Prime Minister’s Employment Generation Programme | Economics Optional Notes for UPSC PDF Download

The PMEGP Scheme

• Initiation: In 2008, the Government of India sanctioned the launch of the Prime Minister's Employment Generation Programme (PMEGP), a credit-linked subsidy program aimed at generating employment opportunities through the establishment of micro-enterprises in both rural and urban areas. The scheme empowers entrepreneurs to establish factories or units.
• Administration: Administered by the Ministry of Micro, Small and Medium Enterprises (MoMSME), PMEGP is a central sector scheme. The implementing agency at the national level is the Khadi and Village Industries Commission (KVIC), a statutory organization under the administrative control of the Ministry of MSME.

Features:

Eligibility:

• Individuals aged 18 and above are eligible. Only new projects/units are considered for loan sanction. Self-help groups without benefits from other public schemes, societies, production co-operative societies, and charitable trusts are also eligible.

Maximum Cost of Project/Unit Admissible:

• Manufacturing Sector: Rs. 50 lakh
• Service Sector: Rs. 20 lakh

Government Subsidy:

• In rural areas, 25% for the general category and 35% for special categories, including SC/ST/OBC/Minorities, NER, Hill and Border Areas, transgender, physically disabled, north-eastern region, aspirational and border district applicants. In urban areas, 15% for the general category and 25% for special categories.

Role of Banks:

• Loans are provided by Public Sector Banks, Regional Rural Banks, Co-operative Banks, and Private Scheduled Commercial Banks approved by the respective State Task Force Committee.

Changes:

• The scheme's definition of village industry and rural area has been revised. Areas under Panchayati Raj institutions are now considered rural, while those under Municipality are treated as urban.

Significance:

• The PMEGP scheme is expected to create sustainable employment opportunities for approximately 40 lakh individuals over five financial years. It aims to foster employment generation for unemployed youth nationwide by supporting the establishment of micro-enterprises in the non-farm sector. Since its inception in 2008-09, the scheme has assisted about 7.8 lakh micro-enterprises, providing a subsidy of Rs 19,995 crore and generating an estimated sustainable employment for 64 lakh individuals. Approximately 80% of the assisted units are in rural areas, with about 50% owned by SC, ST, and women categories.

What are the Challenges?

• The scheme grapples with structural issues and a high rate of Non-Performing Assets (NPAs). In the period from 2015-16 to 2019-20, Rs. 10,169 crore in assistance was provided, with Rs. 1,537 crore turning into NPAs.
• The prevalence of NPAs is attributed to skill deficiencies, inadequate market research, low demand, and intense competition. Unlike most central schemes with defined annual targets, this scheme lacks such targets. The absence of specific annual disbursement goals for both states and banks may lead to a loss of momentum for the program.

Way Forward

• Beyond offering financial assistance, the government should implement an extensive training program to help potential entrepreneurs identify suitable markets and products. The scheme can prove beneficial for economic recovery from the impacts of the Covid-19 pandemic, emphasizing the critical importance of timely fund disbursal for project execution and employment creation.
• The government must concentrate on the micro segment by providing enhanced technology and marketing support, recognizing that financial support alone is insufficient. Addressing the awareness gap about the scheme poses another significant challenge that needs attention.