E-Paper
Programme for micro-enterprises: No set targets, flagship scheme losing steam
Prime Minister’s Employment Generation Programme (PMEGP), under which banks offer subsidies worth up to ₹25 lakh to start new micro-enterprises, is run by the micro, small and medium enterprises (MSME) ministry with the help of the Union finance ministry.
A flagship programme of the Union government to help set up new micro-enterprises is crippled by structural issues and high rate of non-performing assets (NPA), its latest review has underlined.
Prime Minister’s Employment Generation Programme (PMEGP), under which banks offer subsidies worth up to ₹25 lakh to start new micro-enterprises, is run by the micro, small and medium enterprises (MSME) ministry with the help of the Union finance ministry.
The programme is available for any individual above 18, who have passed at least class 8 examination. While only new projects are considered for sanction of loans under PMEGP, self-help groups that have not availed benefits under any other public scheme, societies, production co-operative societies, and charitable trusts are also eligible. It allows entrepreneurs to set up factories or units by depositing a small part (margin money) of the total project cost with banks, which would fund the units. After a factory runs successfully for three years, the bank would return a lion’s share of the margin money.
From 2015-16 to 2019-20, public sector banks sanctioned 2,07,639 accounts and assistance of ₹10,169 crore was allotted, according to official data. Out of these, 82,398 accounts in the manufacturing sector were given ₹5,139 crore and 1,25,241 accounts in service sector got the assistance of ₹5,030 crore.
But at a recent official meeting on audit, MSME secretary AK Sharma and Pankaj Jain, additional secretary (banking) said out of the allotment, ₹1,537 crore has turned out to be NPA. The officials also pointed out that more than 15% NPA in the MSME business is much higher than the global average of 11% for the sector.
Officials observed that a deficiency in skills, lack of market study, low demand and stiff competition were the key reasons for such a large number of NPAs.
Out of the 1,537 NPA firms, 738.14 are in manufacturing and 799.39 are in the services sector, which is otherwise a robust area in the Indian economy.
Officials also pointed out that while normally all central schemes are given definite annual targets, this scheme was not driven by any such target. As both the states and the banks worked without the aim of completing the annual target of disbursement of loans, the programme lost the drive.
It has been also observed that earlier the banks had set up a long-drawn process to fund projects and most of the projects took a long time to get approvals.
To revive the project, the government is now planning to introduce a single window, online clearance for entrepreneurs so that they can get the money easily. The Centre also plans to conduct an intensive training programme to help potential entrepreneurs focus on the right market and right products, officials said.
