Prime Minister’s Employment Generation Programme (PMEGP) — the central government’s flagship credit‑linked subsidy scheme for promoting self‑employment and micro‑enterprise in India
Overview & Objectives
Launched in August 2008, PMEGP merged the earlier PMRY and REGP schemes. It is implemented centrally by the Ministry of MSME via KVIC, and at state/district levels through KVIBs, DICs, banks, SHGs, NGOs, and others its primary goals are:
- Generate sustainable employment in both rural and urban areas by establishing new micro‑enterprises.
- Empower traditional artisans and unemployed youth, boosting their earning capacities.
- Prevent rural-to-urban migration by creating local opportunities c
Financial Structure & Subsidy Levels
PMEGP provides credit-linked margin‑money subsidy based on beneficiary category and project location:
- General Category
- Own contribution: 10%
- Subsidy: 15% (urban), 25% (rural) of project cost.
- Special Category (SC/ST/OBC/minorities/women, ex‑servicemen, differently‑abled, NER, hill & border areas)
- Own contribution: 5%
- Subsidy: 25% (urban), 35% (rural)
Funds come through the annual Budget Estimates, with ₹100 Cr earmarked each year for upgrading existing units. Additionally, 5% is allocated for backward/forward linkage activities such as training, exhibitions, monitoring, and publicity
Project Cost Limits & Bank Involvemen
- For new units:
- Manufacturing: up to ₹50 lakh
- Business/Service: up to ₹20 lakh
- For upgrading units:
- Manufacturing: up to ₹1 Cr
- Business/Service: up to ₹25 lakh
Banks provide term loans covering the remaining project cost. Loans below ₹10 lakh are collateral-free, with optional coverage under CGTMSE for larger amounts
Eligibility & Beneficiary Profile
Eligible applicants include:
- Individuals aged 18+ (no upper age limit specified).
- VIII‑pass required for manufacturing projects above ₹10 lakh or service projects above ₹5 lakh
- SHGs (including BPL_without other subsidies), registered societies, cooperatives, charitable trusts
- Only new micro‑enterprises; those previously aided under other schemes are ineligible.
- One beneficiary per family (self or spouse)
Negative list of excluded activities includes land cost, businesses linked to tobacco, alcohol, meat processing, horticulture, etc
Training & Mode of Implementation
- Entrepreneurship Development Programme (EDP) of 2–3 weeks is mandatory (6 days for small projects, 10 days for larger ones). If previously undergone, it may be waived
- Upon EDP completion, the bank disburses the term loan after beneficiary contributes their share, with subsidy credited after 3 years via a locked-in TDR.
- Projects are physically verified, and a structured grievance redressal system is in place
Repayment, Tenure & Interest Support
- Loan tenure: 3–7 years with an initial moratorium period
- Interest rate: approx. EBLR + 3.25% (~12.15% p.a. as of Feb 2025)
- Certain Khadi/polyvastra units may get concessional 4% rate under special Interest Subsidy eligibility certification (ISEC), funded by KVIC budget
Benefits & Strategic Importance
- Direct subsidy reduces upfront financial burden.
- Collateral relief and bank linkage improve lending ease.
- Local job creation bolsters rural economies and reduces migration.
- Skill & entrepreneurship development via mandatory EDP.
- Upskilling/upgradation of existing units under separate funding stream.
- Marketing linkages through KVIC exhibitions, buyer–seller meets enhancing enterprise visibility
Summar
PMEGP is a robust, multi‑faceted initiative designed to foster self‑employment and micro‑enterprise growth across India. With competitive subsidy rates, minimal collateral requirements, mandated entrepreneurial training, and bank-implemented frameworks, the programme supports sustaining livelihoods, especially in rural & underserved communities—all while strengthening local economy and traditional trades.
Let me know if you’d like a deep dive into application steps, documentation, or specific sector examples!