What PMEGP is, in one paragraph
The Prime Minister's Employment Generation Programme is a credit-linked subsidy scheme of the Ministry of MSME, implemented through KVIC, State KVIBs and District Industries Centres. It funds new micro-enterprises — existing units are not eligible. The bank lends the bulk of the project cost, you contribute a small margin, and a portion of the cost comes back as a margin-money subsidy once the unit is running and the lock-in is served.
Project cost ceilings and subsidy rates
The subsidy is a percentage of eligible project cost, and the percentage depends on two things: whether the beneficiary is general or special category, and whether the unit is rural or urban. Special category covers SC, ST, OBC, minorities, women, ex-servicemen, differently abled, and applicants from NER, hill and border areas.
- Applicant must be 18 or older; there is no income ceiling.
- Class VIII pass is required where project cost exceeds ₹10 lakh (manufacturing) or ₹5 lakh (service).
- Only new units qualify — units already availing a government subsidy do not.
- Margin money is kept in a locked term deposit and adjusted after the lock-in period.
| Parameter | General category | Special category |
|---|---|---|
| Maximum project cost — manufacturing | ₹50 lakh | ₹50 lakh |
| Maximum project cost — service/business | ₹20 lakh | ₹20 lakh |
| Own contribution (margin) | 10% | 5% |
| Bank finance | 90% | 95% |
| Subsidy — urban | 15% | 25% |
| Subsidy — rural | 25% | 35% |
Sections a PMEGP project report must contain
Banks reject reports for missing schedules more often than for weak numbers. A complete report runs to roughly twenty pages and contains all of the following, in this order:
- Cover page with unit name, constitution and proposed location
- Promoter profile — qualification, experience, PAN, Aadhaar, category proof
- Project details — scheme applied under, activity, and purpose of the loan
- Introduction and business profile
- Product or service description with the manufacturing/service process
- Market potential and demand justification
- Means of finance — own contribution, term loan, working capital, subsidy
- Application of funds and the fixed-asset schedule with quotations
- Working capital computation
- Projected profitability statement (P&L) for five years
- Projected balance sheet for five years
- Projected cash flow
- Term loan repayment schedule
- DSCR working
- Depreciation chart
- Break-even analysis
- Assumptions underlying the projections
- Conclusion and annexures
Where applications usually fail
- Projected sales that do not reconcile with installed capacity — the single most common query raised.
- Fixed-asset costs unsupported by quotations, or quotations that do not match the asset schedule.
- DSCR below the bank's threshold, typically 1.5 to 2 in the first full year of operation.
- Working capital computed on an assumption that contradicts the P&L cycle.
- Depreciation that does not tie back to the fixed-asset schedule, leaving the balance sheet unbalanced.