Introduction
Government of India has approved the introduction of a new credit linked subsidy programme called Prime Minister’s Employment Generation Programme (PMEGP) by merging the two schemes that were in operation till 31.03.2008 namely Prime Minister’s Rojgar Yojana (PMRY) and Rural Employment Generation Programme (REGP) for generation of employment opportunities through establishment of micro enterprises in rural as well as urban areas. PMEGP will be a central sector scheme to be administered by the Ministry of Micro, Small and Medium Enterprises (MoMSME). The Scheme will be implemented by Khadi and Village Industries Commission (KVIC), a statutory organization under the administrative control of the Ministry of MSME as the single nodal agency at the National level. At the State level, the Scheme will be implemented through State KVIC Directorates, State Khadi and Village Industries Boards (KVIBs) and District Industries Centers (DICs) and banks. The Government subsidy under the scheme will be routed by KVIC through the identified Banks for eventual distribution to the beneficiaries/entrepreneurs in their Bank accounts. However, in case of Delhi where no DIC is in existence the scheme is implemented by State office KVIC & KVIB in entire Delhi. KVIC will coordinate with State KVIBs/State DICs and monitor performance in rural and urban areas.
Objectives of PMEGP
- To generate employment in both rural and urban areas by promoting new self-employment ventures, micro-enterprises, and small projects.
- To bring together traditional artisans and unemployed youth from rural and urban regions and provide them self-employment opportunities as close to their homes as possible.
- To ensure continuous and sustainable employment for artisans and young job-seekers, helping them secure stable livelihoods.
- To reduce migration of rural youth to urban areas by creating viable income opportunities in villages and small towns.
- To enhance the wage-earning capacity and skills of workers and artisans, thereby supporting growth in overall rural and urban employment.
Quantum and Nature of Financial Assistance
i) For setting up of new micro enterprise (units)
| Category of Beneficiary | Beneficiary’s Contribution (of project cost) | Subsidy – Urban Area | Subsidy – Rural Area |
|---|---|---|---|
| General Category | 10% | 15% | 25% |
| Special Category (SC / ST / OBC / Minorities / Women / Ex-servicemen / Physically Handicapped / NER / Hill & Border Areas, etc.) | 5% | 25% | 35% |
(ii) 2 nd Loan for upgradation of existing PMEGP/REGP/MUDRA units
| Category of Beneficiary under PMEGP | Beneficiary’s Contribution (of Project Cost) | Rate of Subsidy (of Project Cost) |
|---|---|---|
| All Categories | 10% | 15% (20% for NER and Hill States) |
Eligibility Conditions of Beneficiaries
For PMEGP new enterprises/units
- Any individual who is 18 years or older is eligible to apply under PMEGP.
- There is no income limit, so people from all income groups can seek assistance to set up projects under the scheme.
- For larger projects—above ₹10 lakh in manufacturing and ₹5 lakh in the business/service sector—the applicant must have passed at least Class VIII.
- Financial assistance is provided only for new enterprises that are specifically approved under PMEGP.
- Existing units or businesses that have already received support under PMRY, REGP, or any other Central or State Government subsidy scheme are not eligible under PMEGP.
Other Eligibility Conditions of PMEGP (New units)
(i) Projects without Capital Expenditure are not eligible for Financing under the scheme .
(ii) Cost of the land should not be included in the Project cost. Cost of the ready built as well as long lease or rental Work-shed/Workshop can be included in the project cost subject to restricting such cost of ready built as well as long lease or rental work shed/workshop to be included in the project cost calculated for a maximum period of 3 years only.
(iii) PMEGP is applicable to all new viable micro enterprises, including Village Industries projects except activities prohibited by Local Government/Authority keeping in view environment or socio-economic factors and activities indicated in the negative list of the guidelines. (Para 30 of the guidelines).
(iv) Trading activities:
- Business/Trading activities in the form of sales outlets may be permitted in NER, left wing Extremism (LWE) affected districts and A & N Islands.
- Retails outlets/Business – Selling Khadi Products, village industry products produced from Khadi & Village Industries Institutions certified by KVIC and products manufactured by PMEGP/SFURTI clusters only may be permitted under PMEGP across the country.
- Retail outlets backed by manufacturing (including processing) / Service facilities may br permitted across the country.
- The maximum cost of project for Business/Trading activities as above (a) & (b) may be Rs. 20 lakh (at par with maximum cost of project for service sector).
- Maximum 10% of financial allocation in a year in a state may be used for Business/Trading activities as above (a), (b) & (c).
For upgradation of existing PMEGP/REGP/MUDRA units
- Margin Money (Subsidy) claimed under PMEGP has be successfully adjusted on the completion of lock in period of 3 years.
- First loan under PMEGP/MUDRA/REGP has to be successfully repaid in stipulated time.
- The unit is profit making with good turnover and having potential for further growth in turnover and profit with modernisation/upgrading the technology.
Implementing Agencies
The Scheme will be implemented by Khadi and Village Industries Commission (KVIC), Mumbai, a statutory body created by the Khadi and Village Industries Commission Act, 1956, which will be the single nodal agency at the national level.
At the State level, the scheme will be implemented through State Directorates of KVIC, State Khadi and Village Industries Boards (KVIBs) and District Industries Centers and COIR Board for coir related activities others agencies like National Scheduled Tribes Finance and Development Corporation (NSTFDC), National Backward Classes Finance and Development Corporation (NBFDC), Indian Institute of Entrepreneurship, Guwahati, National Institute of Entrepreneurship and small Business Development, National Institute for Micro small and Medium Enterprises, Institute of Entrepreneurship development, Odisha, TR&TCs, O/o DCMSME and MSME DIs etc. Can also be enrolled as IAs, as and when necessary.
All the IAs including the AIs that may be enrolled in future will be allowed to receive and process applications in all rears irrespective of the rural or urban category. KVIC will coordinate with state KVIBs/ State DICs other IAs and monitor performance in rural and urban areas. They IAs will also involve National Small Industries Corporation (NSIC), Udyami Mitras empanelled under Rajiv Gandhi Udami Mitra Yojna, RSTEIs/RUDSETIs, Panchayati Raj Institutions, NGOs of repute and other relevant agencies in identification of beneficiaries under PMEGP.
Coir Board will be involved in identifying Coir units for their setting up under PMEGP in both rural as well as urban areas, their hand holding and monitoring.
Other Agencies
- Government bodies such as the Department of Women and Child Development (DWCD), Nehru Yuva Kendra Sangathan, and the Army Wives Welfare Association of India.
- Non-Governmental Organisations (NGOs) with at least five years of experience in areas like project consultancy, agro and rural industry promotion, technical consultancy, rural development, or social welfare. These NGOs must have adequate staff and infrastructure, be able to work at village and taluk levels, and should have received funding from State or Central Government agencies in the last three years.
- Professional institutions and technical colleges recognised by the Government, Universities, UGC or AICTE, especially those offering vocational or skill-based training such as ITIs, Rural Polytechnics, and Food Processing Training Institutes.
- Certified Khadi and Village Industries (KVI) institutions supported by KVIC/KVIB, provided they fall under A+, A or B category and have the required infrastructure, manpower, and expertise.
- Departmental and non-departmental training centres run by KVIC and KVIB.
- MSME Development Institutes, MSME Tool Rooms, and Technical Development Centres functioning under the Office of the Development Commissioner (MSME).
- Offices, technical centres, training centres, and incubation centres of the National Small Industries Corporation (NSIC), including those set up under the PPP model.
- National-level Entrepreneurship Development Institutions such as NIESBUD, Ni-MSME, and the Indian Institute of Entrepreneurship, Guwahati, along with their branches and entrepreneurship centres established through partner institutions.
- PMEGP Federation, whenever it is constituted.
- Any other agency approved by the competent authority.
Financial Institutions
- All Public Sector Banks.
- All Regional Rural Banks, Co-operative Banks, Private Sector Scheduled Commercial Banks regulated by RBI.
- Small Industries Development Bank of India (SIDBI).
Identification of beneficiaries
The identification of beneficiaries will be done at the District level by implementing agencies and Banks. The Banks should be involved right from the beginning to ensure that bunching of applications is avoided. The applicants who have already under gone training of at least 10 days (for off line mode) / 60 hours (for online mode) under EDP or Skill Development Programme (ESDP) or vocational training need not undergo EDP training again. Priority will be given to persons affected bu natural calamities/disasters in the areas which are declared as affected by ‘Disaster’ as defined under Section 2(d) of the Disaster management Act 2005 by the Ministry of Home affairs.
Exaggeration in the cost of the project with a view only to availing higher amount of subsidy should not be allowed.
KVIC in consultations with Bankers Association had devised scoring model (Score card) which is being used by IAs for appraisal of PMEGP proposals and subsequent forwarding of applications/proposals to the Banks. The scoring model is displayed on the website of KVIC and Ministry.
Bank Finance
Banks sanction 90% of the total project cost for General Category beneficiaries/institutions and 95% for Special Category beneficiaries/institutions, and disburse the full sanctioned amount for setting up the project.
Bank finance is provided as:
- Term Loan for capital expenditure, and
- Cash Credit for working capital.
- Alternatively, banks may provide a composite loan covering both capital expenditure and working capital.
The maximum project cost under PMEGP is ₹50 lakh, which includes both capital expenditure and working capital.
The working capital limit is:
- Up to 40% of project cost for manufacturing units, and
- Up to 60% of project cost for service/trading units.
If the capital expenditure itself reaches the maximum project cost ceiling, banks may sanction additional funds beyond ₹50 lakh (manufacturing) and ₹20 lakh (service sector); however, no subsidy is available on this additional amount.
If, after three years from the start of production, the actual capital and working capital expenditure is less than the sanctioned amount, the excess margin money subsidy corresponding to the shortfall must be refunded to KVIC.
Rate of Interest and repayment schedule
- Normal Rate of interest shall be charged. Repayment schedule may range between 3 to 7 years after an initial moratorium as may be prescribed by the concerned Bank/financial institution.
- RBI has issued necessary guidelines to the Banks to accord priority in sanctioning projects under PMEGP. RBI also issues suitable guidelines from time to time as to which RRBs and other Banks will be excluded from implementing the scheme.
- Definition of Industry and Employment Criteria
- Any Industry (Expect those mentioned in the negative list) locvated in the rural/urban area which produces any goods or renders any service with or without the use of power and in which the fixed capital investment per head of a full time artisan or worker i.e. Capital Expenditure on workshop/workshed machinery and furniture divided by full time employment created by the project does not exceed Rs. 3 lakh in Plain areas and Rs. 4.5 lakh in hilly areas.
Rural Areas
- Any area classified as village as per the revenue record of the state/union Territory, irrespective of the population.
- All the areas irrespective of their population, falling under Panchayati Raj Institutions will be accounted under rural area whereas area falling under Municipality to be treated as urban areas.
Modalities of on-line Process Flow of application and fund flow under the Scheme
All applications under PMEGP must be submitted online only through the PMEGP Portal developed by KVIC; manual applications are not allowed.
Applications for new projects as well as for upgradation or expansion of existing units (as per PMEGP eligibility criteria) must be filed only through this portal.
The portal provides separate online application forms for:
- setting up new units, and
- upgradation/expansion of existing units.
At the time of registration, applicants receive a User ID and Password to track the status of their application, and a unique Application ID after final submission.
Aadhaar number is mandatory and is verified with the UIDAI database before proceeding with the application.
- Applicants without Aadhaar must apply for Aadhaar enrolment and provide the enrolment number.
- In areas where Aadhaar is not issued (such as NER, J&K, etc.), alternate identification like PAN card is accepted.
Applicants must upload their photograph and required documents for screening, including:
- Caste certificate (if applicable)
- Special category certificate (where required)
- Rural area certificate
- Project report
- Educational / EDP / skill development training certificate
- Any other relevant document
Applicants must fill in all required details in the online application form. The username and password are sent to the registered mobile number after saving the application.
Applicants must upload documents as per eligibility for the first and second tranche of assistance, where applicable.
- A self-assessed score is generated based on the information provided.
- After completing all documentation, the applicant submits the form and receives a unique Application ID to track the application status.
- Applicants can download and print the acknowledgment as proof of submission.
The complete application and uploaded documents are electronically forwarded to the representatives of the preferred Implementing Agency (IA) for further processing.
Conclusion
The Prime Minister’s Employment Generation Programme (PMEGP) represents a comprehensive and inclusive policy framework aimed at promoting self-employment and entrepreneurship across rural and urban India. By integrating credit support with capital subsidy, skill development, and institutional handholding, the scheme addresses both unemployment and regional imbalances in economic growth. Its clear eligibility norms, structured financial assistance, strong role of banks and implementing agencies, and transparent online process ensure effective targeting and accountability. Overall, PMEGP plays a crucial role in empowering artisans, youth, and first-generation entrepreneurs, reducing distress migration, and strengthening the micro-enterprise ecosystem in alignment with India’s broader goals of inclusive growth and MSME-led development.
