The Prime Minister’s Employment Generation Programme (PMEGP) is a significant initiative by the Government of India aimed at generating employment opportunities through establishing micro enterprises in both rural and urban areas. Launched in 2008, the programme offers a credit linked subsidy to individuals eager to set up industry units or factories in India.
PMEGP: Extension and Scheme Outlook
In a recent development, the Ministry of Micro, Small, and Medium Enterprises has sanctioned the extension of the PMEGP for five more years till FY26. The program continuation coincides with the 15th Finance Commission Cycle for five years from 2021-22 to 2025-26, with an outlay of Rs 13,554.42 crore.
Underlying Mechanism of PMEGP
The PMEGP scheme is centrally administered by the Ministry of Micro, Small, and Medium Enterprises (MoMSME). The Khadi and Village Industries Commission (KVIC), functioning under MoMSME, serves as the national implementing agency.
Eligibility for the program is open to any individual above 18 years of age, self-help groups, societies, production co-operative societies, and charitable trusts that have not availed benefits under any other public scheme. Only new projects or units are considered for loan sanction under this scheme.
The maximum cost of Project/Unit admissible is Rs. 50 lakh for the manufacturing sector and Rs.20 lakh for the service sector. Under the scheme, rural and urban areas receive different government subsidies according to their categorization.
Loans under PMEGP are provided by several banking institutions including Public Sector Banks, Regional Rural Banks, Co-operative Banks, and Private Scheduled Commercial Banks, all of which are approved by respective State Task Force Committee.
Significance and Impact of PMEGP
Estimated to create sustainable employment for about 40 lakh persons in five financial years, the PMEGP plays a crucial role in alleviating unemployment amongst the youth by assisting the setup of micro-enterprises in the non-farm sector. Since its initiation, about 7.8 lakh micro enterprises have been assisted with a subsidy of Rs 19,995 crore generating sustainable employment for 64 lakh individuals. Approximately 80% of the units assisted are in rural areas, and about 50% units are owned by SC, ST, and women categories.
Challenges Faced by PMEGP
While the PMEGP has seen some success, it is also faced with structural issues such as the high rate of Non-Performing Assets (NPAs). It has been noted that between 2015-16 to 2019-20, out of Rs. 10,169 crore of assistance provided, Rs. 1,537 crore has turned out to be NPA. The lack of skills, absence of effective market study, low demand, and stiff competition are some of the reasons contributing to this high number of NPAs. Another concerning aspect is that unlike other central schemes, PMEGP does not have a specific annual target.
The Way Forward for PMEGP
To enhance the effectiveness and reach of the scheme, the government needs to provide more than just financial support. Intensive training programs should be conducted to help potential entrepreneurs focus on the right market and right products. With the Covid-19 pandemic having caused a significant setback to the economy, the PMEGP could be a beneficial tool for recovery, provided there is timely disbursal of funds to execute projects and create employment. Additionally, creating awareness about the scheme will be critical to ensure maximum involvement and benefits.
