- Prime Minister Employment Generation Program (PMEGP)
- Surety Bond
Focus: Government Policies and Interventions
Why in News?
Since its inception in 2008-09, about 8.34 lakh units have been assisted with Margin Money subsidy of Rs. 20,643 cr. generating estimated employment for about 68 lakh youths across the country.
Prime Minister Employment Generation Program (PMEGP)
- The Prime Minister’s Employment Generation Programme (PMEGP) the result of the merger of two schemes – Prime Minister’s Rojgar Yojana (PMRY) and The Rural Employment Generation Programme (REGP).
- PMEGP is a credit-linked subsidy scheme which promotes self-employment through setting up of micro-enterprises, where subsidy up to 35% is provided by the Government through Ministry of MSME for loans up to ₹25 lakhs in manufacturing and ₹10 lakhs in the service sector.
- PMEGP was established for generation of employment opportunities through establishment of micro enterprises in rural as well as urban areas.
- PMEGP is a central sector scheme administered by the Ministry of Micro, Small and Medium Enterprises (MoMSME).
- At the national level, the Scheme is being implemented by Khadi and Village Industries Commission (KVIC), a statutory organization under the administrative control of the Ministry of MSME as the single nodal agency.
- At the State level, the Scheme will be implemented through State KVIC Directorates, State Khadi and Village Industries Boards (KVIBs) and District Industries Centres (DICs) and banks.
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Focus: GS III: Indian Economy
Why in News?
Union Minister for Road Transport and Highways launched one of India’s first-ever Surety Bond Insurance product from Bajaj Allianz.
What is a Surety Bond?
- A surety bond is a legally binding contract entered into by three parties—the principal, the obligee, and the surety.
- The obligee, usually a government entity, requires the principal, typically a business owner or contractor, to obtain a surety bond as a guarantee against future work performance.
- Surety bonds are mainly aimed at infrastructure development, mainly to reduce indirect cost for suppliers and work-contractors thereby diversifying their options and acting as a substitute for bank guarantee.
- Surety bond is provided by the insurance company on behalf of the contractor to the entity which is awarding the project.
- Surety bonds protect the beneficiary against acts or events that impair the underlying obligations of the principal. They guarantee the performance of a variety of obligations, from construction or service contracts to licensing and commercial undertakings.
IRDAI guidelines for surety bonds:
- The premium charged for all surety insurance policies under written in a financial year, including all instalments due in subsequent years for those policies, should not exceed 10 per cent of the total gross written premium of that year, subject to a maximum of Rs 500 crore.
- The limit of guarantee should not exceed 30 per cent of the contract value. Surety Insurance contracts should be issued only to specific projects and not clubbed for multiple projects.