India is a nation of entrepreneurs. From the smallest roadside vendor to the owners of growing startups, millions of people dream of becoming self-reliant and creating opportunities for others. Recognizing this spirit, the Government of India launched the Prime Minister’s Employment Generation Programme (PMEGP) in 2008. This flagship initiative was designed to boost self-employment, create sustainable livelihood opportunities, and reduce migration from rural to urban areas.
1. Background of PMEGP
Before PMEGP, there were two schemes to promote self-employment in India:
- Prime Minister’s Rojgar Yojana (PMRY)
- Rural Employment Generation Programme (REGP)
Both schemes had been in operation until March 2008. To simplify the process and bring all micro-enterprise support under a single umbrella, the Government merged them into one program – the Prime Minister’s Employment Generation Programme (PMEGP).
PMEGP is a credit-linked subsidy program, which means beneficiaries receive loans from banks, and a significant portion of the loan is covered as subsidy by the government. The program is a Central Sector Scheme administered by the Ministry of Micro, Small and Medium Enterprises (MoMSME).
The Khadi and Village Industries Commission (KVIC) acts as the national-level nodal agency. At the state level, the scheme is implemented through:
- State KVIC Directorates
- State Khadi and Village Industries Boards (KVIBs)
- District Industries Centres (DICs)
- Banks
To make implementation smoother, reputed NGOs, Self-Help Groups (SHGs), Udyami Mitras, Panchayati Raj Institutions, and professional institutions are also associated with the scheme.
2. Objectives of PMEGP
The programme is not just about giving loans; it is about creating a sustainable ecosystem of employment and entrepreneurship. Its main objectives are:
- Generate Employment Opportunities:
Provide self-employment to rural and urban youth through the establishment of new micro-enterprises. - Support Traditional Artisans:
Revive and sustain traditional crafts by bringing scattered artisans together under viable business ventures. - Prevent Migration:
Offer livelihood options locally to reduce migration of rural youth to cities in search of jobs. - Improve Earnings:
Increase the wage-earning capacity of artisans and entrepreneurs, thereby improving their standard of living. - Promote Balanced Development:
Encourage entrepreneurship across rural and urban regions, ensuring that opportunities are not concentrated in cities alone.
3. Financial Assistance under PMEGP
The biggest attraction of PMEGP is the financial assistance in the form of government subsidy. The scheme is structured in such a way that the beneficiary contributes a small part, the government provides subsidy, and the rest is financed by banks.
Levels of Funding
| Category | Beneficiary Contribution (of Project Cost) | Subsidy in Urban Areas | Subsidy in Rural Areas |
|---|---|---|---|
| General Category | 10% | 15% | 25% |
| Special Categories (SC, ST, OBC, Minorities, Women, Ex-Servicemen, Physically Handicapped, People from North Eastern Region, Hill & Border Areas) | 5% | 25% | 35% |
Project Cost Limits
- Manufacturing sector: Maximum ₹25 lakh
- Business/Service sector: Maximum ₹10 lakh
The remaining balance of the project cost is provided as a bank loan (term loan/working capital/composite loan).
For example:
If a woman entrepreneur from a rural area starts a project worth ₹10 lakh:
- She contributes 5% (₹50,000).
- Government provides 35% subsidy (₹3.5 lakh).
- Bank provides the remaining ₹6 lakh as a loan.
This significantly reduces her financial burden while ensuring access to formal credit.
4. Eligibility Criteria
PMEGP is inclusive and welcomes a wide range of beneficiaries. However, certain conditions apply:
- Individuals: Must be above 18 years of age.
- Education Requirement:
- For projects above ₹10 lakh (manufacturing) and ₹5 lakh (service), the applicant must have at least passed 8th standard.
- Institutions Eligible:
- Self Help Groups (SHGs), including BPL families (not availing benefits from other schemes).
- Societies registered under the Societies Registration Act, 1860.
- Production Co-operative Societies.
- Charitable Trusts.
- New Projects Only: Assistance is available only for new projects sanctioned under PMEGP.
- Exclusions:
- Existing units under PMRY, REGP, or any other government subsidy scheme are not eligible.
- Old units seeking modernization are not covered.
Special Note: Only one person per family can avail financial assistance. Here, family means self and spouse.
5. Other Key Conditions
- Caste/Community Certificate: Special category applicants must provide proof from a competent authority.
- Project Cost Components: Includes capital expenditure + one cycle of working capital.
- Land Cost Excluded: Cost of land cannot be included in the project cost, but rent/lease costs for up to 3 years can be added.
- Negative List: Certain activities are not supported (like liquor, tobacco, and polluting industries).
6. Implementing Agencies
The scheme’s success depends on a strong network of implementing agencies:
- National Level: Khadi and Village Industries Commission (KVIC).
- State Level: State KVIC Directorates, KVIBs, and District Industries Centres (DICs).
- Partners: NSIC, Udyami Mitras, Panchayati Raj Institutions, NGOs, technical institutions, and professional training bodies.
7. Financial Institutions
PMEGP loans are routed through multiple banks to ensure wide coverage:
- Public Sector Banks
- Regional Rural Banks (RRBs)
- Approved Cooperative Banks
- Scheduled Private Sector Banks (approved by State Task Force Committees)
- Small Industries Development Bank of India (SIDBI)
8. Identification and Selection of Beneficiaries
Beneficiaries are identified at the district level by a Task Force Committee, which includes representatives from KVIC, KVIB, DICs, banks, and is headed by the District Magistrate/Collector.
Applicants who have completed at least 2 weeks of Entrepreneurship Development Programme (EDP) or Skill Training can directly approach banks. Otherwise, applications go through the Task Force Committee for evaluation.
To maintain fairness, KVIC has introduced a score card system, ensuring transparent and objective beneficiary selection.
9. Bank Finance and Loan Process
The bank plays a central role in PMEGP implementation:
- Loan Sanction:
- 90% of the project cost for General category.
- 95% for Special categories.
- Loan Structure:
- Term Loan for capital expenditure.
- Cash Credit for working capital.
- Or a Composite Loan (both combined).
- Repayment:
- Normal interest rate applies.
- Repayment period: 3 to 7 years, after an initial moratorium (grace period).
- Collateral-Free Loans:
- No collateral required for loans up to ₹10 lakh (as per RBI guidelines).
- Subsidy Flow:
- Subsidy is kept in a 3-year Term Deposit Receipt (TDR) in the name of the beneficiary.
- If the business runs successfully for 3 years, the subsidy is adjusted against the loan.
- If the business fails, the subsidy is returned to KVIC.
10. Online Application Process
Since 2016, applications are accepted only through the PMEGP online portal.
Steps to Apply Online:
- Visit the official PMEGP e-portal.
- Choose between Individual Application or Institutional Application.
- Register using your Aadhaar or PAN number.
- Fill out the application form and upload documents such as:
- Caste certificate
- Special category certificate (if applicable)
- Rural area certificate
- Project report
- Education/training certificates
- Registration documents (for institutions)
- Submit the form to the concerned KVIC/KVIB/DIC.
- Track your application using the provided User ID and Application ID.
Key Point: Applications are reviewed within 45 days by the District Level Task Force Committee (DLTFC), which recommends projects to banks.
11. Training Support
Before receiving the loan, all beneficiaries must undergo Entrepreneurship Development Programme (EDP) training. The training covers:
- Basics of business management.
- Marketing strategies.
- Bookkeeping and accounts.
- Legal and compliance requirements.
This ensures that entrepreneurs not only start but also sustain their businesses effectively.
12. Eligible Village Industries
PMEGP supports almost all village industries and micro-enterprises, except those in the negative list (such as tobacco, liquor, and certain polluting industries). Eligible activities include:
- Agro-based industries
- Food processing
- Handicrafts
- Textile and garment making
- Service-based enterprises
- Coir and rural crafts
The focus is on low-capital, labor-intensive industries, especially those that use local resources and traditional skills.
13. Impact of PMEGP
Since its launch, PMEGP has had a significant impact on India’s employment landscape:
- Generated lakhs of jobs across rural and urban areas.
- Supported women, SC/ST, minorities, and differently-abled entrepreneurs.
- Revived dying crafts and rural industries.
- Reduced migration from villages to cities.
- Empowered Self-Help Groups and grassroots institutions.
14. Key Benefits at a Glance
- High Subsidy Support: Up to 35% subsidy on project cost.
- Low Contribution Requirement: Only 5–10% beneficiary contribution.
- Collateral-Free Loans: For projects up to ₹10 lakh.
- Skill Training Provided: Mandatory EDP training builds entrepreneurial capacity.
- Wide Coverage: Both rural and urban areas covered.
- Inclusive: Special focus on disadvantaged groups.
15. Challenges and Suggestions
Like any large-scale scheme, PMEGP also faces challenges:
- Delays in loan sanctioning by banks.
- Lack of awareness among rural youth.
- Difficulty in preparing viable project reports.
- High rejection rates due to incomplete applications.
Suggestions for Improvement:
- More awareness campaigns in villages.
- Simplified project report templates.
- Stronger support from banks.
- Enhanced monitoring of beneficiaries to ensure sustainability.
