PM-SETU

Slow Pace, Deep Faultlines: Getting PM-SETU on Track

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This is presented as a constructive observation of the PM-SETU (Pradhan Mantri Skilling and Employability Transformation through Upgraded ITIs) scheme. While it is admittedly early days since launch, the significantly slow pace of implementation is deeply worrisome, and extensive discussions with various ground-level stakeholders fail to inspire confidence regarding long-term execution. (Current status of PM-SETU implementation towards the end of this article)

The scheme was originally designed to completely revamp vocational training across India by restructuring 1,000 Government ITIs into a Hub-and-Spoke model comprising 200 Hubs and 800 Spokes. The core objective was to switch from a rigid government-led training style to an industry-managed system where Anchor Industry Partners (AIP) hold a 51% stake in a Special Purpose Vehicle to run the clusters, while government funds up to 83% of the costs. However, rollout has hit significant roadbumps and progress is moving much slower than acceptable. The scheme remains stuck firmly in pre-implementation and tendering stages as states struggle to finalize Requests for Proposals from corporate entities. Beneath this sluggishness lie deep, structural defects in scheme design.

Bureaucratic Friction and Administrative Gridlock

The 51:49 public-private partnership structure sounds good on paper, but it creates intense administrative gridlock. Corporate agility is consistently bottlenecked by traditional, slow-moving government approval cycles. State governments have had to frequently ask the Ministry of Skill Development for clarifications on how to frame agreements, creating massive administrative drag that stalls ground-level execution.

Non-Standardized Portability and Localized Syllabi

Because each Anchor Industry Partner customizes curriculum to fit its own specific factory needs, a syllabus created in Karnataka might differ completely from one in Haryana. If these customized courses do not align perfectly with the National Skill Qualification Framework, student certificates lose value if graduates move out of that specific industrial cluster, severely limiting interstate labour mobility.

Dual Competence Requirements for the Oversight Body

A major institutional weakness is lack of a specialized governance structure capable of managing this transition. An oversight body tasked with managing a massive transformation like PM-SETU cannot function merely as an auditing entity or a bureaucratic ledger-keeper. Because the public-private structure of Special Purpose Vehicles relies on complex escrow accounts and performance-linked milestones, oversight body requires deep financial competence to track milestone-based disbursements, audit asset monetization strategies, and verify whether valuations attached to corporate contributions are fair.

Equally vital is domain delivery competence. The governance framework must include professionals from emerging technical sectors capable of evaluating pedagogical quality, monitoring technology lifecycles, and ensuring that customized curricula maintain alignment with the National Skill Qualification Framework. Without this dual expertise of financial stewardship and deep vocational understanding, the oversight mechanism risks reducing its function to checking boxes rather than ensuring genuine instructional quality and wage-verified placements.

Critical Deficit in Trainer Ecosystems and Pedagogical Gaps

The most severe operational bottleneck threatening PM-SETU is acute non-availability of qualified trainers, a crisis that extends all the way up to master trainers responsible for training other instructors. Installing advanced robotic arms, automation kits, and CNC machines is entirely redundant without personnel capable of teaching students how to operate them. India faces a massive structural deficit in instructors who understand modern technologies like EV maintenance, AI-driven logistics, and smart manufacturing.

This human resource vacuum cannot be solved simply by importing personnel from factory floors. While industry experts possess deep technical knowledge, they frequently lack the vital pedagogical skills required to manage classrooms, design curricula, and break down complex industrial concepts for adolescent learners. Teaching is an entirely different capability set than manufacturing. Conversely, existing ITI faculty lack exposure to modern automation, leaving a massive gap between industrial reality and classroom instruction. The Training-of-Trainers framework within PM-SETU is lagging far behind infrastructure targets, creating a situation where high-tech labs sit idle because there is a total absence of individuals who can both operate the technology and teach it effectively.

Corporate Dilemma and Capitalist Paradox

The reliance on private companies to co-invest and manage these ITI clusters has exposed a fundamental capitalist paradox where Anchor Industry Partners face zero incentive to spend corporate resources to act as public charity, especially if it risks creating talent pipelines for direct rivals. Because ITI graduates are free agents, Anchor Industry Partners cannot legally force them to stay. A competitor who spent zero rupees on training can simply offer these newly skilled graduates slightly higher salaries and steal them away, forcing the investing company to subsidize its competitor’s HR department. Furthermore, teaching cutting-edge Industry 4.0 skills requires exposing internal operational workflows and proprietary tools, creating massive intellectual property risks regarding leakage to rivals. Finding top-tier industrial partners willing to invest heavily in remote, rural Spoke ITIs is also incredibly difficult, as most industrial giants remain concentrated around major manufacturing zones.

Strategic Perks Designed to Attract Private Investment

To convince Anchor Industry Partners to take these risks, the scheme pitches specific operational advantages. While companies cannot legally lock students in, they get exclusive, year-round access through on-the-job training inside corporate facilities. By graduation, these students are fully integrated into company culture and machinery, requiring zero onboarding time. Additionally, major corporations rely on hundreds of Micro, Small, and Medium Enterprise vendors. By managing a PM-SETU hub, an Anchor Industry Partner can train youth who will work for their supply chain vendors, which directly raises component quality and reduces defect rates. Finally, setting up a state-of-the-art training center independently requires 100% private funding, whereas PM-SETU provides up to 83% government funding for capital expenditure, allowing companies to build high-tech training ecosystems for a fraction of market price.

Policy Revisions Required to Accelerate Progress

To get PM-SETU back on track, government needs to implement structural course corrections that address both administrative delays and corporate anxieties. The Ministry should allow Anchor Industries to sign reasonable, legally binding apprenticeship-to-hire contracts where students agree to work for the partner firm for 18 to 24 months post-graduation in exchange for subsidized education. To deter poaching, competing firms hiring a graduate within two years of graduation should be mandated to pay training clawback fees directly to the original investing Anchor Industry Partner.

To resolve the teaching crisis, the government must collaborate with central universities and corporate partners to launch specialized pedagogical diplomas for engineers, transforming industry experts into certified educators. Funding must be aggressively diverted into mandatory corporate training stints for existing ITI faculty. To solve regional disparity, government should offer higher fiscal incentives or tax breaks for companies managing remote Spoke ITIs. Furthermore, the Ministry must mandate a core 70% standardized syllabus aligned with national frameworks, confining industry-specific training to the remaining 30% to ensure certificate portability. Finally, state-level single-window clearance channels must be created to fast-track corporate entity formation, and funding milestones should be strictly tied to actual graduate placement wages rather than mere enrollment numbers.

CURRENT STATUS

Overview of the PM-SETU Rollout

The implementation of the Pradhan Mantri Skilling and Employability Transformation through Upgraded ITIs (PM-SETU) scheme has gained momentum across India, driven by the Ministry of Skill Development and Entrepreneurship (MSDE) and the Directorate General of Training (DGT). According to official parliamentary and Ministry updates, currently 19 States and Union Territories have officially floated Requests for Proposals (RFPs) and tenders to onboard industry expertise, while 32 States/UTs have formed State Steering Committees to oversee the rollout. These procurement notices primarily target Anchor Industry Partners (AIPs) willing to co-invest and co-manage institutional clusters under a modernized Hub-and-Spoke model, reshaping vocational training through public-private collaboration. While nearly 20 states have crossed the hurdle of initiating these tenders, the scheme remains stuck in this exact stage. Publishing the RFP is proving to be the easy part, finding private corporations willing to actually bid on them and finalize the 51% stake agreements is where the current delay lies.

State-Specific Tender Actions

Several state governments have moved swiftly into the active bidding phase with substantial financial outlays. Haryana has issued an RFP for the Chhara ITI Cluster Upgradation in Jhajjar with a massive project outlay of ₹241 Crore, alongside onboarding project monitoring consultancies. Rajasthan’s Directorate of Technical Education has aligned its tenders with a similar ₹241 Crore per cluster framework, utilizing a structured funding split where the state and center cover 83% of costs, leaving a mandatory 17% (approximately ₹41 Crore) for the winning industry bidder. In the northeast, Assam has invited bids for the Guwahati Cluster, comprising ITI Guwahati as the hub and four surrounding spokes with an estimated project value of ₹281 Crore. Meanwhile, Andhra Pradesh has released highly localized, cluster-specific RFPs targeting key hubs like Kurnool, Dhone, Nellore, and Vijayawada to establish specialized training ecosystems.

Cluster Management and Upgradation Mandates

The technical and financial mandates embedded within these state tenders reflect a uniform strategy to decentralize ITI governance and future-proof the curriculum. Winning bidders across states like Odisha, Uttar Pradesh, Uttarakhand, and Tripura are required to establish a Section 8 non-profit Special Purpose Vehicle (SPV), maintaining a 51% industry stake against a 49% government share to ensure operational autonomy. Furthermore, the RFPs strictly bind the selected partners to upgrade infrastructure and introduce the DGT’s newly curated, future-ready courses. This ensures that the upgraded clusters move away from legacy trades and pivot aggressively toward high-demand sectors, including artificial intelligence programming, drone technology, green hydrogen production, semiconductor manufacturing, and 5G infrastructure.

Onboarding Status of Anchor Industry Partners (AIP)

The rollout of the ₹60,000-crore PM-SETU scheme has officially transitioned from the bidding phase to execution, with Andhra Pradesh becoming the first state in India to onboard an Anchor Industry Partner. This milestone was formalized by the Ministry of Skill Development and Entrepreneurship (MSDE) during the third National Steering Committee meeting.

First Onboarded Partner and Pilot Cluster

The inaugural Strategic Investment Plan (SIP) approved under the scheme belongs to the consortium of ArcelorMittal Nippon Steel India (AM/NS India) and its academic partner, the New Age Makers Institute of Technology (NAMTECH). This industry partnership has been officially onboarded to manage and transform the Visakhapatnam ITI Cluster in Andhra Pradesh, backed by a project cost of ₹200.21 Crore. This cluster will serve as the national blueprint for the hub-and-spoke model.

Current Pipeline and Approvals

While AM/NS India is the first to achieve final, formal clearance to begin operations, several other major industry leaders are heavily engaged in the final stages of the selection process. Companies like Hindustan Aeronautics Limited (HAL), Hero MotoCorp, Bajaj Auto, and ITC Limited have actively submitted proposals. With 12 states having already closed or nearing the closure of their initial Request for Proposal (RFP) timelines, the central ministry expects a wave of additional AIP onboardings and cluster approvals to be cleared in the coming months.

References

  1. Ministry of Skill Development and Entrepreneurship (MSDE) Parliamentary Replies: Unstarred Question responses in both the Lok Sabha (Question No. 4939 & 5928) and the Rajya Sabha (Question No. 3794) answered in March 2026.
  2. Press Information Bureau (PIB) Delhi: The Ministry reiterated these exact numbers in official government press releases titled “Operationalisation of PM–SETU” and “ITI Upgradation Under PM SETU”, issued by the Press Information Bureau.

PM-SETU Program: Potential Fault Lines and Fixes

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PM-SETU marks a bold and strategic shift in India’s skilling landscape. By integrating industry-led governance, modern infrastructure, flexible curricula, and robust monitoring mechanisms, it aims to create a future-ready workforce aligned with national development goals. While the scheme is ambitious and complex, its design reflects a deep understanding of past shortcomings and a commitment to inclusive, sustainable, and high-impact transformation.

Read my earlier article on details of the scheme Bridging Skills for 2047: The PM-SETU here. Though it covers potential pitfalls and mitigation risks, this article addresses the same is in greater detail.

Potential Risks and Mitigation

I have tried to classify the potential risks into various categories and highlight the issues under each one of them.

Pitfalls in Delivery: The Anchor Industry Partner (AIP) Model

Commitment and Focus: Industries’ primary focus is business and profit, not skill development. They may view managing an ITI cluster as a Corporate Social Responsibility (CSR) compliance or a low-priority function, leading to inconsistent engagement and neglect of the training center.

Achor Industry’s Priorities

Proprietary Knowledge & Secrecy Companies are often reluctant to share proprietary knowledge, cutting-edge technology, or trade secrets with the ITI, fearing it could benefit competitors or lead to leakage of confidential processes. This limits the “customized syllabus” to non-core, outdated, or basic skills.

Geographic Mismatch Finding a genuinely relevant and committed AIP for ITIs located in remote or underdeveloped rural areas is extremely difficult due to the low density of established industries, defeating the purpose of modernizing every cluster.

Bureaucratic Conflict The “Government-owned, Industry-managed” model creates a high potential for friction. Industry-led SPVs (Special Purpose Vehicles) may clash with existing government bureaucracy, processes, and the typically slow decision-making cycles of the government.

Pitfalls in Assessment and Standards

The shift to outcome-based, customized training creates new risks for standardization and quality control:

Non Standard Assessment and Misplaced Metrics

Assessment Subjectivity: When the assessment is heavily influenced by the AIP or local industry, it risks becoming non-standardized across different ITI clusters. An assessment standard set by a small regional industry might not meet the quality threshold of a national or international company.

“Certificate of Attendance” Risk: There is a risk that the assessment focuses purely on fulfilling a placement metric rather than genuine competency. If the AIP needs a certain number of workers, the assessment might be diluted to certify candidates quickly, leading to poor quality graduates.

Trainer Capacity Gap: The biggest long-standing challenge in ITIs is the lack of qualified trainers who are competent in the latest Industry 4.0 technologies (AI, Robotics, EV maintenance). PM-SETU requires a massive, rapid “Training-of-Trainers” (ToT) program, and failure to execute this will render the new customized syllabus and machinery useless.

Pitfalls in Qualification Portability

Achieving true national and global portability of a certificate based on a customized syllabus is complex:

Qualification Portability

Lack of Uniformity in Customization: A syllabus customized for one AIP’s plant in Karnataka may teach different skills or standards than one customized for a different AIP’s plant in Haryana. If these customized certificates do not map perfectly to the National Skill Qualification Framework (NSQF), their value outside the local industrial cluster diminishes.

Industry Recognition (Internal vs. External): While the certificate will be recognized by the Anchor Industry Partner that helped design it, securing external recognition from the wider, unassociated industry (especially in the informal sector, where most of India’s workforce is employed) remains a challenge.

Social Stigma: Despite significant investment, vocational training in India often suffers from low social prestige compared to formal higher education. Unless PM-SETU demonstrably guarantees high-paying and aspirational jobs, the scheme may still face low capacity utilization (vacant seats) and a lack of highly motivated students, as seen in past ITI reform efforts.

Mitigation for Delivery & AIP Commitment (Industry Engagement)

To ensure the Anchor Industry Partner (AIP) delivers on its mandate and doesn’t merely provide token involvement, the scheme uses financial and governance levers:

Financial Skin in the Game: The scheme employs a blended financing model where the industry is required to contribute an estimated ₹10,000 crore (out of the total ₹60,000 crore). This Industry Share ensures a financial commitment and vested interest in the success and long-term viability of the ITI cluster.

Performance-Linked Funding: Funds are released to the state and the Special Purpose Vehicle (SPV) based on Key Performance Indicators (KPIs). These KPIs are tied to outcome-based metrics like placement rates, capacity utilization, and trainer competency upgrades, ensuring that the focus remains on results rather than just infrastructure spending.

Strong SPV Governance: The Special Purpose Vehicle (SPV) managing the ITI cluster is structured to give the AIP significant autonomy (potentially a 51% share in industry-led SPVs), but this autonomy is balanced by a tripartite agreement (Shareholders’ Agreement and License Agreement) that clearly defines roles and mandates the AIP’s obligations for curriculum, infrastructure, and outcomes.

Encouraging Consortia: The scheme encourages the formation of a consortia of multiple industries rather than relying on a single AIP, especially in smaller or remote clusters. This diffuses the risk of a single company losing interest and broadens the relevance of the skills imparted.

Mitigation for Assessment & Standards

To combat subjectivity and the risk of poor trainer capacity, PM-SETU is leveraging institutional and global partnerships:

Global Benchmarking and Co-Financing: The project is co-financed by multilateral agencies like the World Bank and the Asian Development Bank (ADB). This involvement brings in international expertise and global best practices for design, delivery, and rigorous third-party evaluation, ensuring the standards are not just local but globally relevant.

Focus on Trainers (ToT): A major component is the capacity augmentation of 5 National Skill Training Institutes (NSTIs) into Global Centres of Excellence (NCOEs). These NCOEs are tasked with the crucial mission of running an intensive Training-of-Trainers (ToT) program to skill and re-skill up to 50,000 trainers in new-age trades (like AI, Robotics, etc.), directly tackling the quality gap.

Outcome-Based Certification: The scheme emphasizes strengthening the National Council for Vocational Education and Training (NCVET) framework to ensure that customized courses are properly aligned and mapped to the National Skill Qualification Framework (NSQF) levels. Assessment is therefore focused on demonstrating a defined level of competency needed for employment.

Mitigation for Qualification Portability & Stigma

Integration with NSQF and Pathways: By ensuring that customized courses are mapped to the NSQF, the qualification gains a defined, nationally recognized value, making it portable across states and industries in India.

Flexible Educational Pathways: The scheme creates new pathways for students, allowing them to pursue long-term diplomas and executive programs after their ITI certificate. This integration with the broader education system helps reduce the social stigma associated with vocational training by offering options for higher education and career progression, rather than a single terminal qualification.

Hub-and-Spoke Model for Equity: The Hub-and-Spoke model (200 Hub ITIs connected to 800 Spoke ITIs) is designed to ensure that the cutting-edge infrastructure and training standards of the “Hub” are disseminated to ITIs even in remote or underserved regions, promoting equitable access and ensuring a uniform quality standard across the country.

These mitigation strategies aim to transform the ITI ecosystem from a state-run, rigid system into a market-responsive, accountable, and high-quality vocational training network.

Bridging Skills for 2047: The PM-SETU

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The Pradhan Mantri Skilling and Employability Transformation through Upgraded ITIs (PM-SETU) scheme represents a landmark initiative by the Ministry of Skill Development and Entrepreneurship (MSDE) to reimagine vocational education in India. Rooted in the vision of a “Viksit Bharat 2047”, the scheme seeks to modernize and elevate the Industrial Training Institutes (ITIs) and National Skill Training Institutes (NSTIs) into aspirational, industry-aligned institutions that produce highly employable youth.

Background: The 2008 Craftsmen Training Scheme and Its Limitations
The genesis of India’s formal vocational training ecosystem lies in the Craftsmen Training Scheme (CTS), operational since 2008 under the Directorate General of Training (DGT). While the CTS offered 169 trades aligned with the National Skills Qualification Framework (NSQF), it was largely government-managed, with limited industry participation. The infrastructure remained outdated, curricula were slow to adapt to evolving industry needs, and placement outcomes were inconsistent. Despite the presence of 33 NSTIs (including 19 for women), the system lacked the agility and responsiveness required to meet the demands of a rapidly transforming economy.

Introduction to PM-SETU: A Paradigm Shift
PM-SETU introduces a transformative model that is government-owned but industry-managed. With a total outlay of ₹60,000 crore over five years—shared among the Central Government (₹30,000 crore), State Governments (₹20,000 crore), and Industry (₹10,000 crore)—the scheme is structured into two components:

  • Component I focuses on upgrading 1,000 Government ITIs through a Hub-and-Spoke model, where 200 ITIs serve as hubs managing 800 spoke ITIs.
  • Component II aims to augment five NSTIs (Bhubaneswar, Chennai, Hyderabad, Kanpur, Ludhiana) into National Centres of Excellence (NCOEs), with global partnerships and advanced training capabilities.

The scheme is co-financed by the Asian Development Bank and the World Bank through result-based loans, ensuring accountability and performance-linked funding.

Operational and Governance Model
The scheme introduces Special Purpose Vehicles (SPVs) to manage clusters of ITIs. These SPVs can be industry-led or state-led, depending on the availability of credible Anchor Industry Partners (AIPs). Industry-led SPVs hold a 51% share, with the remaining 49% equally divided between the Centre and State. SPVs have full autonomy over curriculum design, trainer recruitment, financial operations, and infrastructure upgrades. Governance is ensured through a tripartite agreement comprising a Shareholders’ Agreement (SHA) and a License Agreement (LA).

At the national level, a Steering Committee chaired by the Secretary, MSDE, provides policy direction, while State Steering Committees oversee implementation, approve Strategic Investment Plans (SIPs), and monitor progress. Independent Monitoring Agencies (IMAs) verify milestones and ensure transparency.

Pitfalls Identified in the Scheme Design
Despite its robust framework, PM-SETU could have several potential pitfalls:

  • Complex Governance Structure: Multi-tiered committees and overlapping responsibilities may slow decision-making and create bureaucratic bottlenecks.
  • Dependence on Industry Participation: The success of clusters hinges on credible AIPs. Lack of interest or capacity could derail implementation.
  • HR Integration Challenges: Coexistence or deputation of government staff with SPV personnel may lead to role ambiguity and resistance to change.
  • Monitoring Burden: KPI-based fund release and performance tracking require sophisticated systems, which may strain under-resourced states.
  • Equity and Access Concerns: Risk of urban-centric clusters and exclusion of remote regions if not carefully planned.
  • Digital Divide: AR/VR tools and Learning Outcome Management Systems (LOMS) may not be accessible in low-connectivity areas.
  • Curriculum Fragmentation: Excessive customization by SPVs could lead to inconsistency in training quality and certification standards.
  • Sustainability Post-Scheme: Long-term viability depends on continued industry engagement and revenue generation.

Mitigation Strategies in the New Scheme
To address these challenges, PM-SETU incorporates a comprehensive mitigation plan:

  • Strengthening SPV Governance: Clear role definitions, onboarding programs for ITI staff, and change management training are mandated.
  • Ensuring Timely Fund Flow: Streamlined KPI tracking and technical assistance for SIP and AOP preparation are provided.
  • Standardizing Curriculum Framework: A core curriculum is mandated across ITIs, with flexibility in specific modules. All course approvals are routed through CSTARI and NCVET.
  • Planning for Sustainability: SPVs are encouraged to develop revenue-generating activities such as production centers, fee-based courses, and consultancy services.
  • Bridging the Digital Divide: Infrastructure grants and digital literacy programs are planned for ITIs in underserved regions.
  • Promoting Inclusive Cluster Selection: Clusters in NE, hilly, and tribal regions are prioritized, with relaxed hub-spoke definitions and gender/social equity targets.
  • Monitoring Industry Commitment: Performance-linked clauses in SPV agreements and multi-industry consortia are encouraged to ensure sustained engagement.

Conclusion
PM-SETU marks a bold and strategic shift in India’s skilling landscape. By integrating industry-led governance, modern infrastructure, flexible curricula, and robust monitoring mechanisms, it aims to create a future-ready workforce aligned with national development goals. While the scheme is ambitious and complex, its design reflects a deep understanding of past shortcomings and a commitment to inclusive, sustainable, and high-impact transformation.