Guide to PMEGP: Employment, Margin Money Subsidy & Business Support Scheme

The Prime Minister’s Employment Generation Programme (PMEGP) is a government-backed scheme designed to promote self-employment and create employment opportunities by establishing new micro-enterprises. Whether you want to start a small manufacturing unit, open a service venture, or expand a rural enterprise, PMEGP offers financial support to make it possible. In this blog, we will delve deeper into the understanding of how this scheme works and what the eligibility requirements are. Read on to know more.

What is the Prime Minister’s Employment Generation Programme?

The Prime Minister’s Employment Generation Programme (PMEGP) is a credit-linked scheme backed by the Government of India to promote self-employment opportunities across the country. It was launched in 2008 with the sole motive of addressing the unemployment challenges by providing a chance to individuals to convert their skills into income-generating enterprises. 

PMEGP was launched by combining two previous schemes: Prime Minister’s Rajgar Yojana (PMRY) and Rural Employment Generation Scheme (REGP). This flagship scheme is administered by the Ministry of Micro, Small, & Medium Enterprises. 

This scheme is implemented by Khadi and Village Industries Commission (KVIC), which functions as the nodal agency at the national level. At the state level, State KVIC Directorates, State Khadi and Village Industries Board, District Industries Centres, and Coir Board are the implementing agencies.

The programme aims to provide access to government subsidies to young entrepreneurs, artisans, traditional craftsmen, women, and people from marginalised communities in rural and semi-urban areas. 

Key Features of the PMEGP Scheme

• PMEGP Programme: Bank-financed program for setting up microenterprises in the non-farm sector

• Sectors Covered: Manufacturing, Service, and Business Sectors

• Margin Money Subsidy: 15 - 35% on bank loans 

• Loan Amount: Up to Rs. 50 Lakhs for manufacturing projects and up to Rs. 20 Lakhs for service/business projects 

• Subsidy Rate: Up to 35% in rural areas and 25% in urban areas 

• Beneficiary Contribution: 35% in rural areas and 25% in urban areas for special categories (SC/ST/Women/Physically Handicapped/Minorities/Ex-Servicemen/NER)

• Interest Rates: As per the bank’s current rates for the remaining loan amount

Objectives of the PMEGP Scheme

MSME Sector, or Micro, Small, and Medium Enterprises, is a pillar supporting the foundation of a thriving and growing economy of India. The sector alone contributes 30% to GDP and around 45% to the country’s exports. MSMEs represent the most dominant segment of the business ecosystem as they account for nearly 90% of the enterprises and 50% of employment.

PMEGP and other schemes are initiatives that empower this sector to become self-employed and provide continuous and sustainable employment to others.  The objectives of the scheme are: 

• Generate employment opportunities in both rural and urban areas. 

• Bring together urban unemployed youth and dispersed traditional artisans and provide them with self-employment opportunities at their place.

• Improve the wage-earning capacity and per capita income of artisans and contribute to the growth of employment in both rural and urban areas.

• Provide continuous and sustainable employment to a large segment of prospective artisans and reduce the migration of people from rural to urban areas.

Who is Eligible to Avail a Government Subsidy from the PMEGP Scheme?

Whether you are an individual or a group thinking of applying to the PMEGP scheme, here are the eligibility criteria that you will have to meet: 

1. The applicant’s age should be 18 years or above. 

2. The eligible applicants are Individuals, Self-Help Groups (those belonging to BPL only if they haven’t availed benefits from any other government scheme), Production Co-Operative Societies, and Charitable Trusts.

3. No educational qualifications are required to avail a loan of Rs. 10 Lakhs for manufacturing projects and Rs. 5 Lakhs in business/service sectors. 

4. If you want a loan to set up projects worth more than Rs. 10 Lakhs in the manufacturing sector and Rs. 5 Lakhs in the business/service sectors, then beneficiaries should have an educational qualification of at least VIII standard pass.  

5. Existing units or projects that have availed a government subsidy under the PMRY, the REGP, or any other scheme by the Central Government of India or the State Government are not eligible.

What’s the Financial Assistance the PMEGP Scheme Provides?

When you apply for the PMEGP scheme, you get financial assistance for your project in the form of a government subsidy. Since the scheme is a credit-linked subsidy program, the government provides a subsidy on the project cost, and the rest is financed by banks as a term loan. 

Entrepreneurs can apply for the PMEGP scheme for projects with a maximum project cost of ₹50 lakh in the manufacturing sector and ₹20 lakh in the service sector.

Here’s a table that represents the margin money subsidy provided under PMEGP: 

Category	Subsidy (Rural Areas)	Subsidy (Urban Areas)	Beneficiary Contribution
General Category	25%	15%	10%
Special Category (SC/ST/OBC/Women, etc)	35%	25%	5%

The subsidy (urban and rural) refers to the government’s support or grant that is provided to the beneficiaries for setting up the projects. This amount is the government’s contribution to your project cost, and it doesn’t need to be repaid. 

The beneficiary contribution represents the percentage of the project cost that the entrepreneur or the applicant should invest to show commitment and ownership towards the project. 

The rest of the amount (after deducting the margin money, subsidiary, and beneficiary contribution) can be financed through banks or institutions registered with the scheme as a business loan.

Read More: Different Types of Business Loans in India

Important Things to Note

• The funding is released in multiple stages. 

• The repayment period for the loans is between 3 to 7 years after the initial moratorium period (6 months - 1 year). 

• No collateral is required for loans up to Rs. 10 Lakhs as per the Reserve Bank of India. 

• The interest rates generally remain between 11% and 12% per annum, depending on the bank. 

• Entrepreneurs are required to utilise the funds according to the project report. 

• Existing units can avail of a second loan for the expansion or to boost working capital, given that the first loan is fully repaid and the unit has shown profits for the last 3 years of its operation.

Read More: How Business Loans Take Your Business Higher?

Illustrative Example of How PMEGP Funding Works?

Imagine that the total project cost is estimated to be Rs. 10 Lakhs if you are setting up a manufacturing unit of soaps for your handmade soap business.

Given that you are from the general category and set up the unit in a village, then here’s how the PMEGP scheme will be implemented: 

1. Total Project Cost: Rs. 10 Lakhs

2. Beneficiary Contribution (10%): Rs. 1 Lakhs 

3. Bank Loan (90%): Rs. 9 Lakhs

4. Government Subsidy (25%): Rs. 2.25 Lakhs 

The financing bank sanctions Rs. 9 Lakhs as a loan for working capital, but Rs. 2.25 Lakhs of it later gets adjusted as a subsidy. This means that you only need to repay Rs. 6.75 Lakhs + interest to set up your new enterprise.

How to Apply for the PMEGP Scheme?

If you meet the eligibility criteria, then here’s how you can apply for the scheme: 

Step 1. Validate and authenticate your Aadhaar details online. 

Step 2. Visit https://www.kviconline.gov.in/ , click on PMEGP, and then click on Application for New Unit. 

Step 3. Fill the online form. 

Step 4. Save the applicant’s data. Once the data is saved, your application username and password will be sent to your registered mobile number. 

Step 5. Upload the requirement documents. 

Step 6. Submit your form. Your applicant ID will be generated, which you will receive at your email address. 

Ensure you print a copy of your application form after final submission. You can track the status of your application form submission till final disbursement and adjustment of the MM subsidy. 

You can even go through the video tutorial to understand how to proceed with form filling and application submission. 

Documents Required

• Latest passport-size photograph 

• Highest educational qualification 

• Project report summary/detailed project report 

• Social category/special category certification (if applicable) 

• Rural area certificate (if applicable) 

The documents will be uploaded online, so ensure that the scanned files are up to 1 MB in size. 

To Conclude

The scheme in India continues to be a vital programme for fostering entrepreneurship and job creation. With the implementation of the PMEGP's new guidelines, the scheme has become more accessible and efficient. The support from District Industries Centres further enhances the program's effectiveness across the nation.

For additional business financing needs beyond the scheme, explore Business Loan options from Poonawalla Fincorp. Get competitive rates, quick approvals, and flexible repayment terms, and grow your business without any financial strain.

Frequently Asked Questions

How does PMEGP help rural and urban unemployed youth?

The scheme plays a key role in supporting urban unemployed youth and traditional and prospective artisans by helping them start micro enterprises and achieve self-reliance through access to credit, MSME loans, and business training.

Can existing units apply for PMEGP?

Yes, existing businesses can apply for a second loan for the expansion projects to increase production or diversify operations only if they are eligible.

What is the maximum government subsidy?

Up to 25% in rural locations and 15% in urban areas. Certain categories, like women, physically handicapped, or SC/ST entrepreneurs, can avail of enhanced benefits.

What is the loan repayment tenure?

Typically ranges from 3 to 7 years, depending on the project's nature and the bank's policy.

How does the PMEGP e-portal help applicants?

It supports online filing, document submission, project tracking, and transparent communication between applicants and financing institutions.

Is Entrepreneurship Development Training mandatory?

While sometimes optional, many banks require applicants to complete EDP training before amount sanction to ensure business viability.