Pradhan Mantri Skilling and Employability Transformation through Upgraded Industrial Training Institutes, or PM-SETU, claims 50% of the skill development ministry’s budget, yet progress on the scheme has been slow. The initiative was announced in the 2024-25 budget with an allocation of Rs 1,000 crore. The cabinet approved the scheme on May 7, 2025, and the “ITI Upgradation scheme” was renamed PM SETU. The total outlay is Rs 60,000 crore over five years, co-financed by the World Bank and the Asian Development Bank.
Onus falls on states to form industry bodies
The onus of full implementation is on states, which must first secure an industry-led Special Purpose Vehicle (SPV). The SPV will be a Section 8 non-profit company that manages the upgraded ITI cluster. An anchor industry partner (AIP) must hold 51% of the shares. The process requires an Expression of Interest (EOI) followed by a Request for Proposal (RFP) to select partners based on a strategic investment plan.
Only 19 of the 33 states that identified ITI clusters have issued EOIs to onboard anchor industry partners. Four states—Karnataka, Andhra Pradesh, Telangana, and Tamil Nadu—have progressed further to issue RFPs. The Directorate of General Training, which regulates ITIs, told a parliamentary panel it expects only two or three SPVs to be formed by the end of the 2025-26 financial year.
Getting industry partners on board has proven difficult. The ministry told the parliamentary standing committee that public sector units face constraints. They require approval from the Department of Investment and Public Asset Management (DIPAM) to join an SPV. The ministry is exploring a tripartite SPV structure to include them. Private sector partners, however, have shown little interest due to the Rs 2,000 crore turnover requirement and the expectation that they contribute 10% of the funding.
Labour economist Harshil Sharma suggests the government must tailor its approach. He argues for sector-specific clusters, such as automotive in Pune or apparel in Chennai, that align training with actual hiring needs. Without this alignment, he questions why companies not directly benefitting from ITI graduates would participate.
Obstacles in rural areas and social risks
Global financial institutions have also identified potential social risks. The World Bank’s Environment and Social Systems Assessment report highlights concerns. It warns about the exclusion of vulnerable groups. Women, Scheduled Tribes, Scheduled Castes, and Persons with Disabilities may face barriers. These groups could struggle to access ITIs and subsequent employment opportunities.
Historical Upgrades and Global Funding
The project to upgrade 1,396 government ITIs began in 2008. A second initiative started in 2018 to turn existing institutes into model centers. By January, 19 of the 35 target ITIs were fully upgraded. The total budget for these efforts reached Rs 238.08 crore.
PM-SETU is a large-scale five-year program with a total outlay of Rs 60,000 crore. The central government contributes Rs 30,000 crore, states provide Rs 20,000 crore, and industry funds Rs 10,000 crore. Loans from the Asian Development Bank and the World Bank cover half of the central portion. The scheme aims to establish centers of excellence.
Falling enrolment and outdated facilities
Enrolment in Industrial Training Institutes is declining. Data shows a significant increase in vacant seats over recent years. Between 2014 and 2025, the total number of ITIs grew from 9,977 to over 14,682. Despite this growth, lakhs of seats remain unfilled annually.
The vacancy rate is particularly high in private ITIs. In 2021-22, private institutes had a vacancy rate of 58%. By 2023-24, this rate was 55%. Government ITIs are also losing students. Their vacancy rate rose from 46% in 2021-22 to 39% in 2023-24.
Disaffiliation is becoming a common consequence. As of March 19, 2026, the Ministry of Skill Development and Entrepreneurship stated that 614 ITIs have lost their affiliation. This occurred because they had 100% vacant seats in the academic years between 2022 and 2024. A large number of these disaffiliated institutes are private.
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