Which of the following fact is not correct about Mukhya Mantri Laghu Udhyog Protsahan Yojana (MLUPY) of Rajasthan ?

Correct — option (1), Under this scheme, 4 percent interest subsidy on loans upto 15 crore is being provided to small scale entrepreneurs.

The stem asks for the fact that is NOT correct. Rajasthan's Economic Review 2022-23 lists the scheme's slabs: "8 per cent interest subsidy on loans upto ₹25 lakh, 6 per cent interest subsidy on loans upto ₹5 crore and 5 per cent interest subsidy on loans upto ₹10 crore".

Options (2), (3) and (4) each match one of those three slabs.

Option (1) matches none of them. The Review says the scheme provides loans "upto ₹10 crore" through financial institutions, so a ₹15 crore slab falls outside it, and 4 per cent is not one of its subsidy rates.

The idea to remember: 8 per cent up to ₹25 lakh, 6 per cent up to ₹5 crore, 5 per cent up to ₹10 crore. As the loan size rises, the subsidy rate falls.

Why the others are wrong

• (2)
  Under this scheme, 5 percent interest subsidy on loans upto 10 crore is being provided to small scale entrepreneurs. — This is a correct fact, so it cannot be the answer. 5 per cent on loans up to ₹10 crore is the top slab the Economic Review 2022-23 gives for the scheme.

  ₹10 crore is also the ceiling: the Review describes the scheme as providing loans up to ₹10 crore through financial institutions.

• (3)
  Under this scheme, 6 percent interest subsidy on loans upto 5 crore is being provided to small scale entrepreneurs. — This is a correct fact. The middle slab in the Economic Review 2022-23 is 6 per cent on loans up to ₹5 crore.

  It sits between the 8 per cent rate for the smallest loans and the 5 per cent rate for loans up to ₹10 crore.

• (4)
  Under this scheme, 8 percent interest subsidy on loans upto 25 lakh is being provided to small scale entrepreneurs. — This is a correct fact. The highest rate, 8 per cent, applies to loans up to ₹25 lakh, the smallest slab.

  The Review notes one sector-specific top-up: under the Rural Tourism Scheme, 2022, rural tourism units are eligible for 9 per cent instead of 8 per cent on loans up to ₹25 lakh under this scheme.

An interest subsidy is a government payment that covers part of the interest a borrower owes, so the enterprise's effective cost of credit is lower than the bank's rate.

Mukhyamantri Laghu Udyog Protsahan Yojana (MLUPY) uses such subsidies to help small entrepreneurs borrow. The Economic Review 2022-23 says it supports setting up new enterprises in manufacturing, service and trade, and expansion, modernisation and diversification of existing ones.

The subsidy is graded by loan size: the smaller the loan, the higher the rate. The Review's service-sector chapter adds that the 8 per cent subsidy covers working capital as well as term loans.

Key facts

• Economic Review 2022-23: MLUPY was notified and commenced from 13 December 2019.
• Interest subsidy slabs: 8 per cent on loans up to ₹25 lakh, 6 per cent up to ₹5 crore, 5 per cent up to ₹10 crore.
• The scheme provides loans up to ₹10 crore through financial institutions for new and existing enterprises in manufacturing, service and trade.
• In 2022-23 (up to December 2022), ₹1,200.47 crore of loans were disbursed to 6,566 entrepreneurs under MLUPY.
• Under the Rural Tourism Scheme, 2022, rural tourism units get 9 per cent instead of 8 per cent on loans up to ₹25 lakh under MLUPY.

Common traps

• The rates fall as loan size rises. Pairing 5 per cent with the ₹25 lakh slab, or 8 per cent with ₹10 crore, produces a false statement from true numbers.
• Overlooking the ceiling: the Economic Review 2022-23 describes MLUPY loans as up to ₹10 crore, so a ₹15 crore slab falls outside the scheme as the Review describes it.
• The 9 per cent figure is not a general MLUPY slab. It applies to rural tourism units on loans up to ₹25 lakh, under the Rural Tourism Scheme, 2022.

UnlockIAS compared this question with questions from other RAS Prelims papers and found none similar enough to link.

• practice — not a real PYQ

  According to Rajasthan's Economic Review 2022-23, what interest subsidy does Mukhyamantri Laghu Udyog Protsahan Yojana provide on loans up to ₹25 lakh?

  • (a)5 per cent
  • (b)6 per cent
  • (c)8 per cent
  • (d)9 per cent
  Answer(3) — The Review gives 8 per cent on loans up to ₹25 lakh. Option (1) is the rate for loans up to ₹10 crore and option (2) for loans up to ₹5 crore. Option (4) applies only to rural tourism units under the Rural Tourism Scheme, 2022.
• practice — not a real PYQ

  As per Rajasthan's Economic Review 2022-23, Mukhyamantri Laghu Udyog Protsahan Yojana was notified and commenced from

  • (a)13 December 2019
  • (b)17 July 2019
  • (c)1 July 2020
  • (d)30 November 2022
  Answer(1) — The Review says the scheme commenced from 13 December 2019. Option (2) is the date the Rajasthan MSME (Facilitation of Establishment and Operation) Act was enacted. Option (3) is when the new MSME classification took effect. Option (4) is when the Rural Tourism Scheme, 2022 was issued.