written by Khatabook | January 21, 2022

Know About Zero Defect Zero Effect Scheme

India’s competitiveness is low in the global markets because of the lack of innovation in industries like healthcare, construction, finance among others. The ongoing industry resistance is also impacting the uplifting of the Indian industry ecosystem itself. Thus, institutionalising the "Make in India" efforts and the "National Quality Mission" are steps in the right direction. The PM of India, Shri Narendra Modi, pitched for Industry 4.0 or the concept of z effect and ZED Scheme culture in the ‘Make in India’ products and processes. 

India’s hopes to be a world leader in manufacturing rest on the Zero Effect Zero Defect Scheme concept that the manufacture of high-quality products helps in-

  • Technology absorption and use of professional or advanced skills in the domestic industry production
  • Connecting the discerning customer with the supply chains globally.

This means Zero Defects and Zero Effects on the environment while having a two-pronged societal and customer benefit scheme. Zero defects mean producing high-quality standard products that have zero effects on the environment. This is regarding pollution, wastage of natural resources or energy sources depletion and wastage in manufacturing. Hopefully, such certifications and ratings are being paid attention to at the manufacturing stages, which will lead to sustainable and transformational growth in the economy and manufacturing processes. So, let's know more about this Zero Effect Zero Defect Scheme.

Did you know? The MSMEs are credited with 30% of India’s GDP and are the economy’s accelerators. They also provide 48% of India’s overall exports and are an integral part of global supply chains. The MSMEs employ close to 110 million people in India and more than 50% operate out of rural India.

Also Read: All you need to know about MSME registration 

What is the ZED Scheme?

In the book ‘Absolutes of Quality Management’, written by Philip Crosby, he agrees that the Null defect concept is, in reality, the pursuit of enhanced quality and perfection in work or product outcome. A zero-defect is hard to attain and hence the goals of quality improvement, exploiting knowledge fully, and continuous improvement is the desired result of the scheme. The use of optimum practices leads to zero wastages in a project and removes not-useful processes, procedures, policies, employees, tools, etc.

The ZED scheme is also known as the zero defect, zero effect scheme and was launched by the Ministry of Micro, Small and Medium Enterprises or MSME Ministry in 2016 and is a comprehensive, integrated quality certification system for products, processes and outcomes in the MSME sector. It focuses on the concepts of the ZED culture or Zero Effect and Zero Defects in the MSME industries. It means removing processes that have a defect or the removal of defective products. It also indicates the improvement of quality, production, energy savings, manufacturing efficiency, mitigation of pollution, HR and financial efficiency, and includes the Intellectual property rights (IPR) and design of processes and products.

What is meant by Zero Effect Zero Defect?

Zero DefectThe concept of zero defect focuses entirely on the customers and tries to bring in zero waste in all aspects with zero non-compliance in manufacturing or designing processes and zero non-conformity in products

Zero Effect: Zero effect means zero wastage of natural resources and focuses on the environment and how to make it better. It means there shall be zero effect on the environment from MSMEs regarding liquid discharge, air pollution and solid waste materials.

The MSME (Micro, Small & Medium Enterprises) Development Commissioner and the Government of India (GOI) has implemented the upgraded version of the ZED Certification Scheme for ZED MSME Financial Support for 3 years from FYs 2017 to 2020. Its financial budget is ₹116.94 Crore is from the Gol, and ₹16.94 Crore is from private contributions. This funding scheme is a comprehensive hand-holding effort on the Government’s part to upgrade MSMEs by driving their manufacturing processes on environmental and quality-related ratings or their assessment ratings to make them globally competitive. Presently, 23,948 MSME units have registered under the scheme to implement ZED principles or Zero Defect Zero Effects principles on the environment.

Zero Defect Zero Effect Scheme Objectives:

The objectives of this scheme are stated below.

  • To ensure ZED Registration, MSMEs are involved in the continuous upgrade of their standards regarding quality, processes, and products.
  • To build an MSME Zero Defect Manufacturing System.
  • To bring in quality systems and tools and efficient energy manufacturing in enabling the manufacturing of globally competitive quality products in MSMEs.
  • To drive and build the campaign known as Make in India.
  • To develop ZED certification and manufacturing professionals.

Thus, the broad objectives of this scheme include building in the concepts of Zero- Defect and Zero-Effect techniques and practices in all MSME manufacturing processes to ensure the continuous and ongoing quality improvement of the MSME sector through ZED Rating.

What is ZED Certification? 

The ZED Certification is the rating awarded to an MSME for its organisational and operational levels through marks awarded (using the weighted averages method) for each studied outcome or enabler parameter. Based on this score, the MSME is ranked as Platinum, Gold, Diamond, Silver or Bronze enterprises and denotes its conformity to the standards set out by the ZED. Its implementation is by QCI or Quality Council of India and NMIU or National Monitoring & Implementing Unit. The Assessment Model for ZED Maturity has 50 ZED rating parameters and 25 additional parameters for ZED Defence Rating.

Nature of assistance for certifications and re-assessment of ratings:

The MSME scheme creates awareness of the ZED ratings and certifications in manufacturing processes, thus motivating enterprises in the MSME sector to re-assess their certification and production ratings. The main idea behind such ratings and certifications is to get the MSME enterprises to substantially reduce wastage, expand to their markets, increase productivity, become Central Public Sector Undertaking (CPSU) vendors, enjoy more intellectual Property Rights (IPRs), and develop the latest in new processes and products.

Take a quick bird’s-eye view of what the ZED scheme offers regarding re-assessment and ratings for MSME industries.

Nature of rating

Particulars of assessment

Actual Cost (₹)


Rating/Assessment by agencies including the empanelled agencies for Credit Ratings 

The validity period of the rating is four years.

The assessment fee is 10,000/- for assessment on the desktop and 80,000/- per organisation for a comprehensive ZED rating.

The MSME Ministry subsidises an average of 70% of the certification fee and is 60% for Small enterprises, 80% for micro-enterprises, and 50% for Medium Enterprises Certification Fees.

ZED Defence Rating by agencies including the empanelled agencies for Defence Credit Ratings


The validity period of the rating is four years.

The assessment fee for the additional rating for defence angle is 40,000/- per enterprise.

The MSME Ministry subsidises an average of 70% of the certification fee and is 60% for Small enterprises, 80% for micro-enterprises, and 50% for Medium Enterprises defence rating certification fees.

Consultancy fees for Hand Holding and Gap Analysis to improve MSME’s rating undertaken by the consultants of O/o MSME DC, MSME-TC, MSME-DI, and other autonomous bodies like BEE, QCI/NPC, etc. 


The HH or Hand-Holding charges are 1.9 L per enterprise.

The MSME Ministry subsidises an average of 70% of the consultancy fee and is 60% for Small enterprises, 80% for micro-enterprises, and 50% for Medium Enterprises Consultancy Fees.

MSMEs owned by SC/ST entrepreneurs owning the MSME enterprise get additional support of 10,000/-.

Re-Rating or Re-Assessment by agencies including agencies for Credit Rating 


The assessment fee for re-assessment of credit rating is 40000/- per enterprise.

The MEME Ministry subsidises an average of 70% of the certification fee and is 60% for Small enterprises, 80% for micro-enterprises, and 50% for Medium Enterprises re-assessment of rating fees.

To get these benefits, MSMEs can register at www.dcmsme.gov.in free of cost and then apply for the relevant benefit by filling in Annexure-3 of the Application Form. Guidance can be sought at the concerned District Industries Centre (DIC) office for the MSME scheme or the NMIU. You can also reach out to the Director Shri Sanjeev Chawla, The MSME Development Commissioner’s Office, Room #720 of the 7th Floor at Nirman Bhawan on Maulana Azad Road in New Delhi, Pin code: 110108, or call on 011-23061178.

Also Read: MSME Loan Without Collateral

How can the ZED scheme succeed? 

The ZED meaning and approach in manufacturing and design operations can better India’s economy as a global player if our efforts are focused on the following:

  • The national regulatory authority can integrate the hub with the spokes of vertical institutions like the ZED QCI, NPC, BIS etc., rather than work in silos. This would provide for a cohesive policy on accreditation, adoption of standards, international rule forming, running of infra development and coordination programmes with the private sector and more.
  • Assessment for Conformity under the policy for National Conformity Assessment by adopting international standards within a fixed period from industry commencement.
  • Using the best management and quality tools to speed up to-market times, project management software, and management information with ERP, management of supply chains, etc., to help with inventories that are vendor managed.
  • Services Working Group to integrate the services sector.
  • Quality measures and mechanisms compliant with ZED culture.


The manufacturing, service sectors, Small, Medium and Micro Enterprises benefit from the revolutionary ZED scheme. The zero effect zero defect policy is a move in the right direction for India’s economic production, green growth, and generation of tech-oriented jobs which are non-polluting and non-hazardous. Besides, it is a key factor in India’s sustained efforts for climate change and pollution-fighting measures.

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Q: How does the MSME scheme benefit the MSMEs?


Some of the ZED Scheme benefits to MSMEs are

  • Higher revenues through improved processes: Adapting to the ZED process results in high-quality zero defect manufacture of products, services or processes, thereby reducing wastage, rejection, scrap, etc., and leading to higher profit revenues.
  • Access to a reliable and credible vendor database: The ZED Scheme ensures that investors in companies with ZED ratings in India have access to a highly credible and ready-made database of reliable vendors to help procure their activities.
  • Zero Effect on the environment: The ZED culture leads to environmental consciousness, greener solutions to pollution and waste disposal, and addresses the critical climate change issue.
  • Rewards and Recognition: Consistent champions of the ZED culture and high performing ZED rated units are nationally rewarded and recognised as responsible manufacturers or service providers by QCI and the MSME Ministry.
  • Adapting the best practices: MSMEs with a ZED rating use best practices and benchmark their systems.
  • Global market competitive industries.
  • Brand recognition and visibility

Q: How much does the Defence Rating assessment cost and the offset under the MSME scheme?


There are 25 additional parameters under the Defence Rating scheme that ordinarily costs ₹40,000/- per enterprise. The MSME Ministry subsidises an average of 70% of the defence rating certification fee. It offsets 60% for Small enterprises, 80% for micro-enterprises, and 50% for Medium Enterprises in the defence rating certification fees.

Q: To what extent are the certification fees offset under the MSME scheme?


The MSME Ministry subsidises an average of 70% of the certification fee and is 60% of Small enterprises, 80% of micro-enterprises, and 50% of Medium Enterprises certification fees. The actual assessment fee is ₹10,000/- for assessment by the desktop analysis method and ₹80,000/- per organisation for a complete assessment of ZED rating.

Q: What activities can be undertaken under the ZED Certification scheme?


Some of the activities under this Certification Scheme are:

  • Conduct workshops, industry-awareness programs, and training of implementing agencies officials.
  • Benchmarking the international standards and adapting the ‘Best ZED Practices’.
  • Training of Consultants, Assessors & Master Trainers.
  • Conduct ZED International Trainings on QTT/QMS, production management, and delegate foreign travel to PAC/IAF.
  • Onsite Capacity-Building Enterprise Training for I&K, NER, remote areas and industrially backward regions.
  • Rating, assessment, re-rating and certification using the Desktop analysis method or the MSME Assistance programmes for Gap Analysis, Consultancy, and Handholding by the agencies responsible.
  • Calibrating online MIS systems, e- awareness and training content and e-assessment platforms and much more.

Q: What other schemes are there for the MSMEs?


Under the PMEGP or the PM’s Employment Generation Programme are several initiatives like the

  • SFURTI or Scheme for Funds for Traditional Industries Regeneration
  • The CHAMPIONS portal advertising
  • ASPIRE or Scheme for Promotion of Innovation, Entrepreneurship and Rural Industry 
  • CGS or Credit Guarantee Scheme for Small and Micro Enterprise
  • Scheme for Interest Subvention of MSMEs Incremental Credits.

Q: What is meant by ZED culture or effect?


The ‘Make in India’ program’s slogan is “Zero Defect Zero Effect”, also known as ‘ZED Culture’. This concept was advocated by PM Shri Narendra Modi and signifies,

  • Zero defects or high quality made in India products, processes and services
  • The manufacture of these ZED culture products leads to zero detrimental effects on the environment and ecology.

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