Global Scenario
Micro, Small & Medium Enterprises (MSMEs) play a crucial role in the global economy, particularly in developing countries. MSMEs represent about 90% of businesses and provide more than 50% of employment worldwide. Formal MSMEs contribute up to 40% of GDP in emerging economies. These numbers are significantly higher when informal MSMEs are included (UNCTAD, 2020). Yet the vast majority of MSMEs tend to be less productive and more vulnerable to crises than large enterprises. Improving the productivity of MSMEs can lead to more resilient jobs and faster-growing economies as the estimates indicate that halving the global productivity gap between SMEs and large companies would amount to about USD 15 trillion in corresponding value-added, or roughly 7% of global GDP (McKinsey, 2020).
Indian landscape
Micro, Small & Medium Enterprises (MSMEs) are considered the pillars of the Indian economy due to their significant contribution to GDP, Exports and Employment Generation. India has over 63 million MSMEs, contributing about 30 per cent of the country’s total GDP; 40 per cent of its manufacturing output; and close to 50 per cent of its total exports. Employing over 110 million people, MSMEs form an integral part of the Indian economy. However, 99% of the enterprises remain micro during their life cycle. MSME sector is plagued with low productivity, low technology levels, lack of efficiency, and limited means, which lead to poor competitiveness in the global sphere. Understanding the challenges posed by increased globalization, the Government of India launched ZED Scheme to improve the productivity, performance and global competitiveness of MSMEs.
Brief History of Zero Defect & Zero Effect (ZED) Scheme
The ZED scheme was first unveiled by the Prime Minister of India in 2016 as part of the government’s flagship Make in India programme. It indicates high quality manufacturing with a minimal negative impact on the environment. The ZED model aims to make aware, assess & certify, counsel, and handhold MSMEs and ensure that they rise up the ZED ladder, thus enhancing their competitiveness in the global marketplace and making them self-reliant.
Difference between the previous scheme and the new scheme launched in 2022
In the revamped ZED scheme known as MSME Sustainable (ZED) Certification, the following changes have been made which are valid until March 31, 2026: 1. Parameters - The total number of parameters that must be met for certification is now 20, as compared to 50 before. 2. Subsidies – Apart from a Subsidy of 80-60-50% on the cost of ZED certification for Micro, Small & Medium Enterprises, an Additional Subsidy of 10% will be provided to MSMEs owned by Women/SC/ST Entrepreneurs or MSMEs in NER/Himalayan / LW E / Island territories /aspirational districts in the new scheme. Further, MSMEs that are also a part of the SFURTI or Micro & Small Enterprises - Cluster Development Programme (MSE-CDP) of the Ministry will receive an added subsidy of 5%. 3. Validity - The ZED Rating provided under the previous scheme was valid for 4 Years. However, in the new scheme, the ZED Certificate is valid for 3 years only. 4. Upgradation - MSMEs can upgrade to a higher level of certification at any time within the validity of their certificate under the new scheme. The charges toward upgradation and the subsidy applicable will remain unchanged. 5. Financial benefits – In the new scheme, an INR 10,000 ‘joining reward’ will be offered to MSMEs taking up the ZED pledge, which needs to be utilized within 1 year. MSMEs will also be eligible for upto INR 5 Lakh for handholding and consultancy support to help them achieve ZED status. They will also be provided with exemptions from bank processing fees and benefit from low interest rates.
Introduction
As the MSMEs are amongst the strongest drivers of economic development, innovation and employment, it becomes very important to strengthen their ecosystem. The vision of Zero Defect & Zero Effect (ZED) initiative is to enhance the competitiveness of MSMEs, make them sustainable and transform them as National and International Champions. The ZED Certification aims at enhancing the competitiveness of an MSME through assessment, modification, handholding, managerial and technological intervention, so it is not just a Certification.
About MSME Sustainable (ZED) Certification
MSME Sustainable (ZED) Certification is an extensive effort to raise awareness and facilitate MSMEs adopt Zero Defect Zero Effect (ZED) practices and motivate & incentivise them to pursue ZED certification, and encourage them to become 'MSME Champions'. The Zero Defect Zero Effect (ZED) Certification Scheme can help MSMEs to reduce wastages substantially, improve the productivity and performance, increase environmental consciousness, save energy, use natural resources optimally and enhance global competitiveness. This Scheme is proposed to be implemented in 2 Phases. PHASE 1 - MANUFACTURING MSMEs For Manufacturing MSMEs with UDYAM Registration. In this phase focus will be on maximizing inclusion of manufacturing MSMEs and taking them through the journey of ZED PHASE 2 - SERVICE SECTOR MSMEs Inclusion of Service Sector MSMEs In this phase efforts will also be made to integrate those MSMEs (manufacturing and Service Sectors) who are registered under a State Government system but not on UDYAM. In phase 2, funding will also be provided to the ZED Certified MSMEs to obtain international certifications like CE and others, as necessary for international market and further provisions will be made to align ZED Certification with the international certifications for its global acceptance.
Scheme Validity
The financial support, incentives, benefits & other provisions contained in the scheme will be valid till March 31, 2026.
Objectives of the Scheme
The ZED Certification aims at promotion of Zero Defect Zero Effect (ZED) practices amongst MSMEs so as to: • Encourage and enable MSMEs for manufacturing of quality products using latest technology, tools & to constantly upgrade their processes for achievement of high quality and high productivity with the least effect on the environment • Develop an Ecosystem for ZED Manufacturing in MSMEs, for enhancing competitiveness and enabling exports • Promote adoption of ZED practices and recognising the efforts of successful MSMEs • Encourage MSMEs to achieve higher ZED Certification levels through graded incentives • Increase public awareness on demanding Zero Defect and Zero Effect products through the MSME Sustainable (ZED) Certification • Identify areas to improve upon, thereby assisting the Government in policy decisions and investment prioritization
MSME Sustainable (ZED) Certification Components
1. Industry Awareness Programmes /Workshop: MSMEs will be made aware of the MSME Sustainable (ZED) Certification through nation-wide awareness programmes and workshops in physical and/or online mode. 2. Training Programmes: Stakeholders like the MSME Officers, Assessors and Consultants will be provided training on the MSME Sustainable (ZED) Certification for effective implementation by partners like QCI, BIS, NPC. 3. Assessment & Certification: MSMEs will be assessed through desktop verification, remote assessment, onsite assessment as applicable and awarded relevant Certification Level. 4. Handholding: Handholding support will be provided to MSMEs to help them achieve higher ZED Certification levels and for technology upgradation to move towards zero effect solutions/pollution control measures/cleaner technology. 5. Benefits/Incentives: Graded incentives will be available for MSMEs to motivate them to achieve higher ZED Certification Level. These incentives also include assistance to MSMEs in their preparedness to mitigate COVID 19 risks, called MSME KAWACH (Knowledge Acquisition through WASH for an Accelerated COVID-19 Handling) which is based on the WASH (Workplace Assessment for Safety & Hygiene) Standard. 6. PR campaign, Advertising & Brand Promotion: Nation-wide publicity will be done for popularizing the MSME Sustainable (ZED) Certification and Brand Promotion of ZED. 7. Digital Platform: A single window digital platform will be available for MSME Sustainable (ZED) Certification process.
ZED Certification Levels
MSME Sustainable (ZED) Certification can be attained in THREE Levels after registering and taking the ZED Pledge: Certification Level 1: BRONZE Certification Level 2: SILVER Certification Level 3: GOLD By taking the ZED Pledge, MSMEs are making a serious commitment to uphold the Zero Defect Zero Effect values in their practices.
Eligibility
All MSMEs registered with the UDYAM registration portal will be eligible for MSME Sustainable (ZED) Certification and related benefits.
MSME Sustainable (ZED) Certification Model
The ZED Certification model has been developed for the manufacturing sector. The Model brings together the best practices in an integrated, comprehensive way to assist MSMEs in adopting the systems that would enable them to start the ZED journey while improving their competitiveness and sustainability. MSMEs can apply for certification at any of the following three levels: Certification Level 1: BRONZE (5 Parameters) Certification Level 2: SILVER (14 Parameters) Certification Level 3: GOLD (20 Parameters) An organization applying for a particular certification level i.e., Bronze/Silver/Gold under the MSME Sustainable (ZED) Scheme will be assessed on the following parameters, as applicable: S. No. Parameters 1. Leadership 2. Swachh Workplace 3. Occupational (Workplace) Safety 4. Measurement of Timely Delivery 5. Quality Management 6. Human Resource Management 7. Daily Works Management 8. Planned Maintenance & Calibration 9. Process Control 10. Product Quality & Safety (Testing / Certification) 11. Material Management 12. Energy Management 13. Environment Management 14. Measurement and Analysis 15. Supply Chain Management 16. Risk Management 17. Waste Management (Muda, Mura, Muri) 18. Technology Selection & Upgradation 19. Natural Resource Conservation 20. Corporate Social Responsibility The Model also allow exemption(s) from assessment on relevant parameter(s) for the MSMEs with existing Certifications as specified in the scheme, like ISO 9001, ISO 14001, ISO 45001 etc. Note: 1. Exemptions shall be allowed on the relevant parameters, only if the ISO certifications are awarded under the National Accreditation Body of India (NABCB) or by an Accreditation Body which is signatory to the respective Multilateral Recognition Arrangement (MLA) of International Accreditation Forum (IAF). 2. Exemptions shall be allowed on the relevant parameters, only if the Lean certification is obtained from the Implementing agencies under the MSME Competitiveness (Lean) Certification Scheme of Ministry of MSME.
Stakeholders:
Ministry of MSME, Quality Council of India (QCI), Organizations under the administrative control of MoMSME & the office of DC-MSME, Bureau of Indian Standards (BIS), State Governments. Ministry of MSME will identify and partner with Implementing Agencies such as BIS, NPC, Industry Associations.
Key Benefits:
Cost of Certification • Certification Level 1: BRONZE: Rs. 10,000/- • Certification Level 2: SILVER: Rs. 40,000/- • Certification Level 3: GOLD: Rs. 90,000/- Subsidy on cost of ZED certification: • Joining Reward of Rs. 10,000/- (Bronze will become free if availed) • 80-60-50% for Micro, Small & Medium Enterprises Additional subsidy: • 10% for Women/SC/ST owned MSMEs OR MSMEs in NER/Himalayan/LWE/Island territories/aspirational districts. • 5% for MSMEs which are also a part of the SFURTI OR Micro & Small Enterprises - Cluster Development Programme (MSE-CDP) of the Ministry. Financial Assistance in Testing/Quality/Product Certification: Up to 75% of the total cost of Testing/Certification, with the maximum ceiling of subsidy being Rs.50,000/-. Handholding Support: Up-to Rs.2 lakhs for consultancy for all ZED certified MSMEs. Support in Technology Upgradation for Zero Effect Solutions: Up-to Rs. 3 lakhs for all ZED certified MSMEs. MSME KAWACH Certification: After taking ZED Pledge, MSMEs can avail support for their preparedness to mitigate COVID 19 risks after obtaining Certification based on WASH Standard. Graded incentives: MSMEs can avail graded incentives as prescribed for the three ZED Certification Levels. Wherever possible, the incentives provided by States will be linked through API integration with the ZED portal to ensure interoperability.
Incentives:
Offered by Other Ministries/Departments/Institutions Banks: Concession in Processing Fees and Rate of Interest, Preference in Lending. Railways: Discount in freight rates for parcels States/UTs: Incentives by States/UTs like - Quality Certification Subsidy, Capital Subsidy Scheme etc. Ministry of MSME Digital MSME Scheme - Access to Digital MSME Bronze/Silver/Gold Subscription for Bronze/Silver/Gold ZED certified MSMEs. International Cooperation (IC) Scheme – More Reimbursement for Stall Charges, Airfare and Freight charges provided to ZED certified MSMEs. Credit Bureaus Incorporating ZED Certification as a parameter in its rating mechanism.
Validity Of ZED Certificate
The ZED Certificate will be valid for a period of 3 years.
Surveillance
A Surveillance assessment will be conducted after 18 months of Certification of those MSMEs which have achieved Silver & Gold Certification levels. The cost of the Surveillance assessment will be as under: ZED Silver Level: Rs. 10,000/- ZED Gold Level: Rs. 20,000/- The MSMEs will be given subsidy for the surveillance assessment - 80-60-50% for Micro, Small & Medium Enterprises.
Renewal of ZED Certificate
After the expiry of the validity of the ZED Certificate, MSMEs can go for Renewal of their ZED Certification level in order to continue availing associated benefits/incentives.
How to apply:
Eligible MSMEs shall apply through online portal www.zed.msme.gov.in