UP MSME Promotion Policy 2022: Capital Subsidy by Region, Eligibility and How to Apply

Uttar Pradesh's MSME Promotion Policy 2022 pays new micro, small and medium manufacturing units a capital subsidy of 10% to 25% of their investment in plant, machinery, equipment and related building, up to ₹4 crore a unit. The rate depends on your region and size. New micro units also get 50% of their loan interest back, up to ₹25 lakh over five years. You apply online to the Deputy Commissioner (Industries) of your district.

Sources checked: 20 October 2026

Facts checked on 20 October 2026 against the policy's English translation (Government Order of 28 September 2022), the Standard Operating Procedure of 12 January 2023, and Annexure 4 of the IIEPP 2022 guidelines.

Key facts

Item	What the policy says
Notified	Government Order dated 28 September 2022
In force	Five years from notification, or until a new policy is issued
Who	MSMEs under the MSMED Act in manufacturing, and manufacturing-related services such as CETPs, common facility centres and R&D or design services
Capital subsidy	15–25% in Bundelkhand and Purvanchal; 10–20% in Madhyanchal and Paschimanchal; +2% for SC, ST and women entrepreneurs; up to ₹4 crore a unit
Interest subsidy	New micro units only: 50% of interest (60% for SC, ST and women), up to ₹25 lakh over five years
Stamp duty	100% exempt in Purvanchal and Bundelkhand; 75% in Madhyanchal and Paschimanchal; 50% in Gautam Buddha Nagar and Ghaziabad; 100% anywhere for women entrepreneurs
Not paid on	Land (counted only to work out fixed capital investment, at up to 10% of it)
Overall cap	Total support cannot exceed the unit's fixed capital investment
Where to apply	Directorate of Industries portal, msme.up.gov.in

The full scheme entry, with every clause reference, is on our UP MSME Promotion Policy 2022 page.

How much capital subsidy can my unit get?

Your rate is set by two things: the region your unit is in, and whether you are a micro, small or medium enterprise. The policy calls the subsidy Investment Promotion Assistance (IPA).

Region	Micro	Small	Medium
Bundelkhand and Purvanchal	25%	20%	15%
Madhyanchal and Paschimanchal	20%	15%	10%

SC, ST and women entrepreneurs get an extra 2%. The policy counts a unit as SC, ST or women-owned when it is owned by such an entrepreneur, or when at least 51% of its share capital is held by them. The ceiling is ₹4 crore a unit.

The IPA is paid in two equal instalments. The first comes on partial progress, for example when the building is complete. The second comes once the unit reaches at least 50% of its commercial production capacity.

A worked illustration (arithmetic only, not a promise of sanction): a new micro unit in Varanasi district (Purvanchal) invests ₹60 lakh in eligible plant, machinery and related building. At 25%, the IPA works out to ₹15 lakh, paid as two instalments of ₹7.5 lakh. If the unit is women-owned, the rate is 27%, or ₹16.2 lakh. The district committee decides what counts as eligible investment.

Which districts fall in which region?

The policy uses four regions. The district list is in Annexure 4 of the State's IIEPP 2022 guidelines (Government Order of 14 April 2023):

• Bundelkhand: the seven districts of the Jhansi and Chitrakoot divisions.
• Purvanchal: the 30 districts of the Ayodhya, Gorakhpur, Prayagraj, Varanasi, Mirzapur, Azamgarh, Devipatan and Basti divisions.
• Madhyanchal: the Kanpur and Lucknow divisions.
• Paschimanchal: the Agra, Aligarh, Moradabad, Meerut, Saharanpur and Bareilly divisions.

Gautam Buddha Nagar and Ghaziabad sit in Paschimanchal. They get the Paschimanchal capital subsidy rate, but a lower stamp duty exemption (50%).

Who is eligible, and what is left out?

The policy covers new MSMEs as defined under the MSMED Act, in manufacturing or in services linked to manufacturing. The SOP of January 2023 quotes the limits then in force under the Government of India notification of 1 June 2020 (micro up to ₹1 crore investment in plant and machinery and ₹5 crore turnover; small up to ₹10 crore and ₹50 crore; medium up to ₹50 crore and ₹250 crore). Because the policy follows the MSMED Act definition as amended from time to time, use the limits in force today: from 1 April 2025, micro up to ₹2.5 crore and ₹10 crore, small up to ₹25 crore and ₹100 crore, medium up to ₹125 crore and ₹500 crore.

Four rules decide most cases:

1. Only investment made during the policy counts. The eligible investment period runs from the date of application: two years for micro units, three for small and four for medium. Commercial production must start within it. Past investment in land, or part-built construction, does not count.
2. Land is never subsidised. Up to 10% of fixed capital investment can be counted as land when working out your investment, but no IPA is paid on it. Building is also counted at up to 10% of fixed capital investment.
3. One policy per incentive head. If you take a benefit under another State policy (food processing, bio-energy, IT and so on), you cannot take the same benefit under this one.
4. Some products are excluded: tobacco, gutkha and pan masala; alcohol, aerated and carbonated drinks; firecrackers; and plastic carry bags under 40 microns or of a thickness the State has prohibited.

Existing units can claim for an expansion or diversification that raises their gross block by at least 25% and their production capacity by 25% through fresh investment, such as a new production line.

Large projects (capital investment above ₹50 crore) fall under a different policy, the UP Industrial Investment and Employment Promotion Policy 2022.

What other incentives does the policy offer?

Beyond the capital and interest subsidies, the policy reimburses:

• CGTMSE guarantee fee: the State pays the one-time guarantee fee on collateral-free bank loans of up to ₹2 crore. The SOP makes it a reimbursement: you pay the bank first, then apply online with proof of payment. (How the guarantee itself works is explained in our CGTMSE guide.)
• EPF: 100% of the employer's EPF share for five years from the start of production, for new MSMEs.
• Quality certification and testing labs (ZED, WHO-GMP, BIS-recognised and similar): 75%, 50% or 25% of cost for micro, small or medium units, up to ₹5 lakh each.
• Patents and GI registration: 75% of documentation cost, up to ₹10 lakh, paid only after the patent or GI tag is granted.
• ERP and ICT: 75% of capital cost, up to ₹1 lakh for an approved ERP system and ₹5 lakh for ICT facilities.
• Green measures: 50% of equipment cost up to ₹75 lakh for zero liquid discharge; 40% up to ₹20 lakh for clean-production plant and machinery; 75% of energy or water audit fees up to ₹50,000, plus 50% of recommended equipment up to ₹20 lakh.
• Raising equity on a stock exchange: 20% of the cost, up to ₹5 lakh.

How do I apply, step by step?

The SOP of 12 January 2023 sets out the route:

1. Register on the Directorate of Industries portal (msme.up.gov.in) and fill in the online application for each incentive on the prescribed form.
2. Attach the DPR and supporting forms online. Payments for machinery, equipment and services must be listed with their bills and vouchers.
3. Submit the forms and the DPR in four copies at your District Industries and Enterprise Promotion Centre.
4. District scrutiny: the Deputy Commissioner (Industries) examines the claim and forwards it with a recommendation.
5. Divisional approval: a committee chaired by the Additional or Joint Commissioner (Industries) of your division approves the claim.
6. State evaluation and budget: a State-level committee chaired by the Commissioner and Director of Industries technically evaluates the financial claims and seeks the budget.
7. Disbursal: the first IPA instalment after partial progress, the second after 50% of capacity is reached. The interest subsidy is claimed every year after you have paid the year's interest in full.

Which documents does the claim need?

For the capital subsidy, the SOP lists:

• A DPR verified by a chartered accountant, with head-wise financial details.
• The bank's sanction and disbursement letter, and the bank's or appraising agency's project appraisal report.
• An item-wise, value-wise list of plant, machinery and equipment, certified by a chartered accountant who has checked the purchase bills.
• A chartered engineer (civil) report on building and other construction cost, based on bills and vouchers.
• Registration or incorporation papers (partnership deed, MoA and so on); for a sole proprietor, self-signed bio-data.
• The approved building plan and a non-agricultural land certificate.
• Pollution control board and fire safety NOCs, and any other licence the project needs.
• GST registration, Factories Act registration and the Udyam Registration certificate.

For the interest subsidy: the application with the DPR, the bank's sanction and disbursement letter, and a certificate on the bank's letterhead of the interest you paid. For higher SC, ST or women rates: a chartered accountant's certificate of ownership or 51% shareholding.

What are the common mistakes?

• Buying machinery before you apply. The eligible investment period runs from the date of application, so earlier spending may not count.
• Assuming land is subsidised. It is not.
• Missing the production deadline. Production must start within two, three or four years.
• Claiming the interest subsidy for a small or medium unit. It is for micro units only.
• Taking the same incentive under two State policies.
• Weak paperwork. A DPR whose figures do not match the chartered accountant's machinery list or the bank appraisal draws queries. Our DPR Builder gives you a bank-format draft to start from.

What should I do now?

1. Find your district's region in the list above and work out your likely IPA rate.
2. Check that your product is not on the excluded list, and that you have not claimed the same benefit under another State policy.
3. Apply before you make the main investment, and plan to start production within your eligible period.
4. If your activity is your district's ODOP product, also compare the ODOP Margin Money scheme before you decide.
5. Run the free eligibility checker to see which other Central and State schemes match your project.

Not sure how your project fits, or how to put the claim file together? Ask our expert team, or see our Subsidy & DPR service. The district and divisional committees decide every claim. No consultant can promise a sanction.