PLI Scheme for the Food Processing Industry in India

In November 2020, the Indian Government approved a PLI scheme for the food processing sector to boost domestic manufacturing and production in this industry. The scheme aims to attract more investment in the sector and create new job opportunities. The PLI scheme for food products is expected to generate significant investment and job opportunities in the sector and help India become a leading exporter of processed foods in the global market.
 

Some Key Features of the Scheme are:

• The Ministry of Food Processing Industries has assigned a budget of INR 10,900 crore for the scheme which is primarily designed to boost domestic manufacturing and attract investment in the food processing sector.
• The scheme has three broad components –

1. The initial aspect pertains to offering incentives for the production of four significant food product categories, which are ready to cook/ready to eat (RTC/RTE) items, including foods made from millets, processed fruits and vegetables, marine products, and mozzarella cheese.
2. The second aspect is designed to provide incentives for innovative/organic products of small and medium-sized enterprises (SMEs) across all four food product segments mentioned earlier, including free-range eggs, poultry meat, and egg products. The third component pertains to assistance for branding and marketing efforts overseas, with the aim of promoting the emergence of robust Indian brands.
3. The third element is concerned with providing aid for branding and marketing activities overseas, with the goal of encouraging the development of robust Indian brands.

• The scheme will be implemented over a six year period from 2021-22 to 2026-27.

  

Calculation of Incentives:

• The incentives under the PLI scheme for the food processing industry in India are calculated as a percentage of a company's incremental sales over a six-year period. The percentage of incentive varies depending on the category of products and the size of the company.
• To calculate the incentive, the base year for incremental sales is taken as a reference, and the sales achieved in subsequent years are compared to the base year. The incremental sales achieved are multiplied by the applicable percentage of incentive for the category of products and the size of the company.
• The incentive amount is disbursed annually over the six-year period, subject to the company meeting the eligibility criteria and achieving the incremental sales targets.

  

Eligibility:

• To be eligible for the PLI scheme in the food processing industry, the applicant must have total sales of food products that exceed the minimum sales achieved in the base year. The term "food products" refers to any food product that is sold in consumer packs, including those included in the four specified segments.
• The PLI scheme for the food processing industry requires that the entire manufacturing process, including primary processing, of the relevant segment's food products must occur within India. However, this condition does not apply to additives, flavours, and edible oils.
• For food products included in the application and having sales above Rs. 50 crore per annum, the entire manufacturing process chain from raw materials onwards must be clearly specified in the application.
• The applicant must not have been labelled as a bankrupt or wilful defaulter, defaulter or accused of fraud by any bank, financial institution, or non-banking financial company.

 

Overall Challenges Involved:

Recipients of incentives under the PLI scheme for the food processing industry in India may face some challenges in meeting the eligibility criteria and achieving the incremental sales targets. Some of these challenges include:

• The food processing industry in India is highly competitive, and companies may face challenges in capturing market share and achieving incremental sales targets.
• The PLI scheme has eligibility criteria, and companies need to comply with various regulations and guidelines to receive incentives. Non-compliance with these guidelines can lead to the disqualification of incentives.
• The adoption of new technologies and processes may be required to increase productivity, quality, and efficiency. However, the cost of technology adoption may be high, and companies may require additional funding to invest in technology upgrades.
• Companies need access to reliable infrastructure such as transportation, storage, and processing facilities to ensure the timely delivery of products. However, infrastructure development may be limited in some regions, making it challenging for companies to meet delivery deadlines.
• The demand for different food products varies in different regions and markets. Companies need to understand market demand and adapt their production accordingly.

 

The PLI scheme for the food processing industry in India has been introduced with the aim of boosting domestic manufacturing and reducing import bills. The scheme incentivizes companies based on incremental sales of eligible products manufactured in domestic units. The scheme is expected to promote investment in the food processing industry in India and create employment opportunities. However, recipients of incentives under the scheme may face challenges such as competition, technology, compliance, infrastructure, and market demand. By addressing these challenges, companies can leverage the incentives provided under the scheme to grow their businesses and contribute to the growth of the food processing industry in India.
 
To learn more about how to pitch for the PLI scheme, the process of application, disbursement of incentives, the key obligations of the recipient- CLICK HERE.