How the PLI Scheme Boosts the Food Processing Industry

Introduction

India’s food processing industry is a cornerstone of the nation’s agricultural economy. It plays a critical role in converting raw agricultural produce into value-added products, enhancing both its shelf life and its market value. However, despite its immense potential, India’s food processing sector has faced challenges such as limited infrastructure, low levels of modernization, and a lack of globally recognized brands. To address these challenges, the Indian government launched the Production-Linked Incentive (PLI) Scheme for Food Processing in 2021. This initiative is aimed at improving the competitiveness of the food processing industry, promoting exports, and supporting farmers by providing targeted food processing incentives.

Through this scheme, the government intends to make India a global leader in food processing by encouraging the expansion of production capacities, fostering innovation, and creating job opportunities. The PLI scheme for food processing is one of several government schemes for the food industry that aim to build a stronger, more self-reliant sector. This article provides a detailed overview of how the PLI scheme boosts the food processing industry, highlighting food production incentives, subsidy for food processing, and PLI eligibility criteria.

What is the Production-Linked Incentive (PLI) Scheme for Food Processing?

The PLI scheme for food processing is a central sector initiative introduced by the Ministry of Food Processing Industries (MoFPI) in 2021. With an allocated budget of ₹10,900 crore, the scheme will be implemented over a six-year period from 2021-22 to 2026-27. The aim is to provide food processing incentives to eligible companies that enhance their production capacities and improve the branding of Indian food products globally.

By offering subsidy for food processing, the PLI scheme encourages businesses to scale up their operations, invest in technological advancements, and focus on global expansion. As a result, the scheme aims to achieve the following key objectives:

• Increase Manufacturing Capabilities: Financial incentives will allow companies to expand their manufacturing capabilities, making them more competitive in both domestic and international markets.
  
• Promote Indian Brands: The scheme includes grants for international marketing and branding, helping Indian food products gain global recognition.
  
• Create Employment: The expansion of food processing capacities is expected to generate approximately 2.5 lakh jobs by 2026-27, contributing to both urban and rural employment.
  
• Support Farmers: A robust food processing industry will ensure higher demand for raw agricultural produce, leading to better prices for farmers.

Objectives and Benefits of the PLI Scheme for Food Processing

The PLI scheme for food processing is designed to achieve several key objectives, each of which benefits different stakeholders in the food processing sector. Below, we explore these objectives in greater detail:

1. Enhanced Manufacturing Capabilities
   With food production incentives, the scheme encourages manufacturers to invest in scaling up their production capabilities. By improving technological integration and expanding processing units, India can develop a more competitive food processing industry. Companies that meet performance benchmarks in incremental production will receive financial incentives.
   
2. Global Branding and Exports
   The scheme provides grants for branding and marketing of food products abroad, aiming to promote Indian food products in global markets. This will support the creation of strong Indian brands, which can boost exports and position India as a key player in the global food processing market.
   
3. Generation of Employment
   The expansion of food processing capacities under the scheme will create thousands of jobs in the food sector. This will not only reduce the dependency on agriculture for employment but also bring greater economic stability in rural areas.
   
4. Support to Farmers
   The scheme ensures that the farmers benefit from a more robust food processing sector. With better processing facilities and a greater demand for agricultural products, farmers will receive more remunerative prices for their produce.

Eligibility Criteria for the PLI Scheme for Food Processing

To apply for the PLI scheme for food processing, businesses must meet certain eligibility criteria. These include:

1. Proprietary Firms, Partnership Firms, LLPs, and Companies
   Any entity registered in India and engaged in food processing activities can apply for the scheme. This broad eligibility ensures that both large and small businesses benefit from the incentives.
   
2. Co-operatives
   Agricultural and food processing co-operatives are also eligible to apply under the scheme, allowing collective efforts to avail of government benefits.
   
3. Small and Medium Enterprises (SMEs)
   SMEs, especially those involved in manufacturing innovative, organic, or niche food products, are encouraged to apply. The scheme offers specific incentives for SMEs producing innovative or organic products.
   

Applicants are divided into three categories based on their sales and investment criteria:

• Category-I: Large entities that apply based on sales and investment performance.
• Category-II: SMEs that apply based on their sales performance and innovation in food processing.
• Category-III: Companies focusing solely on grants for branding and marketing abroad.

How to Apply for the PLI Scheme for Food Processing

The application process for the PLI scheme for food processing is simple and can be done through an online portal. Here’s a step-by-step guide to applying:

1. Registration
   Create an account on the official PLI scheme portal.
   
2. Application Submission
   Complete the application form with the required details and upload the necessary documents. Applicants must provide information about their company, sales performance, and plans for expanding food processing operations.
   
3. Review and Approval
   The Inter-Ministerial Approval Committee (IMAC) will review the applications and approve eligible candidates. Once approved, the committee will sanction funds based on the eligibility criteria.

Financial Incentives Available Under the PLI Scheme for Food Processing

The PLI scheme for food processing offers several financial incentives to boost the food processing sector. These include:

1. Sales-Based Incentives
   Companies will receive incentives based on incremental sales over a defined base year. For the initial four years, the base year is 2019-20. In the fifth and sixth years, it shifts to 2021-22 and 2022-23, respectively.
   
2. Branding and Marketing Grants
   Eligible companies involved in international branding and marketing can receive grants covering 50% of their expenditure, up to a maximum of 3% of their annual sales or ₹50 crore, whichever is lesser. A minimum expenditure of ₹5 crore over five years is required to qualify.

Key Sectors Covered Under the PLI Scheme

The PLI scheme for food processing focuses on specific product segments within the food processing industry. These include:

1. Ready to Cook/Ready to Eat (RTC/RTE) Foods
   The scheme encourages the processing of millet-based products, which have great potential for export due to their health benefits.
   
2. Processed Fruits and Vegetables
   Increasing the value-added processing of fruits and vegetables will enhance the shelf life and marketability of these products, contributing to India’s export growth.
   
3. Marine Products
   Promoting seafood processing and exports is a key focus of the scheme, which will help India tap into the global demand for seafood products.
   
4. Mozzarella Cheese
   Dairy products, especially mozzarella cheese, are encouraged under the scheme, which will contribute to India’s dairy processing industry’s growth.
   
5. Innovative and Organic Products
   The scheme also focuses on promoting innovative and organic products, including free-range eggs, poultry meat, and other niche food products, particularly from SMEs.

Challenges and Implementation Status of the PLI Scheme

While the PLI scheme for food processing offers substantial benefits, there are some challenges in its implementation:

1. Awareness and Outreach
   Ensuring that all potential beneficiaries, especially SMEs in rural areas, are aware of the scheme is crucial for its success.
   
2. Application Process
   Simplifying the application process will ensure that smaller enterprises can easily apply for the benefits under the scheme.
   
3. Monitoring and Evaluation
   Establishing effective monitoring mechanisms is important to ensure the food processing incentives are utilized efficiently.
   

As of August 2023, the PLI scheme for food processing has shown significant progress, with many applications already approved and funds disbursed to eligible companies.

Conclusion

The PLI scheme for food processing is a game-changer for the Indian food industry. By offering targeted food processing incentives, the scheme not only enhances manufacturing capabilities but also promotes Indian brands globally, generates employment, and ensures better prices for farmers. With its focus on export-driven growth and the creation of a self-reliant food sector, the scheme is poised to make a lasting impact on India’s economic landscape.

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Frequently Asked Questions (FAQs)

1. What is the main objective of the PLI scheme for food processing?
A: The primary objective is to promote food processing, create global food manufacturing champions, and ensure better prices for farmers.

2. Who is eligible for the PLI scheme for food processing?
A: The scheme is open to proprietary firms, partnership firms, LLPs, companies, co-operatives, and SMEs engaged in food processing.

3. How are the financial incentives structured?
A: The incentives are based on incremental sales over a defined base year, with grants available for branding and marketing abroad.

4. Which product segments are covered under the scheme?
A: The scheme covers RTC/RTE foods, processed fruits and vegetables, marine products, mozzarella cheese, and innovative/organic products.

5. How can I apply for the PLI scheme?
A: Applications can be submitted through its official portal

6. What are the eligibility criteria for large entities under the PLI scheme?
A: Large entities must meet sales and investment performance criteria.

7. How can SMEs benefit from the scheme?
A: SMEs can apply based on sales performance and receive financial incentives for producing innovative or organic products.

8. What is the duration of the PLI scheme for food processing?
A: The scheme will be implemented over six years, from 2021-22 to 2026-27.

9. Can co-operatives apply for the PLI scheme?
A: Yes, co-operatives involved in food processing can apply for the scheme.

10. What kind of grants are available for marketing abroad?
A: Eligible entities can receive grants covering 50% of their expenditure on international marketing, up to a maximum of ₹50 crore per year.