Prime Minister Employment Generation Programme (PMEGP): A Guide

Turning dreams into enterprises and fostering self-employment and economic empowerment, the Prime Minister Employment Generation Programme (PMEGP) is a flagship initiative by the Government of India, led by the Khadi and Village Industries Commission (KVIC). 

Launched in 2008, PMEGP has successfully established over 5 lakh enterprises, creating employment for 25 lakh individuals. The credit-linked subsidy covers up to 35% in general and 50% in special categories, including marginalised groups.

Bank loans, with low-interest rates of 4-6%, complement the subsidy, supporting projects with maximum limits of ₹25 lakhs for manufacturing and ₹10 lakhs for services/business. 

The program's impact is pronounced, especially in rural areas, fostering small-scale industries and sustainable economic development. With a visionary goal of creating 1 crore jobs by 2024, the Government continues to strengthen PMEGP, making it a cornerstone for socio-economic empowerment. Take a look at the graph below: 👇

In the year 2023, around 3,74,000 people got jobs through the PMEGP. Last year, in 2022, over 8,25,000 people found employment through this program- the most since it started.

Objectives of the PMEGP Loan Scheme

The PMEGP loan scheme is designed with several key objectives in mind:

1. Job Creation

The primary objective of the PMEGP loan scheme is to create employment opportunities in India's urban and rural areas. By launching new self-employment programs, micro-enterprises, and ventures, the scheme aims to address the issue of unemployment and provide sustainable livelihoods.

2. Support for Traditional Artisans and Unemployed Youth

The PMEGP scheme aims to support self-employment options for traditional artisans and unemployed youth, particularly those in widely scattered areas. By offering financial assistance, the scheme aims to empower these individuals and provide them with the means to start their own enterprises.

3. Curbing Migration

The scheme also aims to halt the migration of rural and unemployed young individuals to cities by creating long-term and consistent employment opportunities in their own communities. This helps balance economic growth across regions and reduces the strain on urban infrastructure.

4. Boosting Artisans' Earning Potential

By providing financial assistance and promoting entrepreneurship, the PMEGP scheme seeks to increase the earning potential of artisans. This, in turn, accelerates rural and urban employment growth and contributes to the overall economic development of the nation.

Benefits of PMEGP

The PMEGP scheme offers several benefits to aspiring entrepreneurs and individuals looking to start their own micro-enterprises:

1. Low-Interest Loans and Subsidies

Under the PMEGP scheme, eligible beneficiaries can avail themselves of low-interest loans and subsidies ranging from 15% to 35% of the project cost. This financial assistance significantly reduces the burden of capital investment required to set up a new enterprise.

2. Increased Credit Flow

The scheme encourages financial institutions to increase credit flow to the micro sector, reducing the dependency on money lenders. This provides better access to finance and helps establish a credit history for future financial needs.

3. Employment Opportunities

As mentioned in the objectives, the PMEGP scheme provides employment opportunities to traditional artisans and unemployed youth, thereby reducing migration rates from rural to urban areas. The scheme contributes to job creation and economic stability in local communities by supporting micro-enterprises.

4. Entrepreneurial Development

The scheme aims to enhance the employment and entrepreneurship characteristics of the regions and the nation as a whole. By nurturing and supporting new enterprises, PMEGP fosters a culture of innovation and self-reliance among the beneficiaries.

5. Inclusive Eligibility Criteria 

The PMEGP scheme offers an equal and fair chance for qualifying for subsidies, as the eligibility criteria are not overly intensive. This ensures that individuals from diverse backgrounds and communities have an opportunity to benefit from the scheme.

6. Wide Coverage 

The PMEGP scheme covers most industries except for a few that are included in the negative industries list. This allows entrepreneurs from various sectors to take advantage of the financial assistance provided by the scheme.

Subsidy Rates and Categories

The subsidy rates under the PMEGP loan scheme are determined based on the beneficiary category and the location of the project/unit. The beneficiary categories are divided into two types: General and Special. Here are the subsidy rates for each category:

The subsidy amount provided by the government ranges from 15% to 35% of the project cost, depending on the category and location of the beneficiary. The remaining amount of the project cost is financed by banks in the form of term loans and working capital.

Project Cost and Loan Limit

1. The PMEGP loan scheme imposes limits on project cost and loan amounts.
2. Maximum project/unit cost in manufacturing is ₹25 lakhs; in the business/service sector, it's ₹10 lakhs.
3. Beneficiary contributes 5-10% of the project cost; the bank sanctions the remaining 90-95%.
4. Actual bank credit may cover only 60-75% of the project cost.
5. PMEGP covers the remaining 15-30%, financed through term loans and working capital.

Collateral Requirements

The collateral requirements for PMEGP loans depend on the project cost. Projects costing up to ₹10 lakhs do not require security, as per RBI guidelines. 

However, for projects with costs ranging from ₹5 lakhs to ₹25 lakhs, a collateral guarantee is provided by the Credit Guarantee Trust Fund for Micro & Small Enterprises (CGTMSE). For projects costing over ₹10 lakhs, the lender's terms regarding security will apply.

Interest Rates and Repayment Tenure

Loans under the PMEGP scheme incur regular interest rates between 11% and 12%. The repayment tenure for these loans ranges from 3 to 7 years, with a preliminary moratorium period. 

The exact terms and conditions of the loan, including interest rates and repayment periods, may vary depending on the bank or financial institution providing the loan.

Eligibility Criteria for PMEGP Loan

The PMEGP loan scheme is open to individuals, self-help groups, institutions, production cooperative societies, and charitable trusts. Here are the eligibility criteria for applying for a PMEGP loan:

Age: The applicant should be above 18 years of age.

Education Qualification: For manufacturing sector projects costing above ₹10 lakhs, the applicant should have passed at least the 8th standard. The same educational qualification is required for business/service sector projects costing above ₹5 lakhs.

Exclusion: Units already benefiting under a state or central government scheme cannot avail of a PMEGP loan. Existing units under Prime Minister Rozgar Yojna, Rural Employment Generation Programme, or any other government scheme, as well as those that have already received government subsidies under any other scheme, are not eligible for PMEGP loans.

Required Documents for PMEGP Loan Application

When applying for a PMEGP loan, applicants need to provide certain documents along with their application. Here is a list of the documents that may be required:

1. Caste Certificate (if applicable)
2. Special Category Certificate (wherever required)
3. Rural Area Certificate
4. Project Report
5. Education / EDP / Skill Development Training Certificate
6. Any other applicable document supporting the loan application

It is advisable to check with the respective authorities or banks for a comprehensive list of required documents specific to the PMEGP loan application.

The Process of Applying for a PMEGP Loan

To apply for a PMEGP loan, applicants can follow these steps:

Local Advertisements

The State / Divisional Directors of KVIC, in consultation with KVIB and the Director of Industries of respective states, will give local advertisements through print and electronic media, inviting applications and project proposals from prospective beneficiaries.

Online Application

Beneficiaries can also submit their applications online through the official PMEGP portal. The online application form can be accessed here. After filling out the form, applicants should save their data and upload the required documents.

Submission of Application

Once the online application is complete, applicants need to take a printout of the application form and submit it, along with the detailed project report and other necessary documents, to the respective offices specified in the advertisement or guidelines.

It is important to note that the application process may vary slightly depending on the state or region. Therefore, applicants should carefully follow the instructions provided by the designated authorities.

The Bottom Line

The PMEGP is like a friendly push towards creating your job and helping the country grow. It gives you a hand with low-interest loans and support to start small businesses. 
PMEGP isn't just for traditional artisans or job seekers; it's for anyone with a dream to start something of their own. 
So, as you start your business journey with PMEGP, remember, it's not just a starting point; it's your ticket to making dreams happen and adding your bit to our country's progress.