In his Independence Day speech in 2008, the then prime minister Dr Manmohan Singh talked about the need of employment generation in the country. About a month later, a scheme aimed to tackle that issue was launched. Merging the erstwhile rural employment generation programme (REGP) and the prime minister’s rozgar yojana (PMRY), a new scheme called prime minister employment generation programme (PMEGP) was launched. Fortunately, it did not get buried under the dust of heavy files with new governments taking over, unlike the usual trend, and continued with the same promotional and capital investment zeal.
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Falling under the ministry of micro, small and medium enterprises (MSME)with the khadi and village industries commission (KVIC) being the nodal agency at the national level, the scheme provides loans at a subsidised rate to those wishing to start their own business but are hesitant to do so due to lack of capital or the worry of repaying the loan.
The eligibility criteria to avail the benefits are simple. One need not necessarily belong to lower economic strata or prove that he or she is in dire need of money. Anyone who is above 18 years and has not availed benefit from any other similar scheme of the government is good to go.
But what has really catalyzed PMEGP is the sanction of loan in a timely manner in the recent past. Sample this: In 2009, Sadhna Singh, who belongs to Bihar and lives in Delhi, applied for a loan of Rs 3 lakh under the scheme. It took a year for the loan to be cleared. On the other hand, Tapan Sarkar, hailing from West Bengal, applied for a loan of Rs 4.9 lakh in 2014. The loan got cleared within a week. “The major formalities in the application process were, in fact, completed in a day’s time. The staff was very helpful in ensuring timely clearance of my loan,” says Sarkar.
Moreover, a reasonable amount of subsidy is provided on the loan depending on the economic and social background of a person. For example, 15 percent of subsidy is provided to persons belonging to the general category in urban areas. This simply means that if a person has applied for a loan of Rs 10 lakh, he would have to pay back the loan with interest calculated only on Rs 8.5 lakh, as Rs 1.5 lakh would be counted as subsidy. Similarly, subsidy for the general category living in rural areas is 25 percent. Persons belonging to the special category (SC, ST, OBC and other minorities, physically handicapped or ex-serviceman) can avail 25 percent subsidy in urban area and 35 percent in rural area.
But here’s the catch. A senior official in the ministry says that to ensure applicants have reasonable amount of business launching capacity, they need to show capital. Under the scheme, people belonging to the general category have to show 10 percent of the project cost to the government, while those belonging to the special category need to have five percent of the project cost in their bank accounts. The scheme has helped many in realising their dream to be entrepreneurs. After her husband retired from the navy, Sadhna Singh was worried about the economic condition of her family, given that her two children were still studying, and that she was 48 years old. Tailoring was her hobby and Singh thought of making it her career. In 2005, her husband was diagnosed with typhoid. He later caught jaundice too and soon developed various health complications. About Rs 17-18 lakh were spent on his treatment, hardly leaving behind any savings. “It was like we had come on the streets to make a living,” says Singh. The burden of earning money was becoming heavier with each passing day. Her son was pursuing engineering that called for Rs 80,000 per annum in tuition fees. In January 2007, Singh’s husband died.
Realising that she needed to act quickly, Singh applied for a loan under PMEGP after her son read a newspaper advertisement. After waiting for a year, a loan of Rs 3 lakh was sanctioned. Singh immediately invested the money to buy raw material and sewing machines and started stitching kurtas for women. In the beginning, she had to slog to sell her products. She used to travel in public buses to various markets in Delhi, carrying samples of her products, in search of prospective buyers. Meanwhile, she managed to find buyers through various free stalls she set up at Delhi Haat, with the help of the government. She also sold her products in the open market. In four years, her hard work paid off as she was able to pay her son’s college tution fee and repay the loan. She even bought a house after her business took off.
Singh says that a major benefit of the scheme was the exposure she got of the market space. “Under PMEGP, I have set up stalls at Pragati Maidan, Delhi Haat and Khadi Gramodyog Bhavan a number of times.” To avoid providing market exposure only for a limited period, KVIC and its state subsidiaries give references of the beneficiaries to wholesale dealers. The commission also plans foreign trips for the beneficiaries to give them international exposure. Tapan Sarkar, who runs a manufacturing unit of jute bags from his residence in West Delhi, was recently invited to showcase his material in Nepal by the government. Sarkar, who has held exhibitions in Mumbai, Bhubaneswar and Bengaluru in the past one year, also sells his products to Khadi Bhavans on consignment basis.
Not everyone, though, is happy with the scheme. Munesh Kumari took a loan of Rs 6.65 lakh to start her own manufacturing unit of khadi shirts. Though she was able to use the money to buy sewing machines and start operations, Kumari is finding it difficult to break ice with prospective buyers. Apart from the stalls she had put up in Delhi Haat thrice and once in Moradabad (UP), Kumari says there is no uniform supply chain. “I have been running from shop to shop, acting like an unemployed person, asking people to buy my goods.” As she talks about her business going into losses, Kumari keeps looking at her phone waiting for recharge of internet package on her phone to be initiated. She urgently needs to send the images of her products to a shopkeeper. “I got this reference from a private company I have registered with. I am paying Rs 2,000 for their services every month, apart from the monthly loan instalments of Rs 8,000. Add to it, the salaries of my employees need to be given on time as well. There are seven tailors working here, who take Rs 3,000-4,000 per week. So much money is being invested but there seems to be no positive outcome,” laments Kumari.
Still, a major success of PMEGP is the employment chain it creates by providing loan to a single person. To run her business effectively, Sadhna Singh has employed five tailors and two salesmen. The senior tailor get Rs 15,000 per month while others get Rs 8,000-9,000. Sadhna pays Rs 9,000 per month to the salesmen. As per official figures, since its inception, the scheme has generated employment opportunities for over 25 lakh people.
yogesh@governancenow.com
(The article appears in the September 1-15, 2015 issue)
