How to use PMEGP scheme to fund your business up to Rs 25 lakh

Till 2008, the government implemented the Prime Minister's Rozgar Yojana (PMRY) and Rural Employment Generation Programme (REGP) to boost employment by establishing micro enterprises. The two schemes were merged and named the Prime Minister's Employment Generation Programme (PMEGP).

PMEGP is a credit-linked subsidy programme aimed at generating self-employment opportunities.

As India recovers from the economic impact of the COVID-19 pandemic, PMEGP looks to empower people to establish their own businesses and create jobs.

Here's all you need to know about PMEGP and how to avail its benefits:

More about PMEGP

PMEGP is administered by the Ministry of Micro, Small, and Medium Enterprises and implemented by the Khadi and Village Industries Commission (KVIC), which functions as the nodal agency at the national level. At the state level, PMEGP is implemented through State KVIC Directorates, State Khadi and Village Industries Boards (KVIB), District Industries Centres (DIC), and banks.

A Financial Express report, citing MSME Ministry data, says PMEGP had disbursed margin money (subsidy) of Rs 1,279.72 crore as of January 31, 2021. According to data from KVIC, margin money worth Rs 1,621 crore was claimed as of February 22, 2021, adds the report.

Eligibility and rate of subsidy

Any individual above 18 years of age can avail the scheme. The person should be at least an eighth standard pass for projects costing above Rs 10 lakh in the manufacturing sector and above Rs 5 lakh in the business/service sector.

The project should be new and self-help groups (including those belonging to below the poverty line, provided they have not availed benefits under any other scheme), institutions registered under Societies Registration Act of 1860, production cooperative societies, and charitable trusts are also eligible. 

The maximum cost of the project/unit admissible in the manufacturing sector is Rs 25 lakh and in the business/service sector, Rs 10 lakh.

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Initially, the guidelines stated that existing units (under PMRY, REGP or any other scheme of the central government or a state government) and units that have already availed subsidy under any other scheme of the central government or state governments are not eligible.

However, a second dose of financial assistance was allowed under the scheme for expansion/upgrading existing PMEGP/MUDRA units. The financial assistance provided under this is up to Rs 1 crore for manufacturing units and up to Rs 25 lakh for service units. There is also a subsidy of 15 percent for non-North Eastern Region (NER) and 20 percent for NER and hilly states.

The rate of subsidy (in percentage of project cost) in the general category is 15 percent in urban areas and 25 percent in rural areas. In special categories such as SC/ST/OBC/minorities/women, ex-servicemen, physically handicapped, NER, hilly, and border areas, the rate is 25 percent in urban areas and 35 percent in rural areas.

The balance amount of the total project cost is provided by banks in the form of term loan and working capital.

How to apply

State/Divisional Directors of KVIC, in consultation with KVIB and Director of Industries of respective states (for DICs), post advertisements locally in print and electronic media inviting applications, along with project proposals from prospective beneficiaries desirous of establishing the enterprise/starting of service units under PMEGP.

The beneficiaries can also submit their applications online at www.kvic.org.in/kviconline.gov.in/pmegpeportal or look up the list of office addresses of KVIC/KVIB/DIC on the KVIC website.

Click here for more information on the scheme.