Unlocking Growth Opportunities with the PMEGP Scheme
The Prime Minister’s Employment Generation Programme (PMEGP) is an innovative scheme launched by the Government of India in 2008 to boost entrepreneurship and employment generation. By providing subsidized loans and support, PMEGP empowers individuals and organizations to set up micro-enterprises across the country.
In this comprehensive guide, we explore all key aspects of the PMEGP scheme – eligibility, application process, subsidies, loan details and more. Read on to understand how you can unlock growth opportunities with PMEGP funding.
Introduction to PMEGP
The Prime Minister’s Employment Generation Programme (PMEGP) is a credit-linked subsidy scheme administered by the Ministry of Micro, Small and Medium Enterprises (MSME). It was introduced in 2008 by merging two pre-existing schemes – Rural Employment Generation Programme (REGP) and Prime Minister’s Rojgar Yojana (PMRY).
The nodal implementation agency for PMEGP at the national level is the Khadi and Village Industries Commission (KVIC). At the state level, it is implemented through KVIC Directorates, State Khadi and Village Industries Boards (KVIBs) and District Industries Centres (DICs).
The PMEGP scheme is aimed at achieving the following key objectives:
- Employment Generation: Provide sustainable self-employment opportunities to unemployed and underemployed individuals in rural and urban areas.
- Rural Industrialization: Promote industrialization in rural and backward regions for balanced economic growth.
- Support under PMEGP can give your business idea the initial thrust required to materialize into a successful enterprise. The next sections provide complete information on how to apply and utilize PMEGP subsidies.
Key Features of PMEGP Subsidy
The PMEGP scheme is designed to incentivize and support first-generation entrepreneurs across India. Here are some salient features:
1. Eligibility Criteria
- Individual entrepreneurs – Age 18+ years, 8th standard pass
- Institutions registered under Societies Registration Act, 1860
- Production Co-operative Societies
- Self Help Groups (SHGs) – Should have been in existence for at least 6 months
- Trusts
- Charitable Institutions registered under Section 25 of Companies Act, 1956
Additionally, applicants should not be in receipt of any financial assistance from government agencies for setting up the same unit. Existing units or those already availing benefits under other subsidy schemes like PMRY, REGP etc. are not eligible.
2. Negative List of Activities
Certain business activities are excluded from receiving PMEGP subsidies:
- Industries covered under Beverages group (Alcoholic)
- Tobacco industry including cigarettes, pan masala etc.
- Any industry/business connected with Meat, Poultry, Marine products and Leather
- Mining and mineral-based industries
- Transport sector and generators except auto rickshaws in Andaman and Nicobar Islands
- Business offerings financial services like chit funds, nidhi companies etc.
Additionally, PMEGP units cannot be subcontractors to other larger firms. They should produce and market their own standalone products.
3. Subsidy Rates
One of the biggest incentives under PMEGP is the provision of capital subsidy which ranges from 15% to 35% of the total project cost based on location and target group:
| Category | Urban Areas | Rural Areas |
|---|---|---|
| General | 10% | 15% |
| Special (SC/ ST/ OBC/ Women etc.) | 25% | 35% |
The special category includes weaker sections like SC/ST/OBC, minorities, women, ex-servicemen and differently abled persons availing of PMEGP loans. For the northeastern region including Sikkim, Jammu & Kashmir, Himachal Pradesh, Uttarakhand and ITDP-notified areas, the subsidy rate is uniform at 35% irrespective of the location.
4. Maximum Project Cost
Another vital parameter under PMEGP is the upper ceiling on project costs:
- For the manufacturing sector, it is capped at ₹50 lakh
- Under services and business activities, it is restricted to ₹20 lakh
Working capital upto 6 months cash flow along with the cost of machinery, equipment and other capital expenditure are included under project cost.
5. Own Contribution
Beneficiaries need to make a minimum contribution from their own funds towards project cost:
- 5% for special category units
- 10% for general category units
This ensures entrepreneurs have genuine skin in the game before availing subsidies.
6. Compulsory EDP Training
Once the PMEGP application is approved, beneficiaries have to undergo Entrepreneurship Development Program (EDP) training before the margin money (subsidy amount) is disbursed. The duration varies based on project cost:
- 2 weeks (10 working days) for projects above ₹5 lakh
- 1 week (6 working days) for projects upto ₹5 lakh
The training covers business basics, financial management, marketing, troubleshooting and more. It equips entrepreneurs with the knowledge required to smoothly run their enterprises.
With a clear understanding of the scheme’s framework, let us look at the step-by-step process to apply and obtain funding under PMEGP.
How to Apply for PMEGP Subsidy
The PMEGP loan application involves the following key steps:
Step 1: Prepare Project Proposal
Begin by drafting a comprehensive project report covering all aspects – product details, production process, machinery requirements, costs and more. KVIC provides nearly 100 model project profiles across sectors that can serve as useful reference templates.
Step 2: Documents Needed
Collect these documents before approaching the nodal agency:
- PMEGP Application Form
- Own contribution payment receipt
- Quotations for machinery and equipment
- Name of bank branch willing to extend credit facility
- Proof of age, residence, caste certificate etc. as applicable
Step 3: Apply to Nodal Agency
Submit your application with all documents to the respective state/district KVIC/KVIB/DIC office based on the project location. Rural area projects come under KVIC while DIC handles those in urban locations.
Step 4: Scrutiny & Recommendation
The proposal goes through an initial scrutiny by a Task Force Committee. If recommended, the margin money (subsidy) amount is reserved.
Step 5: Submit Documents to Bank
Next, approach the bank branch mentioned in Step 2 to complete documentation formalities for term loan and working capital loan components.
Step 6: Undergo EDP Training
Once the project is sanctioned by the bank, undergo the mandatory EDP training at designated centers.
Step 7: Setting up Unit
On completion of training, the PMEGP loan amount is released by banks over pre-defined installments. This funding can be used to finally set up your micro-enterprise.
Thus, with strategic planning and coordination across nodal agencies, banks and training institutes, the entire process from application to disbursal can be completed in around 2 months.
PMEGP Loan Details
While PMEGP provides the initial subsidy amount, the remaining project cost is financed as loans by participating banks.
1. Lending Institutions
PMEGP loans are extended by a wide network of 27 Public Sector Banks, Regional Rural Banks (RRBs), select Private Banks and Cooperative Banks authorized by State Level Task Force Committees. This offers entrepreneurs a diverse range of options instead of depending only on public sector banks.
2. Interest Rates
The interest rates on your PMEGP bank loan typically varies between 11% to 12% based on prevailing market rates. This is quite competitive compared to regular business loans. No processing fees is charged by banks under PMEGP.
3. Repayment Schedule
The PMEGP working capital loan is repayable within 3 years from bank disbursement while term loan for machinery etc. is repaid over 5-7 years.
4. Working Capital Utilization
To ensure funding is actually utilized to spur enterprise growth, at least 75% to 100% of the working capital limit sanctioned should be availed within 3 years of lock-in period. Else, proportionate subsidy amounts may be recovered from beneficiaries.
5. Collateral Security
An added advantage under PMEGP is that loans upto ₹10 lakh do NOT require any collateral security. This provision is as per RBI guidelines for loans under MSE schemes without third-party guarantees.
For loans above ₹10 lakh, applicants may need to offer collateral security as demanded by banks.
These supportive loan policies coupled with the capital subsidy help drive rapid expansion of PMEGP units.
Frequently Asked Questions
Here are some common queries on PMEGP eligibility and application process answered:
What is the definition of a rural area under PMEGP?
Rural areas comprise villages or towns with population less than 20,000 as per latest census and as declared by KVIC under the KVIC Act, 2006. Towns notified by state governments are also included within this definition.
What business activities qualify as village industry under the scheme?
A village industry refers to any small-scale business setup in rural locations with per capita fixed capital investment below ₹1 lakh in plain regions and ₹1.5 lakh in hilly areas. Only such village industries are eligible for subsidies under PMEGP.
Is there an age limit for PMEGP applicants?
The minimum age criterion is 18 years. There is no upper limit on age. All adults are eligible to apply subject to meeting other eligibility terms.
Can existing units avail PMEGP subsidy?
No, the subsidy is meant only for new enterprises being set up. Units already functional or those availing benefits under other Govt schemes like PMRY, REGP etc. cannot apply.
What is the subsidy lock-in period under PMEGP?
The margin money subsidy amount released to beneficiaries cannot be recovered for a minimum period of 3 years from the bank disbursement date. This allows adequate time for units to stabilize operations.
Can I get funding from multiple sources for the same unit?
No, joint financing from different agencies is not allowed under PMEGP. The subsidy amount along with term loans and working capital have to be provided by a single bank only.
Thus, PMEGP aims to spur micro-enterprise growth through an integrated approach spanning training, finance and monitoring support. By spurring rural entrepreneurship and jobs, PMEGP intends to transform lives and local economies.
Summing Up Key Takeaways
For aspiring and early-stage entrepreneurs, PMEGP subsidies serve as a solid launchpad providing:
- Accessible opportunity to turn business ideas into reality
- Equity funding through up to 35% margin money
- Hassle-free collateral-free loans upto ₹10 lakh
- Handholding through mandatory EDP training
Together, these incentives stimulate micro-enterprise growth even in remote corners of the country.
However, the extensive documentation and long drawn application process acts as a deterrent for some. A simpler financing alternative for such cases is the Bajaj Finserv Business Loan. It provides substantial capital infusion up to ₹55 lakh to fund working capital, inventory, equipment and other expansion needs.
With a streamlined process involving just 2-3 documents and quick approval, disbursement takes place within 48 hours* of loan approval against simple assets rather than traditional collateral. This enables you to swiftly scale up operations.
By comparing options like PMEGP and Bajaj Finserv based on your specific needs, you can make an informed financing choice. Partnering with the right lender provides a solid bedrock for turning your enterprise goals into thriving reality.