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CA Bhavik Mehta

The Prime Minister’s Employment Generation Programme (PMEGP) is the result of the merger of two schemes – Prime Minister’s Rojgar Yojana (PMRY) and The Rural Employment Generation Programme (REGP) for generation of employment opportunities through establishment of micro enterprises in rural as well as urban areas. PMEGP is a central sector scheme to be administered by the Ministry of Micro, Small and Medium Enterprises (MoMSME). The Scheme is implemented by Khadi and Village Industries Commission (KVIC), a statutory organization under the administrative control of the Ministry of MSME as the single nodal agency at the National level. At the State level, the Scheme is implemented through State KVIC Directorates, State Khadi and Village Industries Boards (KVIBs) and District Industries Centres (DICs) and banks. The Government subsidy under the Scheme is routed by KVIC through the identified Banks for eventual distribution to the beneficiaries / entrepreneurs in their Bank accounts.


(i) 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.

(ii) 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.

(iii) To provide continuous and sustainable employment to a large segment of traditional and prospective artisans and rural and urban unemployed youth in the country, so as to help   arrest migration of rural youth to urban areas.

(iv) To increase the wage earning capacity of artisans and contribute to increase in the growth rate of rural and urban employment.

Quantum and Nature of Financial Assistance

Levels of Funding under PMEGP

Categories of beneficiaries

under PMEGP



(of project cost)

Rate of Subsidy

(of project cost)

Area (location of project/unit)



General Category




Special (including SC / ST / OBC /Minorities/Women, Ex-servicemen, Physically handicapped, NER, Hill and

Border areas etc.




 Note: (1) The maximum cost of the project/unit admissible under manufacturing sector is Rs. 25 lakh.

(2) The maximum cost of the project/unit admissible under business/service sector is Rs. 10 lakh.

(3) The balance amount of the total project cost will be provided by Banks as term loan.

Rate of Interest and Repayment Schedule:

Normal Rate of Interest as applicable to the enterprise from time to time. Repayment Schedule may range between 3 to 7 years.


No collateral security and third party guarantee are insisted. Assets created out of the bank loan should be hypothecated to Bank.

Nodal Agency:

The Khadi and Village Industries Commission (KVIC) is the nodal agency at the national level. The scheme will be implemented through KVIC and KVIB in rural areas and through DICs in both rural and urban areas.


Training for a period of 2 weeks is mandatory for all the beneficiaries. The sponsoring agency will arrange the EDP training through accredited training center on receipt of information of sanction.

Eligibility Conditions of Beneficiaries

(i) Any individual, above 18 years of age.

(ii) There will be no income ceiling for assistance for setting up projects under PMEGP.

(iii) For setting up of project costing above Rs.10 lakh in the manufacturing sector and above Rs. 5 lakh in the business /service sector, the beneficiaries should possess at least VIII standard pass educational qualification.

(iv) Assistance under the Scheme is available only for new projects sanctioned specifically under the PMEGP.

(v) Self Help Groups (including those belonging to BPL provided that they have not availed benefits under any other Scheme) are also eligible for assistance under PMEGP.

(vi) Institutions registered under Societies Registration Act,1860;

(vii) Production Co-operative Societies, and

(viii) Charitable Trusts.

(ix) Existing Units (under PMRY, REGP or any other scheme of Government of India or State Government) and the units that have already availed Government Subsidy under any other scheme of Government of India or State Government are not eligible.

 Other eligibility conditions

(i) A certified copy of the caste/community certificate or relevant document issued by the competent authority in the case of other special categories, is required to be produced by the beneficiary to the concerned branch of the Banks along with the Margin Money  (subsidy) Claim.

(ii) A certified copy of the bye-laws of the institutions is required to be appended to the Margin Money (subsidy) Claim, wherever necessary.

(iii) Project cost will include Capital Expenditure and one cycle of Working Capital. Projects without Capital Expenditure are not eligible for financing under the Scheme. Projects costing more than Rs.5 lakh, which do not require working capital, need clearance from the Regional Office or Controller of the Bank’s Branch and the claims are required to be submitted with such certified copy of approval from Regional Office or Controller, as the case may be.

(iv) Cost of the land should not be included in the Project cost. Cost of the ready built as well as long lease or rental Workshed/ Workshop can be included in the project cost subject to restricting such cost of ready built as well as long lease or rental    workshed/workshop to be included in the project cost calculated for a maximum period of 3 years only.

(v) PMEGP is applicable to all new viable micro enterprises, including Village Industries projects except activities indicated in the negative list of Village Industries. Existing/old units are not eligible.


(1) The Institutions/Production Co-operative Societies/Trusts specifically registered as such and SC/ ST/ OBC/ Women/ Physically Handicapped / Ex-Servicemen and Minority Institutions with necessary provisions in the bye-laws to that effect are eligible for Margin Money (subsidy) for the special categories. However, for Institutions /Production Cooperative Societies/Trusts not registered as belonging to special categories, will be eligible for Margin Money (Subsidy) for general category.

(2) Only one person from one family is eligible for obtaining financial assistance for setting up of projects under PMEGP. The ‘family’ includes self and spouse.

Financial Institutions

(i) 27 Public Sector Banks.

(ii) All Regional Rural Banks.

(iii) Co-operative Banks approved by State Level Task Force Committee headed by Principal Secretary (Industries)/Commissioner (Industries)

(iv) Private Sector Scheduled Commercial Banks approved by State Level Task Force Committee headed by Principal Secretary (Industries)/Commissioner (Industries).

(v) Small Industries Development Bank of India (SIDBI).

Physical verification of PMEGP Units

100% physical verification of the actual establishment and working status of each of the units, set up under PMEGP, including those set up through KVIBs and DICs, will be done by KVIC, through the agencies of State Government and/or, if necessary by outsourcing the work to professional institutes having expertise in this area, following the prescribed procedures as per General Financial Rules (GFR) of Government of India. Banks, DICs and KVIBs will coordinate and assist KVIC in ensuring 100 % physical verification. A suitable proforma will be designed by KVIC for such physical verification of units. Quarterly reports, in the prescribed format will be submitted by KVIC to the Ministry of MSME.

The following are the broad suggested criteria for distribution of state wise targets:

(i) Extent of backwardness of State;

(ii) Extent of unemployment;

 (v) Population of State/Union Territory; and

(vi) Availability of traditional skills and raw material.


Registration with the KVIC/KVIBs/State DICs under the Scheme is voluntary. No registration fee will be charged from the beneficiaries and the funds available under Forward and backward linkage will be utilized to meet expenses on documentation cost, etc.

Beneficiary will submit quarterly report about production, sales, employment, wages paid etc. to the State/Regional Director of the KVIC/KVIB/State DIC, and KVIC will in turn analyze and submit a consolidated report to the Ministry of MSME, every six months.

Negative List of Activities:
The following list of activities will not be permitted under PMEGP for setting up of micro enterprises/ projects /units:-

Any industry/business connected with Meat(slaughtered),i.e. processing, canning and/or serving items made of it as food, production/manufacturing or sale of intoxicant 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.


Any industry/business connected with cultivation of crops/ plantation like Tea, Coffee, Rubber etc. sericulture (Cocoon rearing), Horticulture, Floriculture, Animal Husbandry like Pisciculture, Piggery, Poultry, Harvester machines etc.


Manufacturing of Polythene carry bags of less than 20 microns thickness and manufacture of carry bags or containers made of recycled plastic for storing, carrying, dispensing or packaging of food stuff and any other item which causes environmental problems.


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 J&K and Cycle Rickshaw).

PMEGP have its long success story. We can see that from the following milestones.


Rs. in Crore [ Last Update Dt.14-06-13]
Year Govt. Subsidy Released by MSME Projects financed (No.) Margin Money subsidy utilized Employment opportunities created
(No of persons)
MM/ Proj Emp/ Proj
2008-09 740.00 19,166 356.23 2,04,747 1.86 10.68
2009-10 504.21 40,918 762.44 4,24,982 1.86 10.39
2010-11 877.20 49,064 891.18 4,80,613 1.82 9.80
2011-12 1010.24 55,135 1057.84 4,95,523 1.92 8.99
Total (XI Plan) 3131.65 164283 3067.69 16,05,865 1.87 9.77
2012-13 1228.44 57,078 1080.66 4,28,221 1.89 7.50
2013-14 676.50 5,955 138.01 42,001 2.31 7.05
Since inception 5036.59 2,27,316 4286.36 20,76,087 1.89 9.13

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  1. Nuba Subzwari says:

    Sir if an entrepreneur wants to have more of CC Limit & the amount of term loan is quite low then what will be the effect of subsidy in case of PMEGP scheme,
    Suppose Project cost is 10 lacks (2 lakhs fixed & 8 lacks w/c requirement) so the subsidy will be 10 *35 % = 3.5 lacs.(margin money 5% subsidy 35%)
    in this case margin money for T/L 10,000/- & T/L will be 1.9 lacs…
    Then how can that subsidy of 3.50 lacs utilized out of term loan of only Rs.1.90 lacs?
    What will be the effect of subsidy on w/c loan (CC limit)

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