims for study or consultancy that were not initiated through a financial institution, bank or government, for the diagnostic study arm.

What documents are required?

Because sickness is proved from accounts, the quality of the audited statements decides most of these claims. A unit with incomplete books will struggle to show either the output decline or the 50% erosion of net worth.

How to apply for rehabilitation assistance in Puducherry

1. Take a print of the prescribed form from the Directorate of Industries and Commerce, Puducherry. The form is the standard application used for financial assistance under this scheme.
2. Fill in all mandatory fields, stating clearly which of the three sickness tests the unit meets and which of the three assistance arms is being claimed. A unit may claim more than one arm.
3. Attach copies of all mandatory documents; registration, three years of audited accounts, the loan account statement, and the study report, consultancy bills or rehabilitation finance sanction letter relevant to the arm claimed.
4. Submit the duly filled and signed application to the Director of Industries, either in person at the Directorate of Industries and Commerce, Industrial Estate, Thattanchavady, Puducherry 605009, or by post.
5. Request a receipt or acknowledgement from the concerned authority at the Directorate and note the file number recorded on it.

The State Level Committee then goes into the merits of each case and decides whether the unit qualifies for the grant of financial assistance.

How the three arms work in practice

Diagnostic study. The study has to be conducted by a technical institution and initiated through a financial institution, bank or the government, a study a unit commissions privately on its own initiative does not fit the wording. Half the cost comes back, capped at Rs 50,000.

Expert fees. The reimbursement is tied to implementing the suggestions given by experts in technology, marketing and finance engaged to advise the sick unit. A report that is paid for but never acted on is not the intent of this arm. The ceiling is Rs 50,000 per unit.

Interest subsidy. This applies to additional finance disbursed for rehabilitation, not to the original defaulted loan. It runs at 5% per annum, limited to Rs 3,00,000 per year, for three years, and is routed through the lender. In practice the lender adjusts the subsidy against interest debited to the rehabilitation account.

How to check the status of your application

1. Quote the file number from your Directorate acknowledgement.
2. Contact the Directorate of Industries and Commerce at +91-413-2248476, 2248168 or 2248320 and ask whether the case has been listed before the State Level Committee.
3. For the interest subsidy arm, follow up in parallel with the branch that sanctioned the rehabilitation finance, because the credit appears in the loan account rather than in the unit's current account.
4. Units in Karaikal can approach the Assistant Director at the Rural Industrial Estate, Kottucherry, on +91-4368-265438; Yanam on +91-884-2321257; Mahe on +91-490-233235.

Common reasons claims are rejected

• Sickness not established on the scheme's own tests. Losses alone are not enough; the file must show output decline over two years, a 12-month repayment delay, or 50% net worth erosion.
• No MSME registration in the name of the unit claiming.
• Diagnostic study not initiated through a bank, financial institution or government, which takes it outside the wording of the first arm.
• Expert fees claimed without evidence that the suggestions were implemented.
• Interest subsidy claimed on the original loan rather than on additional rehabilitation finance.
• Audited accounts missing or unsigned for one of the three years.
• Takeover cases filed without the takeover agreement, so the applicant's standing is not made out.

Where to complain if the file is stuck

Grievances are taken through the Industries and Commerce Department's grievance redressal mechanism at industry.py.gov.in/grievance-redressal-mechanism. Beyond that, the Director of Industries and Commerce at Thattanchavady, and the Secretary to Government (Industries and Commerce) at the Chief Secretariat, Puducherry 605001, phone +91-413-2336115, are the escalation points.

Because sickness cases are time-sensitive, it is worth filing the application as soon as the audited accounts for the relevant year are ready rather than waiting for the rehabilitation package to be fully tied up.