India’s food processing industry has a wide variety of food products and the largest manufacturing base. There are more than 25,00,000 food processing units in the unorganized food processing sector in India of which 66% are located in rural areas and more than 80% are owned by family businesses providing a source of income to the rural communities. However, these disorganized processing units face significant challenges such as lack of institutional funding, access to modern equipment and technology, and branding and marketing expertise. To address these challenges, the Government of India has initiated several programs to encourage investment in the food industry through the Ministry of Food Processing Industry (MOFPI).
On June 29, 2020, Prime Minister Narendra Modi launched a Pradhan Mantri Food Processing Micro-Enterprise (PMFME) formalization program as part of the “Aatmanirbhar Bharat Abhiyan” and “Vocal for Abhiyan” campaigns to provide technical, financial and business support for micro food processing units in the country. The total funds allocated for this program have been valued at Rs. Rs 10,000 crore and will be paid between 2020 and 2025. The government intends to provide direct financial and technical support to around 200,000 units under this program. The central government has taken on 100% of all disbursements in the first year (2020-21), whether made by the centre or by the states, and the same disbursements will be adjusted in the proportions below when the funds are disbursed in the next four years in equal parts.
The program provides:
- Access to credit for existing micro-food processing operations, producer organizations (FPOs), cooperatives and self-help groups (SHGs) for technology upgrades
- Support for 200,000 existing micro-food processing units to transform them into organized units by strengthening its marketing and branding as well as the Supply chain integration with formal entities
- Improved access to shared services such as storage, hatchery and packaging facilities
- Professional and technical support for food processing entrepreneurs
- Appropriate training and research for food processing companies individually or owned by food processing groups
The program has four main components to meet the needs of the Indian food processing sector:
Support for Food Processing Units
Under the program, non-organized micro food processing units are eligible for a loan-linked capital grant of 35% of the project cost, capped at Rs 10 lakhs per unit for upgrades. In addition, members engaged in food microprocessing are eligible for Rs 40,000 in seed funding for working capital and small tooling purchases. As of June 2021, the State Nodal Agency has approved seed capital for 8,040 members and disbursed Rs. 25.25 billion (US$340 million) worth of funds for the State Rural Livelihood Mission (SRLM).
Marketing and Brand Support
Marketing and branding support is provided to FPOs, cooperatives, SHGs and Special Purpose Vehicles (SPVs) at the regional or state level of micro food processing companies. retail sales. FPOs, Cooperatives and SHGs are eligible to receive the assistance of up to Rs.5 lakhs (US$6,750) from the Nodal State Agency to prepare a Detailed Project Report (DPR) for marketing and branding proposals. The plan only covers 50% of general marketing and branding spend however, it does not cover the cost of opening sales outlets.
State governments are constantly making reforms to maximize the benefits of the PMFME system. Some recent developments in different states are:
- The Kerala government recently announced plans to create an online platform to sell products made by micro food processors.
- On October 24, 2021, the Government of Madhya Pradesh announced a credit disclosure program in all of its 52 districts. The program will support sanctions and loan disbursements related to all government programs including Pradhan Mantri Mudra Yojna, Stand Up India and PMFME.
- In January 2021, the Government of Odisha introduced 30 different products for 30 districts under the PMFME ODOP program and will promote these products in the global market with a focus on micro food processing units run by SHG women.
- In November 2020, Andhra Pradesh (AP) Government announced a total disbursement of Rs.450 crores (US$60.75 million) for the PMFME program to be disbursed over five years. o Supporting 10,035 micro food processing units in the state. In October 2021, the PA government announced a loan brokerage program to disburse and sanction loans for various government programs.