PM-SETU Scheme 2026:How India's ₹60,000 Crore ITI Upgradation Works
India's Industrial Training Institutes (ITIs) train the electricians, fitters, welders and technicians that factories run on. Yet for years, employers have complained that ITI graduates arrive trained on outdated machines, and many ITI seats have gone unfilled. The PM-SETU scheme is the government's biggest attempt to fix that, by handing the management of upgraded government ITIs to industry. This guide explains what PM-SETU is, how its hub-and-spoke model and industry-led SPVs work, who can participate as an industry partner, what it means for students and MSMEs, and where the scheme actually stands one year after launch.
Benefits of PM-SETU
Modern Labs
Upgraded hub ITIs get modern machines, labs and digital learning tools, so students train on equipment similar to what they'll use on the factory floor after completing their ITI course.
New-Age Courses
The DGT has introduced 32 new-age courses under the Craftsmen Training Scheme, covering AI, cyber security, electric vehicles and drones, which states can adopt in PM-SETU clusters.
Better Placements
Industry partners who manage clusters have a direct interest in hiring trained graduates, which improves apprenticeship, on-the-job training and placement opportunities for ITI students.
Trained Trainers
Component II strengthens NSTIs for training of trainers. 3,744 trainers had been trained through NSTIs by October 2026, improving teaching quality across upgraded ITIs.
Regional Reach
The spoke model brings better training to smaller towns and districts, so students don't have to move to big cities for industry-relevant skills.
PM-SETU Scheme: Quick Details
How a PM-SETU Cluster Gets Approved
Identify Clusters
States and UTs identify ITI clusters based on regional industrial potential and emerging skill needs. Most states have identified clusters and set up dedicated PM-SETU budget heads.
Invite Industry
States issue an Expression of Interest (EOI) inviting anchor industry partners. Interested companies, PSUs, industry associations or foundations respond with their interest in a specific PM-SETU cluster.
Run RFP
Shortlisted partners go through a competitive Request for Proposal. Some states have reached this stage, while others are still at the EOI stage, so timelines vary widely by state.
Submit SIP
The selected partner prepares a Strategic Investment Plan (SIP) covering infrastructure, courses, training delivery, equipment, industry exposure and placement targets for the hub and its spoke ITIs.
Get Approval
The SIP is reviewed by the State Steering Committee and then approved by the National Steering Committee. Approval fixes the investment amount and outcomes the PM-SETU cluster must deliver.
Form SPV
A non-profit Section 8 company is formed as the cluster SPV. The industry partner holds 51%, while the Centre and State hold 24.5% each, and the SPV then manages the cluster.
Identify Clusters
States and UTs identify ITI clusters based on regional industrial potential and emerging skill needs. Most states have identified clusters and set up dedicated PM-SETU budget heads.
Invite Industry
States issue an Expression of Interest (EOI) inviting anchor industry partners. Interested companies, PSUs, industry associations or foundations respond with their interest in a specific PM-SETU cluster.
Run RFP
Shortlisted partners go through a competitive Request for Proposal. Some states have reached this stage, while others are still at the EOI stage, so timelines vary widely by state.
Submit SIP
The selected partner prepares a Strategic Investment Plan (SIP) covering infrastructure, courses, training delivery, equipment, industry exposure and placement targets for the hub and its spoke ITIs.
Get Approval
The SIP is reviewed by the State Steering Committee and then approved by the National Steering Committee. Approval fixes the investment amount and outcomes the PM-SETU cluster must deliver.
Form SPV
A non-profit Section 8 company is formed as the cluster SPV. The industry partner holds 51%, while the Centre and State hold 24.5% each, and the SPV then manages the cluster.
PM-SETU Industry Partner Eligibility
Companies
Credible companies and manufacturers with operations in India can apply as anchor industry partners. They are expected to bring sector expertise, hiring demand and the ability to run training at scale.
PSUs
Public sector undertakings can participate, though reports indicate they may need additional approvals, including from DIPAM, to take equity in an SPV. A tripartite SPV structure has been under consideration.
Associations
Industry associations and consortia can join as partners, which allows groups of MSMEs to participate collectively instead of one large company carrying the entire PM-SETU cluster alone.
Foundations
Industry-led foundations and CSR arms, such as Tata Steel Foundation in Odisha, can act as anchor partners, aligning skilling investment with their existing CSR and community programmes.
Training Institutions
Academic or training institutions promoted or operated by industry can also qualify. States may add their own conditions, so check each state's EOI before applying.
Financial threshold
States set specific criteria in their EOI or RFP documents. One state official was reported as citing a turnover requirement of ₹2,000 crore in each of the last three financial years, which would exclude most MSMEs from leading a cluster alone. Partners are also expected to contribute around 10% of funding.
How the PM-SETU Hub-and-Spoke Model Works
Funding Structure
PM-SETU Latest Progress (October 2026)
Latest approvals (16 October 2026): Five clusters worth ₹1,194.92 crore:
FAQs
What is PM-SETU?
PM-SETU is a centrally sponsored scheme that upgrades 1,000 government ITIs into industry-managed clusters. Instead of the government alone deciding courses, buying equipment and running training, each cluster is run by a Special Purpose Vehicle (SPV) in which an industry partner holds the majority stake.
The idea is simple: the companies that hire ITI graduates should shape what those graduates learn, on the machines they will actually use.
The scheme has two components:
Component I: Upgrading 1,000 government ITIs in a hub-and-spoke structure.
Component II: Strengthening five National Skill Training Institutes (NSTIs) at Bhubaneswar, Chennai, Hyderabad, Kanpur and Ludhiana as sector-specific National Centres of Excellence, including training of trainers.
Why PM-SETU Matters
Seat Vacancies
A large share of ITI seats goes unfilled. Government ITI vacancy rates were reported at 46%, 42% and 39% across 2021-22 to 2023-24, signalling that students don't see enough value in many ITI courses.
Outdated Training
Employers frequently cite obsolete equipment, old curricula and weak industry links in ITIs. PM-SETU puts industry in charge of upgrading labs, courses and training delivery to close that gap.
Manufacturing Push
India's manufacturing growth needs skilled technicians at scale. Upgraded ITI clusters near industrial hubs can supply trained workers for MSMEs and large manufacturers in electronics, automotive, EV and capital goods sectors.
Earlier Lessons
A previous ITI upgradation effort ran until 2024 with limited reach. PM-SETU is far larger and shifts from government-run upgrades to industry-led management with outcome-linked financing.
What This Means for MSMEs
Most MSMEs won't qualify to lead a cluster, but they can still benefit:
Join through an industry association that bids as an anchor partner.
Partner with the SPV as a training, apprenticeship or placement partner in your district.
Hire from upgraded clusters: Trainees on modern equipment reduce your on-the-job training costs.
Offer apprenticeships: Combine PM-SETU trainees with the National Apprenticeship Promotion Scheme (NAPS), which supports part of the stipend.
Shape local courses: SPVs need industry inputs on trades. Engage with your State Steering Committee or nearby hub ITI.
Challenges to Watch
PM-SETU is ambitious, and early reports show real hurdles:
Slow industry response: High turnover thresholds and the funding contribution have kept many companies away.
PSU approvals: Public sector participation needs extra clearances.
Rural clusters: Finding anchor industries far from industrial belts is hard.
Inclusion: World Bank assessments flag the risk of excluding women, SC/ST trainees and persons with disabilities without targeted measures.
Pace: Against a 1,000-ITI target, only a small share of clusters had approved investment plans one year in.
For businesses, this means opportunity: states actively need credible partners, and associations or consortia can fill gaps.
Common Mistakes to Avoid
Treating PM-SETU as a student scholarship: It funds institutional upgrades, not individual grants. Students benefit by enrolling in upgraded ITIs.
Applying on a central portal without checking your state: Industry partners are selected through state EOIs and RFPs.
Underestimating commitments: Anchor partners take on SPV management, co-funding and outcome targets for years.
Ignoring association routes: MSMEs can participate collectively instead of skipping the scheme.
Conclusion
PM-SETU changes who runs India's ITIs: government still owns them, but industry manages them through SPVs, with ₹60,000 crore behind the effort. One year in, the structure is in place and approvals are picking up, but industry participation is still the bottleneck.
For larger companies, it's a chance to build a dedicated skilled-workforce pipeline. For MSMEs, the practical routes are associations, apprenticeships and hiring partnerships with upgraded clusters near you.
Explore related skilling and MSME schemes on the StartupFlora Government Schemes Dashboard, or talk to the StartupFlora team to find out which schemes fit your business.
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