MoFPI Schemes - How MSMEs can gain from them?

Being an agricultural country, India is highly dependent on food and food processing industries for its economic development. In terms of India's GDP, the food processing industry contributes around 13%, and in terms of overall market share, it constitutes around 32% of India's total market. The Indian food processing industry is the sixth-largest in the world, with its output expected to reach $ 535 billion by 2025-26.

However, despite being an integral part of India's sustainable development, the industry faces several challenges. It constitutes a large number of farmers, micro, small and medium-sized enterprises (MSMEs) dealing in the food processing and selling businesses, and some large-scale companies.

One major challenge that the MSMEs belonging to the food processing industry face is the lack of sufficient financing. As a result, they often fail to upgrade their positions in the market or even maintain their day-to-day operations smoothly. The Ministry of Food Processing Industries (MoFPI) has realised these challenges and launched several schemes to help the industry.

Pradhan Mantri Kisan Sampada Yojana (PMKSY)

Launched in 2016 by the Indian government and overlooked by MoFPI, the primary aim for PMKSY is to develop a robust infrastructure for agriculture and food processing in India, thereby helping the farmers and MSMEs involved in them.

PMKSY is a comprehensive package allotted by the Indian government to build modern infrastructure in the country. Additionally, it's meant to ensure optimum supply chain management of food products from farm fields to processing factories to retail outlets.

The scheme can contribute greatly to the growth of the food processing industry in India and the MSMEs involved in it. PMSKY can ensure:

  • Better returns to farmers

  • Employment opportunities in rural and urban parts of India

  • Reducing agricultural waste

  • Increasing the production levels of food processing businesses

  • Enhancing the export volumes of processed foods

The following projects are lined up for implementation under the PMKSY scheme:

  • Mega food parks

  • Integrated cold chain and value addition infrastructure

  • Creation or expansion of food processing and preservation capacities

  • Instructure for agro-processing clusters

  • Creation of backward and forward linkages

  • Food safety and quality assurance infrastructure

  • Human resources and institutions

  • Operation greens

Pradhan Mantri Formalisation of Micro Food Processing Enterprises (PM FME) Scheme

The PM FME scheme was launched on 29 June 2020, under the AatmaNirbhar Bharat Abhiyaan, to help food processing MSMEs by providing financial, technical, and business support. This scheme is being implemented in India by the central government in partnership with various state governments and union territories. Some of the benefits available under the PM FME scheme include:

  • Common infrastructure support

  • Capital support

  • Training and research support

  • Capacity building support

  • Branding or marketing support

This scheme is expected to help nearly 25 lakh food processing MSMEs in India, with almost 66% of them located in rural areas. By availing of central assistance through this scheme, these MSMEs can overcome challenges such as:

  • Lack of productivity and innovation

  • Limited access to modern technology and machinery for food processing and packaging

  • Limited skills among the employees

  • Deficient quality and food safety control systems

  • Lack of branding and marketing skills

  • Inability to integrate with supply chains

  • Lack of access to working capital and bank credit

The budget allocation for this scheme remains around Rs. 10,000 crores for a period of five years between 2020-21 to 2024-25. The expenditure under this scheme would be shared between the central and state governments in the ratio of 60:40.

Production Linked Incentive Scheme for Food Processing Industry (PLISFPI)

The Indian government approved the implementation of the PLISFPI in the Union Budget of 2021. With an outlay of Rs. 10,900 crore, this scheme is aimed at supporting the food manufacturing companies in India and converting them into globally-renowned brands. The incentive under this scheme is paid for six years, i.e., from 2021-22 to 2026-27.

Under the PLISFPI scheme, an incentive is paid for establishing or expanding manufacturing and food processing companies belonging to four major food segments: 

  • Ready to cook

  • Ready to eat

  • Processed fruits and vegetables

  • Marine products

The beneficiary can use the incentives to invest in food processing plants and machinery for the first two years and then in branding and marketing. The implementation of this scheme is expected to cause the expansion of food processing capacities in India and increase the reach of the existing companies to a global level.

To conclude

All MoFPI schemes are expected to help in three ways – increase the farmers' income, expand food processing capacities in India, and create employment. As an MSME belonging to the food processing industry, you can also get technical and financial assistance to expand your reach and production.

If you are a micro or small business owner seeking additional financing, HDFC Bank has numerous customised solutions to help you. You can also apply for a Working Capital Loan to get started. For further details, reach out to your Relationship Manager or visit the closest branch to know more.

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Read more on how the NCS and MSMEs are collaborating to bring about economic change by clicking here.

*Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. All loans for MSMEs, at the sole discretion of HDFC Bank limited. Loan disbursal is subject to documentation and verification as per Banks requirement.