The Prime Minister's Employment Generation Programme (PMEGP) is India's largest flagship credit-linked subsidy initiative administered by the Khadi and Village Industries Commission (KVIC) under the Ministry of MSME. It provides substantial upfront non-refundable capital subsidies (termed "Margin Money") to establish greenfield industrial and service ventures and expand existing performing units.
In this guide
1. Project Cost Ceilings & Sectoral Coverage
The maximum permissible project cost supported under PMEGP for new business setups:
- Manufacturing Sector: Project cost up to ₹50 Lakhs (covers plant & machinery, factory civil works, and working capital margin).
- Service Sector: Project cost up to ₹20 Lakhs (covers commercial equipment, IT hardware, diagnostic devices, and operating setup).
2. Detailed Margin Money Subsidy Slabs
The government subsidy amount is categorized by applicant demographic classification and project geographic location: • General Category (Urban): 15% Subsidy | 10% Own Contribution | 75% Bank Loan • General Category (Rural): 25% Subsidy | 10% Own Contribution | 65% Bank Loan • Special Category (Urban) - Women, SC, ST, OBC, Ex-Servicemen, Divyangjan, Minorities: 25% Subsidy | 5% Own Contribution | 70% Bank Loan • Special Category (Rural) - Women, SC, ST, OBC, Ex-Servicemen, Divyangjan, Minorities: 35% Subsidy | 5% Own Contribution | 60% Bank Loan
- For example, a woman entrepreneur setting up a ₹50 Lakh food processing unit in a rural location contributes only ₹2.5 Lakhs (5%), receives ₹17.5 Lakhs (35%) as non-refundable government subsidy, and avails ₹30 Lakhs as bank term finance.
3. Second Loan for Existing Performing Units (Up to ₹1 Crore)
Entrepreneurs who previously availed PMEGP or MUDRA loans and successfully repaid all bank installments on time can apply for a Second Loan for Upgradation/Modernization: • Manufacturing units can secure up to ₹1 Crore with 15% to 20% government subsidy. • Service enterprises can secure up to ₹25 Lakhs with 15% to 20% government subsidy.
4. Critical Application Prerequisites & KVIC Portal Workflow
Applications must be submitted exclusively online via the official KVIC PMEGP portal (kviconline.gov.in/pmegp):
- Age must be 18 years or above with no income ceiling restriction.
- For projects costing over ₹10 Lakhs in manufacturing or over ₹5 Lakhs in service, the applicant must have completed at least 8th standard schooling.
- A detailed Detailed Project Report (DPR) indicating civil costs, quotation of machinery, cost of raw materials, power load, and projected profitability must be uploaded.
- Upon online sanction, the subsidy amount is placed in a 3-year term deposit receipt (TDR) in the financing bank branch and adjusted into the loan account upon successful physical verification of the operating unit.
Key takeaways
- Rural classification provides a significant 10% higher subsidy benefit compared to municipal urban zones.
- Units must complete mandatory Entrepreneurship Development Programme (EDP) training (online or physical) before disbursement.
- Avoid negative list activities: Meat processing, tobacco products, single-use polythene bags under 50 microns, and crop cultivation/agriculture cannot be financed under PMEGP.
- Always obtain genuine supplier quotations with GSTIN numbers for all capital machinery included in the project cost.
Frequently asked questions
Can partnership firms or private limited companies apply for PMEGP subsidy?
For first-time projects, only individuals (proprietorships), Self Help Groups (SHGs), and cooperative societies are eligible. Existing units applying for the 2nd loan upgradation can apply as partnerships or private limited entities.
When is the subsidy credited into the borrower account?
The subsidy (Margin Money) is disbursed to the lending bank and kept in a locked TDR for 3 years without interest. After 3 years and a physical site verification by KVIC/district officials verifying that the unit is operating, the subsidy is credited to clear the loan balance.
Official sources
General information only, not advice for your specific situation. Scheme rules and bank policies change; check the official source or talk to us before acting on it. Lending and subsidy decisions are made by banks, NBFCs and government agencies.