PMEGP is a new MSME Scheme of Govt. of India by merging REGP and PMRY scheme launched on 04-04-2008. State Khadi & V.I. Board and District Industries Centre of State Government have also been associated in implementation of the programme. Special Package of subsidy to promote rural industrialization. Empowering entrepreneurs through Skill Development and entrepreneurial development programme (EDP).

Objective of the scheme: To provide continuous and sustainable employment to a large segment of traditional and prospective artisans, of rural and urban unemployed youth in the country for their better livelihood. 

To increase the wage-earning capacity of artisans and contribute to increase in the growth rate of rural and urban employment. To facilitate participation of financial institutions for higher credit flow to only new micro enterprises.

Eligible Borrowers: Individuals, SHGs (of BPL), Charitable Trust, Institutions under Society Registration Act., Production based Co-operative Societies. Beneficiary should have attained 18 years age.

Education Qualification: VIII Std. passed only for project costing above Rs. 10.00 lakh in manufacturing and above Rs.5.00 lakh for Service Sector. Otherwise no minimum education qualification required.

Definition of Family: Beneficiary & spouse. Only one person from family eligible.

Repayment: 3 to 7 years with moratorium prescribed.

Project: 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.

Documents Required: Following certificate should be submitted along with application;

  • Age proof certificate;
  • Caste certificate if beneficiaries are from special categories (SC/ST/Minority/Ex-Servicemen etc.);
  • Educational qualification certificate if beneficiaries opting project cost above Rs.10.00 lakhs in case manufacturing and above Rs.5.00 lakhs for service sector;
  • 2-3 weeks EDP training certificate if already undergone such training.

Implementing Agencies and Facilitators: For easy approach and accessibility, first three agencies and following facilitators will work in each district.

  1. Khadi & Village Industries Commission;
  2. Khadi & Village Industries Boards;
  3. District Industrial Centres of State Govts;
  4. Rajiv Gandhi Udyami Mitra Yojana;
  5. Ministry of Women & Child Development;
  6. Panchayati Raj Institutions;
  7. KVI Federations;
  8. Nehru Yuva Kendra Sangathan;
  9. Army Wives Welfare Association.

Financing Agencies: Scheme is financed by any of the following;

  • All Public-Sector Banks;
  • All Regional Rural Banks;
  • Small Industries Development Bank of India (SIDBI);
  • Co-operative Banks approved by a committee headed by the Secretary, Industries of the State;
  • Private Sector Commercial Banks approved by a committee headed by the Secretary, Industries of the State.

Eligible Industry: Any industry including Coir Based projects excluding those mentioned in the negative list. Maximum project cost for Rs. 25.00 lakh in case of manufacturing and Rs.10.00 lakh for Service Sector.

Negative List of the Activities: Following activities are not eligible under the scheme;

  1. Any Industry/business connected with Meat (slaughter) i.e. processing, canning and/or serving items like Beedi / Pan / Cigar / Cigarette etc. any Hotel or Dhaba or sales outlet serving liquor, preparation / producing tobacco as raw materials, tapping of toddy for sale.
  2. Any industry / business connected with cultivating of crops / plantation like Tea, Coffee, Rubber etc. sericulture (cotton rearing), Horticulture, Floriculture, Animal Husbandry like Pisciculture, Piggery, Poultry, Harvester machines etc.
  3. Manufacture of Polythene carry bags of less than 20 microns thickness and manufacture of carry bags or containers made up of recycled plastic for storing, carrying, dispensing or packaging of food stuff and any other item which causes environmental problems.
  4. Industries such as processing of Pashmina Wool and such other products like hand spinning and hand weaving, taking advantage of Khadi Programme under the purview of Certification Rules and availing sales rebate.
  5. Rural Transport (except Auto rickshaw in Andaman & Nicobar Islands, House boat, Shikara & Tourist Boats in Jammu & Kashmir and Cycle Rickshaw).

Implementing Agency: Rural area as declared under KVIC Act 2006 – Scheme to be implemented by KVIC, KVIB and DIC. Urban area - Only DIC.

Margin & Financial Assistance
Categories of beneficiaries under PMEGP Beneficiary’s contribution of project cost Rate of Subsidy of Project Cost
Area (location of project/unit) Urban Rural
General Category 10% 15% 25%
Special (including SC/ST/OBC/Minorities/Women, Ex-Servicemen, Physically handicapped, NER, Hill and Border areas etc. 05% 25% 35%

Bank Finance:  The Bank will sanction 90% of the project cost in case of General category beneficiary and 95% in case special category of beneficiary / institutions.The Bank will disburse full amount suitably for setting up of the project.

Selection of Beneficiaries: Project proposals will be invited from potential beneficiaries at District level through Print and Electronic Media by KVIC/KVIBs and DIC at periodic intervals.

Facilitating agencies may also collect applications and submit the same to the KVIC, KVIB and DICs for placing the same before District Task Force Committee. To ensure the transparency in identification of the beneficiaries, Panchayati Raj Institutions to be involved in the process of selection.

Process to apply for loan: Prescribed application may be downloaded from KVIC website or from any field offices of KVIC or KVIB or DICs.The application along with required certificate may be submitted to any one of the Offices of KVIC or KVIB or DICs. The application will be placed before District Task Force Committee headed by District Magistrate/Deputy Commissioner/Collector of respective Offices. Personal Interview will be conducted by District Task Force Committee.

Application Selection: Selection will be made on the basis of background and personal interview.The District task force will forward its recommendation to KVIC /KVIB /DICs within a period of one month of the meeting. The same will be forwarded by the implementing agencies to Financing Branch of the Bank within 15 days of receipt of the same. 

Operational Procedure: The Bank will take their own credit decision on selection of projects. In case of any rejection, the same will be intimated to the District Task Force with reasons. After sanctioning of project, the beneficiary has to deposit 5% or 10% of the project cost as the case may be, in the bank. First installment of loan will be released to Beneficiaries only after completion of EDP training.  Project cost will include capital expenditure and one cycle of working capital. 

Entrepreneurs Development Programme (EDP) training for 2-3 weeks is compulsory before disbursement of loan. EDP training will be provided by the following Training Institutions

  1. Departmental and Non-Departmental Training Centers of KVIC /KVIB,
  2. Accredited training Centers,
  3. EDP Institute of National repute like NIESBUD, NIMSME, IIE, EDI etc.

Skill Development: District Task Force will recommend needy entrepreneurs for skill development programme. Skill Development / Skill Up gradation    will be provided as per requirement to the entrepreneurs by Training Centre accredited with Ministry of MSME and reputed institutions of KVIC / KVIB / State Govts. , DIC.

Subsidy Release & Adjustment: The subsidy claim will be submitted online through Financing Bank after release of first instalment of loan. The Financing Branch will forward the same to the respective Nodal branch. The Nodal Branch after being satisfied that the unit fulfills the criteria under PMEGP will release the subsidy to the Financing Branch. 

The original claim format to be forwarded to respective office i.e. KVIC/KVIB/DIC by the Nodal Branch of the Bank keeping a copy with them. Acknowledgement letter in the prescribed format will be issued by the KVIC/KVIB/DIC to the Nodal Branch on receipt of original claim format.

The lock in period of subsidy is of 3 years in the TDR in the name of beneficiary. No interest will be paid on the TDR and no interest will be charged on loan to the corresponding amount of TDR. subsidy will be adjusted only after physical verification.

Operational Guidelines for 2nd Financial Assistance under PMEGP for Expansion of the Existing Successful PMEGP/MUDRA Units

The Scheme: Khadi & Village Industries Commission (KVIC), under the Ministry of MSME, Government of India, New Delhi, is presently implementing the Prime Minister's Employment Generation Programme (PMEGP) as the National-level Nodal Agency. At the State Level, the scheme is implemented through the State KVIC Directors, State Khadi & Village Industries Boards (KVIBs), District Industries Centres (DICs) and Banks. Up to 31.3.2018, a total of 4,66,471 units have been set up in the Country.

Considering the success of the scheme, the Government now approved continuation of PMEGP beyond 12th five-year Plan for a period of 3 years from 2017-18 to 2019-20 with a financial outlay of Rs. 5,500 Crores.

While giving such approval, a provision has also been made for sanctioning a 2nd loan with Subsidy for upgrading the existing units, which are performing well in terms of turnover, profit making and loan repayment. Accordingly, for manufacturing units, financial assistance upto an amount of Rs. 1 Crore would be provided, and for Service/Trading Units, financial assistance upto an amount of Rs.25.00 lakhs would be provided with a subsidy of 15% (20% for NER and Hilly States).

Quantum and Nature of financial assistance:

  1. The maximum cost of the project/unit admissible under manufacturing sector for up-gradation is Rs.1.00 Crore, and the maximum subsidy would be Rs.15 lakhs (Rs.20 lakhs for NER and Hill States).
  2. The maximum cost of the project/unit admissible under Service/Trading sector for up-gradation is Rs.25 lakhs, and the maximum subsidy would be Rs. 3.75 lakhs (Rs. 5 lakhs for NER and Hill States).
  3. For all categories , rate of subsidy (of project cost) is 15% (20% in NER and Hill States). Beneficiary's contribution will be 10% for all categories.
  4. The balance amount of the total project cost will be provided by bank as term loan. The applicant can utilize the loan amount for investment on fixed assets i.e. for construction of building/purchase of required new machineries/ Installation of machinery etc.
  5. Under the term loan component (construction of building/industrial shed, machinery & equipment etc.), the construction of own building may be included and ceiling of construction should not usually exceed 25% of the total sanctioned project cost.
  6. The capital expenditure component including cost of construction should be upto 60% of the total project cost. The working capital cost would be upto 40%.However the financing bank can decide the criteria at the time of sanction of loan based on the nature of the product/project.

Eligibility conditions for the beneficiaries:

  1. All existing units financed under PMEGP/MUDRA Scheme whose margin money claim has been adjusted and the first loan availed should have been repaid in stipulated time are eligible to avail the benefits.
  2. The unit should have been making profit for the last three years.
  3. Beneficiary may apply to the same financing bank, which provided first loan, or to any other bank, which is willing to extend credit facility for second loan.
  4. Registration of Udyog Aadhaar Memorandum (UAM) is mandatory. v) The 2nd loan should lead to additional employment generation.

The main objective of the scheme is to assist the well-performing units for upgrading the units. The other points, which are already covered in the ongoing existing PMEGP scheme, related to eligibility of the beneficiary units, negative list, procedure for claiming the margin money by the banks and release of the margin money subsidy through existing e-portal and retaining the subsidy in TDR shall also be applicable for 2nd financial assistance. It should be ensured that the second financial assistance would be applicable only for expansion/ up-gradation in the existing/related activities of well-performing PMEGP/MUDRA units.

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Books Written by Abinash Mandilwar