Karnataka has introduced penalties for micro, small and medium enterprises (MSMEs) that terminate employees within three months of receiving job-creation incentives under the Udyoga Nidhi scheme, according to a government order. The measure is intended to ensure that enterprises maintain the employment created under the programme.

Eligible MSMEs will receive a monthly incentive of Rs. 2,500 for each qualifying job for two years. The scheme applies to employment created in 11 identified backward districts, with the government estimating total expenditure at around Rs. 3 bn and targeting the creation of 100,000 jobs.

Under the recovery provision, the government can reclaim the incentive paid to an enterprise if it terminates an employee within three months of receiving the payment. The recovered amount will include interest. The provision will also apply if an MSME is found to have falsely reported job creation, with additional action possible under applicable rules.

The districts covered are Yadgir, Bidar, Raichur, Kalaburagi, Koppal, Vijayanagar, Belagavi, Gadag, Haveri, Vijayapura and Bagalkot. They were identified based on recommendations from the Karnataka Regional Imbalances Redressal Committee, headed by economist M Govinda Rao.

A district-level implementation committee, headed by the deputy commissioner, will physically verify at least 10 per cent of eligible MSMEs before incentives are released. Another 10 per cent of beneficiaries will be verified before the third instalment. Recruited workers must be residents of one of the 11 districts and provide a residence certificate, Aadhaar or Electoral Photo Identity Card. They must be aged 18 to 45 years and maintain full monthly attendance. MSMEs cannot claim another incentive for the same employee, including benefits under the National Apprenticeship Promotion Scheme. The government will establish an Udyoga Nidhi portal for registrations and claims, while a state-level committee headed by the Principal Secretary of the Commerce and Industries Department will oversee implementation.