In the initial five months (April to August) of the financial year 2020-2021, project approvals under the Prime Minister’s Employment Generation Program (PMEGP) rose by an impressive 44%. The Khadi and Village Industries Commission (KVIC) sanctioned approximately 1.03 lakh project applications for bank consideration during this period. Comparatively, the number stood at 71,556 projects in the same duration in 2019. This elevation in project approvals indicates the government’s determination to encourage self-employment and build a sustainable livelihood for the population via advocating local production.
The Initiation of PMEGP
The Government of India gave its nod to the PMEGP, a credit linked subsidy program, in 2008. The primary aim was to generate employment opportunities through the formation of micro enterprises in both rural and urban regions.
Administration and Management of PMEGP
The Ministry of Micro, Small, and Medium Enterprises (MoMSME) administers the PMEGP, which is a central sector scheme. The national level implementation is performed by the KVIC, a statutory body functioning under the administrative jurisdiction of the MoMSME.
PMEGP Features and Eligibility
The scheme facilitates entrepreneurs to establish factories or units. The eligibility criteria include any individual aged 18 years or above, self-help groups not previously benefitted from any other public scheme, societies, production co-operative societies, and charitable trusts.
Project Cost and Government Subsidy
For the manufacturing sector, the maximum permissible cost for any project or unit is Rs. 25 lakh, while for the service sector, it is capped at Rs.10 lakh. In rural areas, the government subsidizes 25% for the general category and 35% for the special category. In urban regions, the subsidies are 15% for the general category, and 25% for the special category.
The Role of Banks
Many financial entities provide loans, including Public Sector Banks, Regional Rural Banks, Co-operative Banks, and Private Scheduled Commercial Banks authorized by the respective State Task Force Committee. To aid PMEGP and Mudra units in expanding or upgrading, MoMSME has launched a ‘second financial assistance’ scheme.
Challenges Faced by PMEGP
The PMEGP grapples with structural problems and an escalated rate of Non-Performing Assets (NPAs). From 2015-16 to 2019-20, assistance worth Rs. 10,169 crore was granted. However, it is alarming that out of this, Rs. 1,537 crore turned out to be NPA. The underlying causes for such high NPAs include skill dearth, inadequate market research, diminished demand, and intense competition.
A Way Forward
Aside from offering financial support, the government needs to roll out extensive training programs to enable potential entrepreneurs to channel their focus towards the right products and markets. This scheme could prove to be a catalyst in reviving the economy from the impacts of the Covid-19 pandemic. It is of utmost importance to ensure timely fund disbursements for successful project execution and employment creation in the nation.