90% to 95% Loan and 15% to 35% Capital Subsidy under PMEGP scheme in India

90% to 95% Loan and 15% to 35% Capital Subsidy under PMEGP scheme in India

In August 2008, Government of India approved a new credit linked subsidy programme called Prime Minister’s Employment Generation Programme.

The Prime Minister Employment Generation Programme (PMEGP) is a Government of India-backed credit-linked subsidy scheme. Under this scheme, beneficiaries can get a subsidy amounting to 15-35% of the project cost from the government. PMEGP is an initiative of the Ministry of Micro, Small and Medium Enterprises and is implemented at a national level by the Khadi and Village Industries Commission (KVIC). As an entrepreneur, PMEGP can give you the financial assistance required to set up a new project. Read on to know more about the PMEGP scheme.

What are the objectives of the PMEGP scheme?

• To produce employment opportunities in India’s urban and rural areas by establishing new self-employment projects, micro-enterprises and ventures.
• To facilitate self-employment opportunities for widely dispersed traditional artisans/ unemployed rural and urban youth to the degree feasible at their location.
• To generate sustainable and continuous employment for rural and unemployed youth and thereby halt their migration to urban areas.
• To boost artisans’ income-earning capacity and spur the growth rate of both rural and urban employment.

1 : What is maximum project cost allowed under PMEGP?

A : Rs.50.00 lakhs for manufacturing unit and Rs.20.00 lakhs for Service Unit.

2 : Whether cost of land can be included in the project cost?

A : No.

3 : How much Margin Money (Govt. Subsidy) is admissible?

Categories of beneficiaries under PMEGP                                                     Rate of (Margin Money) Subsidy (of project cost)

Area (location of project/unit)                                                                            Urban                                 Rural

General Category                                                                                                    15%                                     25%

Special (including SC/ST/OBC/Minorities/Women/Transgender,

Ex-servicemen, Physically handicapped, NER, Hill & Border areas etc.        25%                                      35%

How much subsidy can you get through the PMEGP loan scheme?

Beneficiary categories           Beneficiary’s share                         Subsidy rate (from govt.)                Subsidy rate (from govt.)

…………………………………………………     (of total project)                                         Urban                                                           Rural

General                                                     10%                                                        15%                                                              25%

Special                                                       5%                                                        25%                                                              35%

What is the PMEGP loan limit?

The PMEGP loan limit is Rs. 18.00 to Rs. 47.50 lakh. The maximum project cost for the manufacturing sector is capped at Rs. 50 lakh and capped at Rs. 20 lakh for the business/ service sector. The beneficiary makes a 5 to 10% contribution, and the bank sanctions the remaining 90 to 95%.

In actuality, your bank credit will amount to only 60% to 75% of the project’s cost as you receive the remaining 15 to 35% as margin money through the PMEGP scheme. Banks provide the balance amount of the project’s cost as a term loan.

4 : What are the component of project cost?

A : Capital Expenditure(Term Loan) Loan, working capital and 10% of project cost as own contribution in case of General category and 5% of project cost in case of weaker section.

5 : Who are the beneficiaries?

A : Individual Entrepreneurs Only.

6 : Which are the financial agencies?

A : All Public Sector Banks ,Regional Rural Banks(RRB), Co-operative Banks,SIDBI and Private Scheduled Commercial Banks regulated by RBI and approved by SLMC of concern State.

7: Where does the beneficiary has to submit his/her application/ Project?

A : Beneficiary can submit his/her application/Project online on kvic website kviconline.gov.in / pmegpeportal. List of office addresses of KVIC/KVIB/DIC/COIR are available at our website.

8 : What is the Employment Criteria ?

A : Any Village Industry (except those mentioned in the negative list) located in the Rural/Urban Area which produces any goods or renders any service with or without the use of power and in which the fixed capital investment per head of a full time artisans or worker does not exceed Rs.3.00 lakh in plain area and Rs.4.50 lakhs in hilly areas and for A & N Island and Lakshadweep Rs.4.5 Lakhs.

9: What is rural area ?

A : Any area classified as Village as per the revenue record of the State/UT, irrespective of the population. All the areas, irrespective of Population, following unde Panchayat Raj Institutions.

10 : What is Age limit ?

A : Any adult beneficiary above 18 years is eligible for assistance under PMEGP.

11 : What are the main criteria of project?

A : It should fulfill the criteria of rural area (for Rural Area project), per capita investment, own contribution, negative list and the unit should be new one.

12 : Whether EDP training is compulsory?

A : Before MM Claim through PMEGP eportal, EDP training of 10 working days for Project cost More than 5.00 lakhs and 5 Working days training for upto Project Cost 5.00 lakhs by the beneficiary is compulsory. EDP Training is not Mandatory for Projects Upto Rs.2.00 Lakhs.

13 : Whether collateral security is mandatory?

A : As per RBI guidelines the project costing upto Rs.10.00 lakhs under PMEGP loans are free from collateral security. The CGTMSE provided collateral guarantee for the project upto Rs. 2.00 Crore.

14 : What is the helpline for the beneficiary in preparation of the project ?

A : Model projects are available in PMEGP ePortal.

15 : Whether an entrepreneur can submit more then one project ?

A : No.

16 : What is the definition of family ?

A : Self and Spouse.

17 : Whether Unit can be set up in urban Area.?

A : Yes through All Implementing Agencies.

18 : Whether existing unit can avail funds under PMEGP ?

A : No, only new unit are eligible except for 2nd Loan for existing (REGP/PMEGP/MUDRA) units .

19: Whether model projects are available with KVIC.

A : yes, Industry wise model projects are available at kvic.org.in.

20 : where training centers are available to undertake EDP?

A : List of EDP training centers including 582 training center of RSETI/RUDSETIS are available at our website kvic.org.in.

21 : What is lock in period for Govt. Subsidy?

A : 3 years.

22 : Can project be financed jointly from two different sources (Bank/Financial Institutions)?

A : No, it is not eligible.

23 : How much own contribution is to be deposited?

Categories of beneficiaries under PMEGP                                                                                      Own contribution (of project cost)

General Category                                                                                                                                               10%

Special (including SC / ST / OBC /Minorities/Women/Transgender, Ex-servicemen,

Physically handicapped, NER, Hill and Border areas etc.)                                                                           05%

24 :Which Activity (Industry) Not allowed under PMEGP Scheme ( Negative List)?

A : The Following list of activities will not be permitted under PMEGP for setting up of micro enterprises/ projects/ units.

1. 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/Paan/Cigar/Cigarette etc. Hotels or Dhaba or Sales outlet serving liquor, preparation/producing tobacco as raw materials, tapping of toddy for sale will not be allowed.

(a) However, serving/selling non-vegetarian food at Hotels/Dhabas will be allowed.

1. Activities prohibited by Local Government/Authorities keeping in view environment or Socio-economic factors will not be allowed.

iii. Manufacturing of polythene carry bags of less than 75 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. Thickness of polythene carry bags shall be governed by the Ministry of Environment, Forest and Climate changes notification for plastic waste management rules and amendments from time to time.

1. Any Industry/Business connected with cultivation of crops/plantation like Tea, Coffee, Rubber etc. sericulture (Cocoon rearing), Horticulture, Floriculture, Animal Husbandry will not be allowed.

(a) However, value addition under these will be allowed under PMEGP. Off Farm/Farm Linked activities in connection with sericulture, horticulture, floriculture etc. will be allowed.

Following industry/Business connected with Animal Husbandry will also allowed:

(a) Dairy-Milk and other dairy products through primarily Cows but also sheep, goats, camels, buffaloes, horses, and donkeys.

(b) Poultry-Poultry, kept form their eggs and for their meat, include chickens, turkeys, geese and ducks.

(c) Aquaculture-It is the farming of aquatic organisms including fish, molluscs, crustaceans and aquatic plants

(d) Insects -Including Bees, Sericulture, etc.

(As a special case piggery, which is a major source of livelihood in NER may also be allowed in NER states only).

Does a PMEGP loan require collateral?

Projects costing up to Rs. 10 lakh do not require security as per RBI guidelines. For projects with costs ranging from Rs. 5 lakh to 25 lakh, CGTSME provides a collateral guarantee. The PMEGP loan process is different for projects costing over Rs. 10 lakh as you may need to provide security as per your lender’s terms.

What is the PMEGP loan interest rate?

Loans under the PMEGP scheme incur regular interest rates between 11 and 12%.

What are the main PMEGP loan details?

• Banks sanction funding up to 90% to 95% of the project cost
• On this, the government provides 15% to 35% as margin money or PMEGP subsidy
• The bank provides the remaining 60% to 75% as a term loan
• Interest rates are regular, from 11% to 12%
• Repayment tenor is 3 to 7 years after a preliminary moratorium

Who can apply for a PMEGP loan?

Here is the list of persons who can apply for funding for new projects under the PMEGP scheme.

• Any individual who is above 18 years of age
• The person should have passed at least the 8th standard for a manufacturing sector project costing above Rs. 10 lakh, and a business/ service sector costing above Rs. 5 lakh
• Self-help groups (even those falling under BPL provided that the SHG has not obtained benefits from another scheme)
• Institutions registered under the Societies Registration Act,1860
• Production co-operative societies
• Charitable trusts

However, units already benefiting under a state or central government scheme cannot avail of a PMEGP loan.

What are the documents required when making a PMEGP loan application?

Here are some documents you may need to produce when applying for the PMEGP loan scheme:

• Aadhaar card
• PAN card
• Project report
• Special category certificate, if required
• Rural area certificate
• Education/ skill development training/ EDP certificate
• Authorization letter

How to make a PMEGP online application

• To start with PMEGP online, apply via the e-portal of KVIC (Khadi and Village Industries Commission)
• Click on ‘online application form for individual’/ ‘online application form for non-individual’
• Fill out the entire form by entering details like name, sponsoring agency, type of activity, first financing bank
• When done, click on ‘save applicant data’
• Then, upload documents and prepare for final submission
• Post final submission, you will get an application ID and a password sent to your registered mobile number

Rajesh Savaniya