Prime Minister’s Employment Generation Programme And PMEGP Loan- Procedure And Finance
In 2008, the Government of India initiated the Prime Minister’s Employment Generation programme (PMEGP) for the purpose of facilitating credit linked subsidy for qualified beneficiaries.
Two previous programmes – Prime Minister’s Rojgar Yojana (PMRY) & Rural Employment Generation Programme (REGP) – were amalgamated to form the PMEGP. These previous programmes focused on giving the necessary aid for the establishment of micro enterprises in urban and rural areas of India.
In this same vein, the PMEG has outlined the following as its core objectives:
- To generate employment opportunities in rural as well as urban areas of the country through setting up of new self-employment ventures/projects/micro-enterprises.
- To bring together widely dispersed traditional artisans/rural and urban unemployed youth, and give them self-employment opportunities to the extent possible, at their place.
- To provide continuous and sustainable employment to a large segment of traditional and prospective artisans, rural and urban unemployed youths in the country, so as to help arrest migration of rural youth to urban areas.
- To increase the wage-earning capacity of artisans, and contributing to increase in the growth rate of rural and urban employment.
How the Programme Works
Under the PMEGP, project costs for the establishment of beneficiaries’ enterprises are raised through:
- Contributions of the beneficiaries, at the rate fixed under the program;
- Credit subsidy given to beneficiaries by the government; and
- Term loans (PMEGP Loans) given to the beneficiaries by participating banks.
In simple terms, out of 100% project cost:
- The beneficiary bears 5% or 10% of the cost.
- The remaining 95% or 90%, funds are allocated by designated banks for the project.
- Of this percentage, 15% – 35% is the subsidy given to the beneficiary, by the government.
- The remaining percentage is given to the beneficiary, by the bank, as PMEGP loan.
A detailed discourse is presented below.
Who Can Apply?
Persons who are desirous of starting their enterprises or service units under the PMEGP can apply for the scheme.
The beneficiaries under the PMEGP consist of micro, small, and medium-sized enterprises, in both urban and rural areas of India.
These enterprises could be individuals, as well as organizations. So, eligible applicants include:
- Individuals who are 18 years and above.
- Self-help groups
- Societies registered under the Societies Registration Act, 1860
- Production Cooperative Societies
- Charitable Trusts
Note: The following conditions apply for eligibility:
- Individuals must have, at least, a Standard 8 pass if their projects cost above5 lakh in the business/service sector & Rs.10 lakh in the manufacturing sector.
- Applicants must not have existing units (i.e. been previous beneficiaries) under PMRY & REGP, or any other government scheme.
- Per capita investment should not be above1.00 lakhs in plain areas, and Rs. 1.50 lakhs in Hilly areas.
Financing under the Programme
By the rules of the programme, applicants are expected to contribute to their project cost. The contribution rate is fixed as follows:
|General Category||10% of the project cost|
|Special Category||5% of the project cost.|
Government then gives subsidy on the applicant’s project cost at rate fixed as follows:
|Applicants||Urban Areas||Rural Areas|
The balance amount on the project cost is given to the applicant, by participating banks, in form of working capital, and term loan (also known as a PMEGP loan).
Note: Persons who fall under the special category include
- Physically challenged persons
- Ex-defence employees
- SC/ST/OBC minorities
- People in the North East Region, hills, and border areas, amongst others.
Procedure for Application
Applicants are required to submit their proposals together with the following documents:
- Document from a competent authority which shows applicant’s eligibility under any of the categories, and this includes, caste or community certificate.
- A claim to the subsidy under the applicant’s appropriate category.
- Document showing the project cost, broken down into capital expenditure, and working capital requirements for one cycle.
- cost of land should not be included in the project cost
- 10% or 5% of the project cost, as the case may be, should reflect the applicant’s contribution.
- Cost of rent for 3 years or less can be included as part of the capital expenditure.
- For Society or Institutions, a certified copy of its byelaws.
PMEGP loan can only be assessed by applicants whose projects fall under any of the following sectors:
- Mineral-based products
- Forest-based products
- Agro-based products
- Service and Textile
- Hand made paper and fibre
- Polymer and Chemical-based products
- Rural Engineering and Bio-tech
Rs.25 lakh, has been placed as the maximum amount that can be borrowed for projects within the manufacturing sector. Rs.10 lakh, has been placed as the maximum amount that can be borrowed for projects within the business or service sector.
The loan is given for a period of 3 – 7 years, at the normal interest rate applicable to MSE sector. This should be around 11-12% interest rate.
The PMEGP loan is not accessible by enterprises providing any of these services:
- Companies producing or Manufacturing
- Harmful intoxicants
- Polythene bags that are less than 20 microns thick
- Containers, or plastic bags from recycled plastic
- Enterprises engaged in
- Cash crop cultivation
- Sericulture, horticulture, animal husbandry
- Meat slaughter or any such related activities such as processing, canning, or serving meat for consumption.
- Tapping of Tody for sale
- Hotels, or outlets serving liquor.
- Enterprises that provide harvester machines.
- Enterprises engaged in processing Pashmina wool, or such other products by hand spinning, or hand weaving.
- Enterprises in the rural transportation business, except for transports by cycle rickshaw, auto rickshaw in certain designated areas, house boat, Shikarar or tourist boat in Jammu and Kashmir.
The Ministry of Micro, Small and Medium Enterprises (MoMSME) has been vested with the administration of the PMEGP.
Implementation of PMEGP is carried out both at the national level and State level.
- At the National level: The Khadi and Village Industries Commission (KVIC) implement at the national level. They function as nodal agency.
- At the State level, various players are involved in the implementation of the scheme. They are – State KVIC Directorates, State Khadi and Village Industries Boards (KVIBS), District Industries Centres (DIC), and designated banks.
These authorities implement the PMEGP by identifying the beneficiaries, target areas for investment, and training of youths to set up micro-units, or take up jobs.
Government subsidy is routed by the KVIC through designated banks into the bank accounts of the beneficiaries.