Policy Update
Aditi Natasha Bhuinyan
Background
Modern production and consumption systems have historically followed a predominantly linear economic model, in which raw materials are extracted, converted into products, consumed and then discarded as waste. This “use-and-throw-away” pattern increases pressure on natural resources and contributes to waste accumulation. To move beyond this model, the transition towards a circular economy seeks to establish a “use-and-reuse” system. It aims to eliminate waste and pollution by keeping products and materials in use for longer through reuse, repair, recycling and resource recovery.
However, the transition from a linear to a circular economic model can be particularly challenging for Micro and Small Enterprises (MSEs). The adoption of circular production practices often requires investment in new machinery, technologies and production processes, creating high upfront costs. Smaller enterprises may also face constraints in accessing institutional finance and mobilising sufficient internal resources. In addition, the transition requires technical knowledge to identify suitable technologies, redesign production processes and comply with evolving environmental requirements. Limited awareness of available technologies and financing opportunities can further restrict adoption.
Against this background, the Ministry of Micro, Small and Medium Enterprises (MoMSME) introduced the Micro and Small Enterprises Scheme for Promotion and Investment in Circular Economy (MSE-SPICE) under the Raising and Accelerating MSME Performance (RAMP) Programme. The scheme was formally launched on 20 December 2023 and is being implemented during FY 2023–24 to FY 2026–27, with a total outlay of ₹472.5 crore.
MSE-SPICE seeks to encourage MSEs to invest in circular-economy projects, particularly in activities involving waste recycling and resource recovery (Ministry of Micro, Small and Medium Enterprises [MoMSME], n.d.). Its coverage includes sectors such as plastics, rubber, electronic waste, lithium-ion batteries, solar panels, end-of-life vehicles, scrap metal, municipal solid and liquid waste, compressed biogas, gypsum, and hazardous industrial waste.
The scheme is an attempt to address both the financial and institutional barriers that can prevent smaller enterprises from adopting circular-economy practices. The scheme also seeks to support MSEs in responding to environmental requirements, including Extended Producer Responsibility (EPR) and relevant waste-recycling targets.
Functioning
To be eligible for the MSE-SPICE Scheme, an enterprise must be registered as Micro or Small Enterprise (MSE) on the Government’s Udyam portal. Medium enterprises are excluded from the scheme. The scheme supports only brownfield projects, meaning projects involving the technology upgradation, expansion or modernisation of existing operational facilities rather than the establishment of entirely new projects.
The scheme covers 11 circular-economy sectors: plastic, rubber, electronic waste, lithium-ion batteries, solar panels, end-of-life vehicles, ferrous and non-ferrous scrap metal, municipal solid and liquid waste, compressed biogas, gypsum, and toxic or hazardous industrial waste.
The MSE-SPICE Scheme provides a 25% capital subsidy on eligible plant and machinery, subject to a maximum subsidy of ₹12.5 lakh per project. Projects costing more than ₹50 lakh may also be eligible for assistance, although the subsidy remains capped at ₹12.5 lakh (MoMSME, n.d.).To ensure that assistance supports technological upgradation, the purchase of second-hand or refurbished equipment is not eligible under the scheme(MoMSME, n.d.).
The application and financing process is credit-linked. Eligible MSEs approach participating financial institutions for institutional finance for eligible investments. Once the relevant investment and financing requirements are fulfilled, eligible enterprises can receive the capital subsidy through the scheme’s implementation mechanism.
Financing is channelled through participating financial institutions, with the Small Industries Development Bank of India (SIDBI) designated as the implementing agency. A Green MSME Portal has also been developed to facilitate the processing of capital-subsidy applications and implementation and monitoring.
Beyond financial assistance, MSE-SPICE also includes an Awareness Generation and Demand Creation component for workshops and awareness programmes for MSEs and other stakeholders on circular-economy solutions. The scheme also includes an Information, Education and Communication (IEC) component aimed at addressing institutional capacity gaps and supporting implementation, monitoring and communication.
Thus, the scheme combines financial assistance with awareness and institutional-capacity building rather than relying exclusively on subsidies. This design aims to address both the financial and informational barriers that can constrain the adoption of circular-economy technologies among MSEs.
Performance
MSE-SPICE Scheme has a total outlay of ₹472.5 crore, divided into ₹450 crore for Credit Linked Capital Subsidy, ₹15 crore for Awareness Generation and Demand Creation, and ₹7.5 crore for Information, Education and Communication (IEC) (MoMSME, n.d.). Thus, approximately 95% of the total outlay is allocated to capital subsidy, reflecting the scheme’s emphasis on reducing the financial barrier to circular-economy investment.
Source: Ministry of Micro, Small and Medium Enterprises, Government of India — MSE-SPICE / MSME RAMP Portal.
Figure 1: MSE-SPICE scheme outlay by component.
The scheme aims to benefit more than 3,400 MSEs through brownfield circular-economy projects. According to the official MSE-SPICE RAMP Portal, 33 capital-subsidy applications have been received, 7 applications have been approved and 32 MSEs have been covered. The portal further reports ₹73.53 lakh in capital subsidy approved, ₹75.53 lakh in capital subsidy disbursed and ₹25.63 crore in term loans sanctioned.
The 32 MSEs covered represent approximately 0.94% of the intended target of 3,400 MSEs, while the ₹75.53 lakh in capital subsidy disbursed represents approximately 0.17% of the ₹450-crore capital-subsidy component. These figures indicate that implementation remains at an early stage relative to the scheme’s overall targets. (MoMSME, n.d.)
.
Source: Ministry of Micro, Small and Medium Enterprises, Government of India — MSE-SPICE / MSME RAMP Portal.
Figure 2: MSE-SPICE intended beneficiary target versus MSEs covered.
The portal also reports ₹25.63 crore in term loans sanctioned against ₹75.53 lakh in capital subsidy disbursed. This illustrates the credit-linked structure of the scheme. However, the mobilisation of term finance has so far involved a relatively limited number of covered enterprises.
There has also been progress in strengthening the technological base of the scheme. The MSME Annual Report 2025–26 reports that a technology deck comprising 116 circular-economy technologies had been approved.
| Indicator | Reported Figure |
| Total scheme outlay | ₹472.5 crore |
| Intended beneficiary target | 3,400+ MSEs |
| MSEs covered | 32 |
| Capital subsidy disbursed | ₹75.53 lakh |
| Term loans sanctioned | ₹25.63 crore |
| Approved circular-economy technologies | 116 |
Source: Ministry of Micro, Small and Medium Enterprises, Government of India — MSE-SPICE / MSME RAMP Portal; MSME Annual Report 2025–26
Table 1: Key MSE-SPICE Performance Indicators
Although MSE-SPICE covers 11 sectors, the available implementation data do not provide sufficient sector-wise beneficiary information to assess differences in participation across sectors. Similarly, the limited number of beneficiaries makes it difficult to assess geographical reach across states and regions.
Overall, the scheme has established its financial architecture and technology base, but the number of enterprises receiving support remains below the target of more than 3,400 MSEs.
Impact
The available evidence is not yet sufficient to quantify the impact of the scheme. Thus, its potential impacts include:
- Economic Impact
At the enterprise level, MSE-SPICE has the potential to reduce the financial barrier to adopting circular-economy technologies through its capital subsidy. By partially offsetting the cost of eligible plant and machinery, the scheme can make investments in recycling, resource recovery, reuse and waste-processing technologies more financially feasible for participating MSEs. The approval of 116 circular-economy technologies also provides a broader technological base for adoption.
- Environmental Impact
Environmental improvement is central to the rationale of MSE-SPICE. Its focus on plastics, e-waste, batteries, end-of-life vehicles, scrap metal and waste management creates potential for greater recycling, resource recovery and material efficiency. Investments supported under the scheme could potentially reduce waste sent for disposal and increase the recovery and reuse of materials.
- Regulatory Impact
MSE-SPICE also supports the wider transition towards improved waste management and compliance with relevant environmental requirements. By facilitating investment in recycling and resource-recovery capacity, the scheme can help MSEs respond to Extended Producer Responsibility (EPR) requirements and other waste-management obligations.
Emerging Issues
1. Limited Scheme Uptake
MSE-SPICE aims to benefit more than 3,400 MSEs, while the available implementation data indicate a much smaller number of enterprises receiving support. This suggests the need to examine whether eligible MSEs are sufficiently aware of the scheme and whether the application and financing processes are accessible to smaller enterprises.
2. Financing Constraints
The subsidy covers only part of investment costs, requiring MSEs to mobilise the remaining capital through institutional finance or their own resources. Circular-economy investments can involve significant expenditure on specialised machinery and technology, which may be difficult for smaller firms with limited access to formal credit. Access to complementary credit therefore remains important.
3. Awareness and Technical Capacity
The transition to circular production requires more than financial assistance. MSEs may need support in identifying appropriate technologies, preparing investment proposals, understanding environmental requirements and operating new equipment. Ensuring that awareness and technical support reach enterprises beyond major industrial centres remains a challenge.
4. Monitoring of Environmental Outcomes
Existing reporting provides information on implementation but limited evidence on actual environmental outcomes. Indicators such as the quantity of waste processed, materials recovered, raw materials conserved, energy saved and emissions avoided would provide a better assessment of the scheme’s environmental outcomes.
5. Challenges in Outreach and Sectoral Coverage
Different circular-economy sectors have different technological, financial and regulatory requirements. Effective implementation therefore requires sector-specific handholding and stronger coordination among SIDBI, participating financial institutions, State Governments, industry associations and MSE clusters.
Way Forward
To strengthen the effectiveness of MSE-SPICE, the focus should move beyond providing financial assistance towards improving access to finance, technical support and measurable circular-economy outcomes.
1. Strengthen Awareness and Last-Mile Outreach
Awareness of MSE-SPICE can be expanded through MSME Development and Facilitation Offices, State Governments, industry associations and MSE clusters. Outreach should particularly target enterprises operating in the sectors covered by the scheme and provide clear information on eligibility, financing procedures, available technologies and environmental compliance requirements.
2. Provide Greater Technical Handholding
Financial support alone may not be sufficient for MSEs unfamiliar with circular-economy technologies. Dedicated technical assistance can help enterprises identify appropriate technologies, prepare project proposals, assess investment requirements and understand regulatory requirements. The approved repository of 116 circular-economy technologies can serve as a useful basis for such handholding.
3. Improve Access to Complementary Finance
Since the subsidy covers only part of the eligible plant and machinery costs, greater coordination with participating financial institutions and other MSME financing mechanisms can help enterprises mobilise the remaining capital. Simplifying the linkage between subsidy applications and institutional credit could also reduce barriers for smaller enterprises.
4. Introduce Outcome-Based Monitoring
In addition to tracking applications, approvals and subsidy disbursement, the scheme could monitor indicators such as waste processed, materials recovered, raw materials conserved, energy saved and emissions avoided. Such indicators would make it easier to assess whether financial support is translating into measurable circular-economy benefits.
5. Strengthen Convergence Across Green MSME Initiatives
Greater convergence between MSE-SPICE and other initiatives supporting the greening of MSMEs, including MSE-GIFT and related green-financing and technology-support programmes, could reduce fragmentation and provide enterprises with a more integrated support system. Coordination among the Ministry of MSME, SIDBI, financial institutions, State Governments and industry bodies can further strengthen implementation.
Overall, the long-term effectiveness of MSE-SPICE will depend on its ability to translate financial assistance into sustained adoption of circular-economy practices at the enterprise level. Strengthening awareness, improving access to finance and technical support, and establishing outcome-based monitoring can help the scheme move beyond individual investments towards wider and measurable economic and environmental benefits.
References
- Ministry of Micro, Small and Medium Enterprises, Government of India. (n.d.). MSE-SPICE, MSME RAMP Portal.
https://ramp.msme.gov.in/ramp/RAMP-initiative/mse-spice/mse-spice - Ministry of Micro, Small and Medium Enterprises, Government of India. (n.d.). MSE-SPICE scheme guidelines / SIDBI circular.
https://msme.gov.in/sites/default/files/SIDBICircularMSESPICEEnglish.pdf - Ministry of Micro, Small and Medium Enterprises, Government of India. (2026). Annual report 2025–26.
https://msme.gov.in/sites/default/files/MSMEANNUALREPORT2025-26ENGLISH_0.pdf - Ministry of Micro, Small and Medium Enterprises, Government of India. (n.d.). MSME dashboard: SPICE.
https://dashboard.msme.gov.in/ - Press Information Bureau, Ministry of Micro, Small and Medium Enterprises. (2024, December 16). MSE-SPICE scheme.
https://www.pib.gov.in/PressReleasePage.aspx?PRID=2084812 - NITI Aayog. (2026, January). Roadmap for green transition of MSMEs.
https://www.niti.gov.in/whats-new/roadmap-green-transition-msmes - NITI Aayog. (2026, January). Advancing circular economy of waste electronic and electrical equipment (e-waste) and lithium-ion batteries in India.
https://www.niti.gov.in/whats-new/advancing-circular-economy-waste-electronic-and-electrical-equipment-e-waste-and-lithium - NITI Aayog. (2026, January). Achieving efficiencies in MSME sector through convergence of schemes.
https://www.niti.gov.in/whats-new/achieving-efficiencies-msme-sector-through-convergence-schemes
About the Contributor
Aditi Natasha Bhuinyan is an Economics postgraduate from the Delhi School of Economics, University of Delhi, with research interests in public policy, development economics, governance and environmental sustainability. With experience in empirical analysis and data-driven research, she is keen to explore how evidence-based research can inform policy solutions to contemporary development challenges.
Acknowledgments
The author sincerely expresses gratitude to the reviewers Sneha Kohli and Sandra Menon, and the IMPRI team for their expert guidance and constructive feedback throughout the process.
Disclaimer
The views and opinions expressed in this article are solely those of the author and do not necessarily reflect the views, policies, or positions of IMPRI (Impact and Policy Research Institute) or any other affiliated organisation.
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