Known as Young Producers and sponsored by Alan McGee, the Labour-leaning managing director of Creation Records, the year-long bursary programme has already won a lottery grant of pounds 1.5m and will be announced on 12 October.
The London-based scheme will also receive backing from the Arts Council of England and the London Arts Board. Despite its title, the aim of the scheme is to fund musicians - the people who produce the actual music, rather than the records. The bursaries are aimed at replicating the success of award-winning new British artists, such as Roni Size and Asian Dub Foundation.
Worth pounds 5,000 each, they are designed to break down some of the record industry's fabled incestuousness. Along with the cash grant, the musicians will get technical, legal and accounting support. They will also work with a mentor from the industry.
"The beauty of Young Producers is that it is at last a way of getting what historically have been completely different animals to work together," said Alison Tickell, the project manager for the scheme.
"In the past, educators, musicians and the industry have all been pulling in different directions. By staying close to the community this time we can avoid the pitfalls of becoming another unfashionable government scheme," she said.
The project will be administered by South London-based Community Music Ltd, the grass-roots organisation that has already boosted the careers of both Asian Dub Foundation and Roni Size.
The chairman of the International Managers Forum, John Glover, says the scheme could be a more elite and clearly focused version of the government's New Deal provisions for unemployed musicians.
"The success of the scheme will depend on how it is handled," said Mr Glover, who manages artists such as Tony Hadley and Beverly Craven.
"There is a huge problem getting started in this industry, but some would argue that the most talented people do break through in the end. If this project can help to bring raw talent on more quickly, that would be great."
A central part of Young Producers is a series of music industry seminars between February and July each year which all bursary recipients will be expected to attend. The seminars have been set up by the University of Westminster's Commercial Music Department.
Nine high-tech studios have also been co-opted into the scheme, and Adrian Sherwood of On U Sound, Steve Walters of MCA records and Dr Das, of Asian Dub Foundation, have all agreed to become mentors.