MSME Sustainable (ZED) Certification Scheme: India's Propellant For Global Competitiveness

INTRODUCTION

The Indian economy in the recent years has attempted to leapfrog towards a five trillion-dollar economy by 2024-25, with India's MSME Sector forming a solid under-structure for the Country's economic bulwark, which has been fortified by an amalgamation of increased efficiency displayed by the small and medium scale industries, as well as the sagacious vision, flagged by a legion of schemes and policies, adopted by the Indian Government since the economic liberalisation in 1991. This economic bulwark, besides providing a ladder for economic growth and global competitiveness, has also retained the ability to fend off major economic adversities and economic shocks in the recent years. However, with Covid-19 Pandemic being the recent 'Cyclop' hitting this economic bulwark, India's MSME Sector has endured an unprecedented first-hand disruption in terms of both consumption as well production. Forming a substantial part of the economy, India's MSME Sector houses close to 63 million units pan India, contributing to approx. 40% of the Country's GDP from manufacturing as well as services activities, and 40% of India's gross exports¹. Nonetheless, the MSME sector has suffered the largest blow of the Pandemic in India on account of assorted constrains, including without limitation, the unorganised and heterogeneous nature of the sector, lack of skill and awareness, limited access to markets, credit facilities and socio-economic opportunities, and scarred by obsolete technology and unskilled labour. The wrath of the Pandemic inflicted upon these medium and small scale industries has driven many thwarted business owners into closure or temporarily shutting down their operations, or drowned them neck-deep into debts, hurling a blaring dent on India's economic bulwark, by attacking the very foundation, which is the MSME Sector.

Realising the indispensible need of the hour, i.e. bolstering up India's MSME Sector and extending a rehabilitation mechanism to the thwarted MSMEs by providing awareness coupled with financial and technological hand-holding support, the Indian Government has initiated an intensive drive to divert the course of economy into a production-based economy, encouraging MSMEs to create India into a global manufacturing hub by undertaking production of goods within the country, with "Zero Defects" and "Zero Effects" (ZED) on the environment, thereby placing India's MSME Sector at par with the global competitors in terms of product quality, technological innovation and service delivery, consequently contributing to overall development of the Indian Economy. The Hon'ble Prime Minister, while addressing the nation on India's 68th Independence Day urged India's MSME Sector to undertake more production activities and stated the following²:

This vision of the Indian Government gave birth to the MSME Sustainable (ZED) Certification Scheme, implementing Up-scaled Financial Support to the MSMEs, wherein the Government has approved a budget of Rupees 491.00 Crores (including a contribution of Rs. 365.00 Crores by the Indian Government) during the 12th Five-Year Plan. Vide this scheme, the Ministry of MSME, in co-ordination with the Quality Council of India, attempts to 'develop an ecosystem for ZED manufacturing in MSMEs'³ by providing the manufacturers: (a) an ease of doing business; (b) support to enhance the quality and sustainability of the manufactured products or services; and (c) adequate human resources to provide consultation, thereby paving them a way to compete in the global markets. In doing so, the scheme extends a robust mechanism to the MSMEs which includes proviso of numerous industry awareness and training programmes and workshops, assessment of products by relevant authorities and certification at different levels, hand-holding support to achieve higher certification levels with enhanced quality via upgraded technology, graded benefits and incentives to achieve higher ZED Certification and provision of a digital platform for the purpose of running PR campaigns, advertising and brand promotions.

The scheme is planned to be implemented in two phases, whereby Phase 1 shall focus on bringing on-board Manufacturing MSMEs with UDYAM Registration, and Phase 2 shall focus largely on inclusion of Service Sector MSME, including those MSMEs, not registered under UDYAM but are registered under a particular State Government System, as well as providing funding to the ZED certified MSMEs to obtain ZED certification at different levels.

Objectives: Vide this Scheme, the M/o MSMEs has proposed various Zero Effect Zero Defect (ZED) Practices, and envisages the adoption and promotion of ZED Practices by the MSMEs, enabling them equipped with the latest technology and resources for manufacturing products that are high in quality, environmentally sustainable, enhancing their productivity and enabling an increase in the exports, making them "aatmanirbhar" and ensuring a sustainable growth for the MSME Sector in the Country. Furthermore, the scheme, by way of providing support and incentives, urges the manufacturers to achieve higher levels of ZED Certifications through graded incentives, thereby ensuring an augmented quality of India-manufactured products by constantly providing resources to MSMEs to upgrade their processes. Finally, the Scheme also urges the general public to demand ZED Products through ZED Certification in order to maintain equilibrium in the demand and supply of ZED Products.

This scheme has emerged as a two-pronged strategy adopted by the Indian Government, wherein adoption of ZED Practices by the manufacturers will not only result in an increased productivity of the manufacturers and quality of the manufactured products, but also instills an enhanced environmental consciousness in the manufacturing sector to undertake manufacturing in an environment-friendly manner, thereby resulting in a substantial reduction in Industrial waste and optimal consumption of energy and natural resources, thereby leading to a sustainable growth.

ZED ACTIVITIES: AN OVERVIEW

The Scheme houses an abundance of activities, carried out in coordination with different government agencies and specialised bodies dedicated to developing a sustainable and growth-oriented ecosystem, wherein MSMEs intending to acquire certifications at various levels are extended a hand-holding support from the grass-root level of the certification process. The Government realises the limitations of Indian MSMEs in terms of lack of skill, awareness and technology, and has thus, created holistic support packages for MSMEs relevant to the requirements of the certification level they intend to achieve. Some of the major activities standard at each level carried out under the ZED Certification Scheme are as follows:

Training and Awareness: The M/o MSMEs, in consultation with various government agencies and quality facilitation councils, have laid out an extensive mechanism for extending training and awareness, which includes conducting industry awareness programmes, registration camps and workshops for providing training to both MSME as well as officials of various agencies including MSME DIs, testing and technology centres, design incubation centres etc., providing them training for a duration of up to 25 days and has also set the amount limit for the respective modes of training. Furthermore, the scheme also attempts to provide on-site training for Enterprise Capacity Building for NER, J&K and Industrially backward areas.⁴ The training activities also include provision of International Benchmarking and training related to ZED practices QMS/QTT, and provision of foreign visits by delegations etc.

Digitization of Process: The ZED certification process is fully e-enabled, which provides an online system or e-platform (MIS) comprising of web interface and online applications which facilitate the entire process of ZED certification, ranging from online handling of applications, provision of e-content for awareness and training, online assessment, data security etc. The Quality Council of India (QCI) shall be responsible for the development and management of the e-platform and take appropriate measures for data security, which shall be under the ownership of M/o MSME.

Assessment, Rating and Certification: For the purpose of carrying out assessment and rating of MSMEs at different certification levels, the QCI shall function as the governing and regulatory body, in co-ordination with the M/o MSME. The QCI shall be responsible for development of effective and comprehensive framework and guidelines including e-material for training and awareness, for both assessment agencies as well as assessors to carry out training, assessment and certification of MSMEs at each level in an efficient manner. The MSME applying for certifications at different levels shall be assessed against the assessment allocation criteria developed by QCI for the respective levels, as well as the requirements so defined in the ZED Certification Model, and shall be rated at three different levels: Bronze, Silver and Gold. Certificates shall be awarded to the MSME applying for the same considering the conformance of applicants with each parameters set out by the QCI against different levels, and in conformance with the mechanism developed by the QCI for issuing certificates

GAP Analysis and Handholding: Handholding support shall be extended to the applicants applying for Bronze Certification, wherein the applicants are eligible to receive consultancy support enabling them a rapid transition towards production of ZED products, and an additional grant of up to Rs. 5 lakhs (per MSME) out of which Rs. 3 Lakhs shall earmarked to be utilised for up-gradation of technology, and Rs. 2 Lakhs shall be used for achieving consultancy support from various consultancy organisations, which will push these MSMEs to achieve a high degree of product quality, thereby enabling them to acquire higher certification levels. Furthermore, the Ministry provides also provides handholding support for respective enterprises at a subsidized rate, providing 80% subsidy to micro enterprises, 60% to small and 50% to medium enterprises. Additionally, a subsidy of 10% is also extended to enterprises owned by women/sc/st or MSMEs in north-eastern regions, and a 5% subsidy to MSMEs which are also a part of the MSE-Cluster Development Programme of the Ministry.

ZED CERTIFICATION LEVELS AND PROCESS

MSMEs embarking on the journey to attain ZED certification at different levels can do so after taking the "ZED Pledge", thereby becoming eligible to apply for certification at the following three levels:

Eligibility: All MSMEs registered with the UDYAM registration portal (of M/o MSME)

Certification Process-flow: Post taking the ZED Pledge, every applicant shall be eligible to attain the Certification on WASH Standard and other capacity building measures through MSME KAWACH. Once taken the ZED Pledge, the applicant shall submit an undertaking to comply with all relevant regulatory and statutory measures, and conduct an online self-assessment to conform to the parameters of the certification level the applicant has applied for. In the event of non-conformity with any of the requirements or compliances, the applicant shall be given an opportunity to make good the said non-conformities within a stipulated period of time to attain eligibility for certification. The final certificates shall be issued on account of successful implementation of ZED Activities and upon observations of the assessment agencies satisfied with the compliance of the applicant with each parameter, which shall be carried out after a series of assessment and analysis, including desk assessment, site assessment and analysis as well as re-assessment.

The ZED Certification scheme encourages and urges the applicants to utilise the benefits and handholding support of the scheme to its fullest potential in order to move up the ladder of product quality and sustainability and achieve higher levels of certification.

SUBSIDIES AND INCENTIVES FOR ACHIEVING ZED CERTIFICATION

• Subsidy of Cost of Certification: The costs of certification for bronze, silver and gold certification are Rs. 10,000/-, Rs. 40,000/- and Rs. 90,000/- respectively. The MSME applying for certification at these levels are eligible to avail subsidies on the cost of certification, wherein a subsidy of 80%, 60% and 50% can be availed by Micro, Small and Medium enterprises respectively, and an additional subsidy of 10% is available to Women/SC/ST entrepreneurs and 5% subsidy to MSMEs which are also a part of the MSE-Cluster Development Programme of the Ministry. Furthermore, upon taking the ZED Pledge, a limited purpose joining reward of Rs. 10,000/- shall also be granted to the applicant, which shall be utilised within a stipulated period of time for the purposes set out in the ZED Scheme, and if the same is used for any Certification, then the cost of the reward will be first deducted from the cost of Certification and then the Subsidy may apply, if applicable, on the balance amount as per the type of the MSME.
• Incentives (Ministry of MSME): Provision of Stall Charges subject to a maximum of Rs.3.50 lakh or actual rent paid, whichever is lower, Economy class airfare subject to a maximum of Rs. 1.75 lakh or actual fare paid, whichever is lower, freight charges subject to maximum of Rs. 50,000/- + Rs. 10,000/- per MSME unit and Rs. 75,000/- + Rs. 10,000/- per MSME for Latin American Countries.
• Financial Institution Incentives: Waiver/ Reduction/Concessions on Processing Fees and Interest Rate for MSMEs provided by various financial institutions.
• State Incentives: Subsidy on technology transfer, acquisition of plant machinery/ testing equipment for adopting ZED, quality certifications or ZED Certifications, freight assistance and additional incentives for strengthening MSMEs provided by departments of various state governments.

CONCLUSION

The Ministry of MSME, in coordination and support with its partner organisations such as Quality Council of India (QCI) and various other organisations under the control and administration of M/o MSME and DC-MSME, have formulated a supremely robust mechanism and put in place such developmental strategies by way of ZED Certification scheme, that ensures a legion of benefits endowed upon the MSMEs in terms of an increased efficiency in production processes that will generate higher revenues, and create a reliable and credible market base within the country, resulting in a higher rate of exports and placing India-manufactured products in amongst the giants in the global competitive market. The adoption of ZED practices is further a sustainable way to give back to the environment by way of efficient use of natural resources, thereby limiting the negative impacts on the environment and thus, proving to be a propellant for sustainable growth and global competitiveness.

Footnotes

1. CII Micro, Medium & Small Scale Industry

2. Brief History - ZED Quality Council of India | ZED - Zero Defect Zero Effect (msme.gov.in)

3. ZED MATURITY ASSESSMENT MODEL | ZED - Zero Defect Zero Effect (msme.gov.in)

4. www.dcmsme.gov.in.

Author: Priya Sharma - a student of National Law University (Shimla), currently doing intership at Khurana & Khurana, Advocates and IP Attorney.

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