1. Introduction to PMEGP
The Prime Minister’s Employment Generation Programme (PMEGP) is a flagship scheme of the Government of India designed to support individuals in setting up their own small businesses. The scheme is especially meant for unemployed youth, artisans, and people in rural and urban areas who want to become self-employed.
Launched in August 2008, the scheme brought together two older initiatives: the Prime Minister’s Rojgar Yojana (PMRY) and the Rural Employment Generation Programme (REGP). By combining the best parts of both, the government created a more efficient and comprehensive plan to promote self-employment and micro-enterprise development.
2. Objective of the PMEGP
The key goals of PMEGP are:
- To generate employment opportunities for jobless individuals by supporting them in starting new micro-enterprises.
- To support traditional skills and crafts, enabling artisans and small business owners to sustain and grow their work.
- To slow rural-to-urban migration by creating job opportunities in villages and small towns, so people don’t feel forced to leave for cities.
- To strengthen the local economy by encouraging entrepreneurship and small business ownership.
This scheme is not only about job creation but also about promoting self-reliance and economic independence among India’s citizens.
3. Who Runs the PMEGP Scheme?
The Ministry of Micro, Small and Medium Enterprises (MSME) is responsible for the scheme at the national level.
The implementation is handled by:
- Khadi and Village Industries Commission (KVIC) – main nodal agency
- State KVIC Directorates
- Khadi and Village Industries Boards (KVIBs) in each state
- District Industries Centres (DICs)
- Recognized NGOs and Self-Help Groups (SHGs)
These bodies work together to ensure the scheme reaches eligible individuals across India.
4. Eligibility Criteria for PMEGP
To apply under PMEGP, you must meet certain basic conditions:
General Eligibility
- Must be an Indian citizen aged 18 years or older.
- Should have studied at least till Class 8 if applying for a:
- Manufacturing project above ₹10 lakh
- Business/service project above ₹5 lakh
Who Can Apply?
- Individuals who are unemployed but want to start a new business.
- Self-Help Groups (SHGs), even if they include members below the poverty line (BPL), provided they are not already receiving benefits under other schemes.
- Registered societies, co-operative societies, and charitable trusts.
Who Cannot Apply?
- Anyone who has already received financial help under PMRY, REGP, or any other subsidy-linked government scheme.
- Existing units and businesses (only new projects are eligible).
- Applicants who want to start a business in prohibited sectors like:
- Alcohol/tobacco
- Meat processing
- Horticulture/sericulture/fisheries
- Buying and selling land
Also, only one person per family can apply under PMEGP (includes self and spouse).
5. Financial Support Provided Under PMEGP
PMEGP offers financial help in the form of credit-linked subsidies.
How the Funding Works:
- You (the applicant) contribute a part of the money.
- The bank gives you a term loan for the rest.
- The government provides a subsidy directly linked to your project cost.
Subsidy and Contribution Structure
| Category | Your Contribution | Govt. Subsidy (Urban) | Govt. Subsidy (Rural) |
|---|---|---|---|
| General | 10% of project cost | 15% | 25% |
| Special (SC/ST/OBC/Women/Minorities/Ex-Servicemen/Disabled/NER/Hill Areas) | 5% | 25% | 35% |
So, if you’re from a special category and your project is in a rural area, you get a 35% subsidy and contribute only 5% from your side.
6. Project Cost Limits Under PMEGP
The maximum amount you can borrow under PMEGP depends on the type of business you want to start:
For New Units
- Manufacturing projects: Up to ₹50 lakh
- Business/service sector: Up to ₹20 lakh
For Upgrading Existing Units
- Manufacturing units: Up to ₹1 crore
- Business/service units: Up to ₹25 lakh
Remember, the scheme does not support businesses that simply trade goods—it must involve creating goods or providing services.
7. Bank Loan and Interest Rates
The remaining cost of the project (after your own contribution and government subsidy) is covered by a term loan from a bank.
Loan Details:
- Loans under ₹10 lakh are collateral-free.
- Larger loans may be covered by CGTMSE (Credit Guarantee Fund Scheme for Micro and Small Enterprises).
- Loan tenure: Between 3 and 7 years.
- Interest Rate: Based on the bank’s current lending rate (EBLR) + 3.25%, which comes to around 12.15% as of early 2025.
- Special Khadi and polyvastra units may get loans at a concessional 4% interest rate, if they qualify under the Interest Subsidy Eligibility Certification (ISEC) scheme.
8. Mandatory Training for Beneficiaries
One of the key features of PMEGP is that it includes training to make sure the beneficiary is prepared to run a business.
Entrepreneurship Development Programme (EDP):
- A 2 to 3-week training programme is mandatory.
- For smaller projects: 6 days
- For larger projects: 10 to 15 days
- Training includes:
- How to prepare a business plan
- How to manage business finances
- Sales, marketing, and digital tools
- Legal requirements for running a business
If you have already completed such training in the past, you may get an exemption.
9. Project Approval and Loan Process
Step-by-Step Process:
- Apply online through the PMEGP portal.
- Submit all required documents, including project report and ID proof.
- Attend the EDP training.
- The District Level Task Force Committee (DLTFC) will evaluate your application.
- If approved, the bank will:
- Sanction your loan
- Disburse funds once you deposit your share
- The government subsidy is kept in a Term Deposit Receipt (TDR) for 3 years.
- After 3 years, the subsidy is adjusted against the loan if all conditions are met.
10. Monitoring and Verification
Once your business is set up, there will be physical verification by the implementing agency (KVIC, KVIB, or DIC). This is to ensure that:
- The business is real and operating
- The loan is being used properly
- The subsidy should be released
There’s also a grievance redressal system if you face delays or issues.
11. Additional Support & Activities
The scheme also sets aside part of its budget for additional support activities:
- ₹100 crore every year to upgrade existing businesses.
- 5% of funds go toward:
- Training
- Publicity
- Monitoring
- Marketing support through exhibitions and trade fairs
- Buyer–seller meets for helping entrepreneurs sell products
12. Benefits of PMEGP
PMEGP offers multiple advantages for budding entrepreneurs and unemployed youth:
Financial Benefits
- Reduces upfront burden through high subsidy rates.
- Allows for easy access to loans even without collateral.
- Encourages people from backward communities and remote areas to apply.
Skill Development
- The training programme builds necessary business skills and confidence.
Employment Generation
- Creates jobs in villages and small towns, reducing stress on urban areas.
Support for Traditional Industries
- Helps revive traditional crafts, especially in handloom, khadi, pottery, and more.
Marketing Help
- Promotes products through KVIC exhibitions, online platforms, and buyer-seller meets.
13. Challenges and Limitations
While PMEGP is a strong scheme, some challenges remain:
- Delays in loan disbursement due to strict bank procedures.
- Some applicants find the online application system difficult to navigate.
- Physical verification can delay subsidy release.
- Lack of awareness in rural areas limits participation.
However, the government is continuously working on improving these aspects, especially through digital outreach and local training camps.
14. Example Scenarios
Example 1: Starting a Tailoring Unit
Meena from a village in Madhya Pradesh applies to start a tailoring business. Her total project cost is ₹2 lakh. Since she belongs to the OBC category and lives in a rural area:
- She contributes ₹10,000 (5%)
- Gets a subsidy of ₹70,000 (35%)
- Gets a loan of ₹1.2 lakh from the bank
After completing her training, Meena receives the loan and starts her unit with two sewing machines, providing jobs to two more women.
Example 2: Mobile Repair Shop in a Small Town
Ravi, a 22-year-old from a small town in Assam, wants to start a mobile repair business. His total project cost is ₹3 lakh. Since he belongs to the general category and lives in an urban area:
- He contributes ₹30,000 (10%)
- Gets a subsidy of ₹45,000 (15%)
- Takes a bank loan of ₹2.25 lakh
He completes his training, opens a shop, and now earns a steady income while employing one assistant.
15. Conclusion
The Prime Minister’s Employment Generation Programme (PMEGP) is a well-designed, people-centric scheme that gives India’s unemployed youth and traditional artisans a chance to become successful business owners.
With government subsidy, training, and loan support, PMEGP helps reduce unemployment, boost local industries, and encourage a culture of entrepreneurship. The scheme also plays a critical role in improving the rural economy and preserving India’s rich traditional crafts.
As India pushes towards self-reliance and inclusive growth, schemes like PMEGP are essential building blocks in that journey.