IAS Gyan

Daily News Analysis


1st June, 2022 Economy

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  • The government has approved continuation of the Prime Minister’s Employment Generation Programme (PMEGP), over the 15th Finance Commission Cycle for five years from 2021-22 to 2025-26.
  • It has been approved with an outlay of around 13 thousand 554 crore rupees.


Prime Minister’s Employment Generation Programme (PMEGP)


  • Prime Minister’s Employment Generation Programme (PMEGP) is a credit linked subsidy programme is credit linked Scheme of Govt. of India by merging erstwhile Rural Employment Generation Programme and Pradhan Mantri Rozgar Yojana.



  • To generate employment opportunities in rural as well as urban areas through setting up of self-employment ventures.
  • To provide continuous and sustainable employment to a large segment of traditional and prospective artisans and unemployed youth, so as to help arrest migration of rural youth to urban areas.
  • To generate continuous and sustainable employment opportunities in Rural and Urban areas of the country through setting up of new self-employment ventures / projects / micro enterprises.
  • To increase the wage earning capacity of unemployed youth and contribute to increase in the growth rate of Rural and Urban employment.


Implementing Agency

  • The Ministry of Micro, Small and Medium Enterprises (MSME) is implementing the programme to facilitate generation of employment opportunities for unemployed youth across the country by assisting setting up of micro-enterprises in non-farm sector.
  • Since its inception in 2008-09, about 7.8 lakh micro enterprises has been assisted with a subsidy of 19,995 crore rupees generating estimated sustainable employment for 64 lakh persons.


Nodal Agency

  • Khadi and Village Industries Commission (KVIC) will be the single National Level Nodal Implementation agency for PMEGP.
  • At the State Level, the Scheme will be implemented through State KVIC Directorates, State Khadi and Village Industries Boards (KVIBs) and District Industries Centres (DICs) and Banks.



  • Individuals above 18 years of age.
  • VIII Std. pass required for project above Rs.10.00Lac in manufacturing and above Rs.5.00Lac for Service Sector.
  • Self Help Groups and Charitable Trusts.
  • Institutions Registered under Societies Registration Act-1860.
  • Production based Co-operative Societies.
  • No income ceiling for setting up of projects.
  • Assistance under the scheme is available only to new units to be established.
  • Existing units or units already availed any Govt. subsidy either under State / Central Govt. Schemes are not eligible.



  • Any industry including Coir Based Projects excluding those mentioned in the Negative list.
  • Per capita investment should not exceed Rs.1.00Lac in plane areas and Rs.1.50Lac in Hilly areas



  • The scheme is applicable to all viable (technically as well as economically) projects in rural as well as urban areas, under Micro enterprises sector.
  • Only one person from family is eligible for obtaining financial assistance under the scheme.
  • Assistance under the Scheme is available only for new projects.
  • The scheme is aimed at encouraging manufacturing sector and Business / Trading activities.
  • The assistance under the scheme will be available to business / trading activities in the form of sales outlets in North East Regions (NER), Left Wing Extremist (LWE) affected districts and Andaman & Nicobar Islands and also retail outlets backed by manufacturing (including processing) / Services facilities.
  • The assistance under the scheme will not be available to activities indicated in the negative list.


Negative list of activities

  • Businesses / Industries connected with processing/productions/sale of meat or intoxicant items like pan/beedi/cigarette etc.
  • Businesses/ Industries linked with sericulture, cultivation, floriculture, horticulture.
  • Manufacture of containers of recycled plastic/polythene carry bags of less than 20 microns
  • Processing of pashmina wool and other products which involve hand spinning and hand weaving which comes under the purview of Khadi Certification Rule.
  • Rural transport (except houseboat, shikara, tourist boat in Andaman & Nicobar Islands and in Jammu & Kashmir, auto rickshaw and cycle rickshaw.) CNG auto rickshaw will be permitted only in Andaman & Nicobar Islands and North Eastern Region of the country with the prior approval of Chief Secretary of the State on merit.


Ceiling of Project Cost :

  • The maximum cost of the project / unit admissible under manufacturing sector is Rs.25.00Lac.
  • The maximum cost of the project / unit admissible under business / service sector is Rs.10.00Lac.

Subsidy Entitlement & Bank Finance

Subsidy from KVIC and the bank finance depends on the cost of project as per details given below:


Bank Finance

Subsidy from KVIC

Promoter’s contribution

Urban area

Rural area

General Category beneficiary / Institution





Special category beneficiary / Institutions (Including SC / ST / OBC / Minorities / Women / Ex-Servicemen / Physically Handicapped / NER / Hill and Border Areas etc.






Rate of Interest

  1. Up-to Rs.10.00Lac: Base Rate + 0.50%
  2. Above Rs.10.00Lac to Rs.100.00Lac: Base Rate + 1.00%.



  1. Term Loan: Up-to 7 years after including moratorium prescribed by the Bank.
  2. Working Capital: 12 months, renewal on yearly basis.



  1. Assets created out of the Bank's finance.
  2. Personal Guarantee of the Proprietor / Promoter.
  3. Eligible units to be covered under Credit Guarantee Fund scheme for Micro & small Enterprises (excluding Margin Money/subsidy component).



  • A 2 weeks training period is mandatory for all the beneficiaries.



  • Since its inception in 2008-09, about 7.8 lakh micro enterprises have been assisted with a subsidy of Rs 19,995 Crore generating estimated sustainable employment for 64 lakh persons.
  • About 80% of the units assisted are in rural areas and about 50% units are owned by SC, ST and women categories.


How does this scheme work?

Let’s assume Mr. Don, a young new entrepreneur from Bangalore Urban, wants to apply for the PMEGP scheme Estimated Project Cost – Rs 10 lakh Mr. Don’s Contribution (Mandatory as per PMEGP) – Rs 1 lakh (10% of Rs 10 lakh) Amount Received By Mr. Don – Rs 9 lakh Note: The margin money (ie 15% of the Project Cost – Rs 1,50,000/-) generally withheld by the bank will be reimbursed to the bank by KVIC within 24 hours of acceptance of the PMEGP application. Hence, entrepreneurs like Mr. Don can get the required capital to proceed with their venture very easily/ Note:


Banks will finance capital expenditure in the form of a term loan and working capital in the form of cash credit. Projects can also be financed in the form of composite loan consisting of capital expenditure and working capital

The bank credit will be ranging between 60-75% of the cost after deducting (Margin Money) subsidy and the owner’s contribution.

Though banks will claim subsidy on the basis of the projections of capital expenditure mentioned in the project report, Margin Money can be availed only on the actual availment of capital expenditure and excess if any, is to be refunded to KVIC

Working Capital component should be utilized in such a manner that at one point it should touch 100% limit of the cash credit within 3 years of the lock-in period of margin money and not less than 75% utilization of the sanctioned limit.


Revised Guidelines

  • The PMEGP has now been approved for continuation over the 15th Finance Commission Cycle for five years from 2021-22 to 2025-26 with an outlay of Rs.13554.42 Crore.


Following major modifications/improvements have been made in the existing Scheme:

  1. Increasing the maximum project cost from existing Rs.25 lakh to Rs. 50 lakh for manufacturing units and from existing Rs.10 lakh to Rs.20 lakh for service units.
  2. Modify definition of village industry and Rural Area for PMEGP. Areas falling under Panchayti Raj institutions to be accounted under rural area, where as areas under Municipality to be treated as urban area.
  • All Implementing Agencies are allowed to receive and process applications in all areas irrespective of the rural or urban category.
  • PMEGP applicants under aspirational districts and transgender will be treated as Special category applicants and entitled for higher subsidy.


Major impact

  • Scheme will create sustainable estimated employment opportunities for about 40 lakh persons in five financial years.


States/districts covered

  • All the States/UTs will be covered under the Scheme.


Higher rate of Margin Money subsidy

  • 25% of the project cost in urban area and 35% of the project cost in rural areas, for special category applicants including, SC, ST, OBC, women, Transgender, Physically Disabled, NER, Aspirational and Border district applicants.
  • For General category applicants subsidy is 15% of the project cost in urban area and 25% of the project cost in rural areas.