Investing in India’s Food Processing Sector and PLI Scheme

Foreign investors keen to tap into value addition opportunities in the food processing industry in India should note how the PLI scheme has impacted sector capability and target beneficiaries.

On March 31, the central government approved a new PLI scheme for the food processing sector, with a budget outlay of INR 109 billion (US$1.46 billion). Incentives under the scheme will be disbursed for six years to 2026-27.

The government hopes that PLI beneficiaries will create 250,000 jobs, expand existing industrial capacity to generate output of processed food worth INR 334 million (US$4.4 billion), and boost exports. 

Ultimately, the scheme intends to attract greater sectoral investment, accelerate agri-exports, push for rise in farmer incomes and remuneration for farm produce, and culminate in the growth of globally competitive Indian food brands.

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The government plans to achieve this by supporting food manufacturing entities that meet minimum criteria as laid out in the Production-Linked Incentive Scheme for the Food Processing Industry (PLISFPI).

A statement published by the Ministry of Food Processing on June 17 states: “The Ministry has reviewed the status of application submission of all the three categories and based on the requests received from various entities and entrepreneurs, the last date of submission of applications for all three categories have now been extended up to June 24 up to 5 pm”. 

What are the eligibility criteria for PLI beneficiaries in India’s food processing industry?

The PLISFPI scheme is made up of the following components:

• Incentivize the manufacture of four major food product segments: ready-to-cook/ready-to-eat foods, marine products, processed fruits and vegetables, and mozzarella cheese. Innovative and organic products from small and medium-sized enterprises (SMEs), such as eggs, egg products, and poultry meat, are covered under this component.
• Support the branding and marketing of select Indian food products abroad to enable their entry into international food markets and increase their visibility. For example, the scheme is considering providing grants for applicant entities to establish in-store branding, shelf space renting, and marketing.

The Ministry of Food Processing Industries will invite applications for entities availing sales-based incentives and grants for undertaking branding and marketing activities abroad under the scheme from three categories of applicants:

• Category-I: Applicants are large entities who apply for Incentive based on Sales and Investment Criteria. Applicant under this category could undertake Branding & Marketing activities abroad also and apply for grant under the scheme with a common Application.
• Category-II: SMEs Applicants manufacturing innovative/ organic products who apply for PLI Incentive based on Sales.
• Category-III: Applicants applying solely for grant for undertaking Branding & Marketing activities abroad.

What is the application process?

The Ministry of Food Processing Industries published detailed scheme guidelines on May 2, 2021 and put out the Expression of Interest (EoI) application: see here.

The Ministry also provided answers to frequently asked questions on how the PLI scheme will work for the industry’s target segments and selected beneficiaries.

Interested entities should submit their proposals online as per the “Production Linked Incentives Scheme for Food Processing Industry” Scheme Guidelines dated May 2, 2021. The detailed guidelines of the scheme may be seen at “www.mofpi.nic.in”. The proposals/ Expression of Interest applications will only be received through the online portal: https://plimofpi.ifciltd.com.

Fee payment

The applicant shall pay a non-refundable application fee for each application.

The fee is INR 100,000 for Category-I applicants and INR 10,000 for Category-II applicants. Under Category-III, INR 10,000 and INR 50,000 would be payable by SMEs and other applicants, respectively.

The fee may be paid electronically through NEFT / RTGS to the Account Number: 3000061891, IFSC Code: CBIN0282169, Central Bank of India, Udyog Bhawan, New Delhi or Demand Draft (DD) in favour of “The Pay & Accounts Officer, Ministry of Food Processing Industries” payable at New Delhi. Electronic transfer details or the scanned copy of Demand Draft shall be submitted with online proposal and the original Demand Draft (DD) should be submitted to the Ministry within seven days of submission of online proposal, failing which the proposal will not be considered.

How will the PLI scheme be implemented?

The PLISFPI will be implemented through a Project Management Agency (PMA). The PMA will appraise the applications and investment proposals, verify eligibility to claim support, and scrutinize eligibility of claims for disbursement of incentive.

Investors who want to avail the PLI scheme must commit to a minimum amount of sales and a minimum level of investment to each segment. If both are achieved, then under the scheme, eligible applicants will receive a percentage of the amount for incremental sales as subsidy in the following year.

Technical committees for the target segments and the approval committee have also been formed as of June 17, 2021.

How are the incentives disbursed?

The scheme is “fund-limited”. Thus, the cost shall be restricted to the approved amount, which be paid the following year. The maximum incentive payable to each beneficiary shall be fixed in advance at the time of approval of that beneficiary. Regardless of the entity’s achievement/ performance, this maximum incentive paid shall not be exceeded.

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Selected beneficiaries will have to invest in plant and machinery (subject to the prescribed minimum) in the first two years, 2021-22 and 2022-23. Investments made in 2020-21 will be counted towards meeting the mandated investment.

The conditions of stipulated minimum sales and mandated investment will not be applicable for entities selected for making innovative/ organic products.

For more details: see here.

Investment outlook of the sector

From April 2000 to December 2020, India’s food processing sector received FDI worth US$10.24 billion. By 2030, the sector is expected to be worth over half a trillion dollars, making India the world’s fifth largest consumer market.

Multinational companies ITC Limited, Nestle, Parle, Britannia, and Hindustan Unilever Limited (HUL), are the sector’s top FMCG (fast-moving consumer goods) companies in India.

So far, they have welcomed the PLI scheme, which could fuel investment and vertical growth in the food processing sector. HUL commented that less than 10 percent of the food grown in India is processed, which reveals the untapped potential for value addition in the food sector besides increase in employment opportunities in agriculture.

This article was originally published April 13, 2021. It was last updated June 18, 2021.

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