PMEGP, the Prime Minister's Employment Generation Programme, is the Government of India's main credit-linked subsidy scheme for people starting a new micro enterprise outside agriculture. You take a loan from a bank, and the government pays part of the project cost as a subsidy. The Ministry of MSME runs it, with the Khadi and Village Industries Commission (KVIC) as the national agency and KVIC, the state Khadi and Village Industries Boards and the District Industries Centres handling applications in each state.
This guide covers what the scheme pays, who qualifies, how to apply and where applications go wrong. The figures come from the PMEGP scheme guidelines; the sources are listed at the end.
PMEGP is a subsidy on a bank loan, not a grant. The bank still decides whether to lend, and you still repay the loan.
How much does PMEGP pay?
The maximum project cost is ₹50 lakh for a manufacturing unit and ₹20 lakh for a service or business unit. The subsidy is a percentage of the project cost. The percentage depends on your category and on whether the unit is in an urban or a rural area:
| Category | Your own contribution | Subsidy, urban unit | Subsidy, rural unit |
|---|---|---|---|
| General | 10% | 15% | 25% |
| Special category | 5% | 25% | 35% |
Special category means SC, ST, OBC and minority applicants, women, ex-servicemen, physically handicapped applicants, and units in the North Eastern Region and in hill and border areas. Check how your exact location is classified before you assume a rate.
Two worked examples, to show the arithmetic:
- A general-category applicant sets up a ₹20 lakh manufacturing unit in a rural area. The subsidy at 25% is ₹5 lakh, the own contribution at 10% is ₹2 lakh, and the bank finances the remaining ₹13 lakh.
- A woman entrepreneur opens a ₹10 lakh service unit in a city. The subsidy at 25% is ₹2.5 lakh, the own contribution at 5% is ₹50,000, and the bank finances ₹7 lakh.
These show how the percentages work. They are not a promise of sanction.
Who can apply?
- Any individual above 18 years of age. There is no income ceiling.
- For projects above ₹10 lakh in manufacturing or above ₹5 lakh in the service sector, the applicant must have passed at least Class VIII.
- Institutions such as self-help groups, production co-operative societies and charitable trusts can also apply.
- Only new projects qualify. Existing units, and units that have already received a government subsidy under any other scheme, are not eligible. The guidelines have a separate, narrower route for upgrading units that were set up under PMEGP.
How to apply
Applications are made online on the PMEGP e-portal. Manual applications are not accepted.
- Choose your activity and confirm it is eligible under the scheme.
- Prepare a project report: the cost of machinery and working capital, expected sales, and how the loan will be repaid.
- Complete the Entrepreneurship Development Programme (EDP) training. If you have already done at least 10 days of offline or 60 hours of online training, you do not need to repeat it.
- Submit the application on the portal with your documents. These usually include identity and address proof, an education certificate where required, a category certificate if you are claiming special-category rates, the project report and your bank details. Your bank will confirm its own list.
- The application is processed by the implementing agency and sent to a bank, which appraises it and decides on the loan.
The subsidy is routed through the bank and is subject to a three-year lock-in period.
Where applications go wrong
- A project report that does not support the loan. Most rejections happen at the bank. If the sales and repayment numbers do not work, the subsidy never comes into play.
- Costs that do not match quotations. Machinery and construction figures should come from real quotations, not round numbers.
- The wrong category or area. Claiming special-category or rural rates without the certificate or the location to back them up.
- Starting before the bank has sanctioned the loan. Talk to the bank before you buy machinery or begin work.
- Assuming an existing business can apply. PMEGP is for new units.
What to check before you apply
Scheme guidelines and portal procedures change. Before you apply, read the current guidelines on the PMEGP e-portal and confirm that applications are open.
If you are planning a PMEGP application, we prepare the project report, handle the application and follow up with the bank. See our subsidy and scheme services, or message us on WhatsApp.