PMEGP Loan Project Report: Subsidy Up to 35% and How to Apply

PMEGP is a government scheme that pays part of the cost of a new micro unit as a subsidy on a bank loan. The subsidy is 15% to 35% of a project costing up to Rs 50 lakh in manufacturing or Rs 20 lakh in services. You apply online, upload a project report, and the bank funds the rest.

How much subsidy can you get?

Rural or urban depends on where the unit sits. An area under a panchayat counts as rural; an area under a municipality counts as urban. If your project costs more than Rs 50 lakh (manufacturing) or Rs 20 lakh (services), the bank may lend the extra, but no subsidy is paid on it.

The subsidy is called margin money and is back-ended. It is not cash in your hand. It is held against your loan for a lock-in period, three years in the scheme papers we read, and then adjusted. If at the end of the third year you have spent less than the sanctioned amount, the excess subsidy goes back to KVIC.

Who can apply, and who cannot?

• Any individual above 18. There is no income ceiling.
• Class VIII pass for projects above Rs 10 lakh in manufacturing or above Rs 5 lakh in services.
• Only one person per family, and family means you and your spouse.
• Existing units, and units that already took a subsidy under another central or state scheme, are not eligible.
• Projects with no capital spending are not eligible.
• Pure trading is allowed only in limited cases, such as certain regions or outlets backed by manufacturing or service. A plain resale business usually does not qualify.

Running an online store? A unit that makes or processes what it sells, such as packaged foods, garments or candles, fits the scheme. Buying and reselling, by itself, mostly does not.

What goes into the project cost?

Machinery, equipment, furniture, installation, and working capital. Rent or lease of a ready work shed can be counted for up to three years. Working capital can be at most 40% of the project cost for manufacturing and 60% for service units. Land is never counted.

A worked example

A woman in a village plans a spice grinding and packing unit. Her project cost:

She is in the special category and in a rural area. Her own contribution is 5%, Rs 75,000. The bank lends 95%, Rs 14,25,000. The subsidy is 35%, Rs 5,25,000, held against the loan for the lock-in period. Working capital is under 15% of the cost, well inside the 40% limit. As the project is above Rs 10 lakh in manufacturing, she needs a Class VIII pass.

The same project for a general category applicant in a town: own contribution Rs 1,50,000, subsidy 15%, Rs 2,25,000. The difference in subsidy is Rs 3 lakh, which is why the category and location in your application must be right and backed by certificates.

How to apply, step by step

1. Choose an activity and location. Check it is not on the scheme's negative list and that it involves real capital spending.
2. Collect quotations. Every machine and fitting in the report should have one.
3. Prepare the project report. Model project reports for many activities are on the PMEGP portal. Use them as a starting point, then put in your own prices and market.
4. Apply online on the PMEGP portal run by KVIC. Aadhaar is authenticated first. Upload the project report, education or training certificate, and caste, special category or rural area certificates as they apply to you.
5. Appraisal. The implementing agency (KVIC, the state KVIB or the District Industries Centre) scores the application and forwards it to the bank you chose.
6. Training. The scheme expects entrepreneurship development (EDP) training. If you already did at least 10 days offline or 60 hours online, you need not repeat it.
7. Sanction and release. The bank sanctions the loan, you set up the unit, and the subsidy is claimed through the bank.

The mistake people usually make

The usual mistake is inflating the project cost to get a bigger subsidy. The scheme papers say exaggeration of cost only to get more subsidy should not be allowed, and the bank checks quotations. Worse, if you do not actually spend the sanctioned amount, the unspent share of the subsidy is taken back.

The second mistake is copying a model project report as it is. Those reports use sample prices and capacities. A banker who has seen the same template ten times will ask where your numbers come from.

The third is choosing a resale business and finding it ineligible after weeks of paperwork. Check the activity first.

Need only a small loan without subsidy? A Mudra loan may be simpler. For what any bank report should contain, see project report for a bank loan.

Frequently asked questions

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