Prime Minister’s Formalization of Micro Food Processing Enterprise (PMFME) Scheme: All You Need To Know

The Indian food processing industry has grown rapidly with an average annual growth rate of 8.3% in the past 5 years. With a market size of US$ 866 billion in 2022, the food industry will play a vital role in the economy's growth. The domestic food market is projected to grow by over 47% between 2022 and 2027, reaching US$ 1,274 billion. In 2023, the food market will generate US$ 963 billion in revenue and the market is anticipated to expand at a CAGR of 7.23% between 2023-27.

While the unorganised food processing sector, which includes almost 25 lakh units, employs 74% of the food processing workforce. Approximately 66% of these units are in rural areas, and around 80% of them are family-based companies supporting livelihood in rural households and minimizing their migration to urban areas. These businesses are mostly classified as micro-enterprises. These units are confronted with a number of problems that impede their performance and expansion. The Ministry of Food Processing Industries (MoFPI) has launched the "PM Formalisation of Micro Food Processing Enterprises Scheme (PM FME Scheme)" through a package of support and services in recognition of the contribution of unorganised micro food processing enterprises and the challenges that impede their performance. It is a milestone effort under the Aatmanirbhar Bharat Abhiyan, providing a golden opportunity for micro food entrepreneurs, FPOs/ SHGs/ Co-operatives to benefit from the US$ 1.21 billion (Rs. 10,000 crore) Scheme for the formalisation of 2 lakh Micro Food Processing Enterprises.

The Prime Minister’s Formalization of Micro Food Processing Enterprise (PMFME) Scheme

Under the AatmNirbhar Bharat Abhiyaan, the Prime Minister- Formalisation of Micro Food Processing Enterprises (PM-FME) scheme was aimed at promoting ‘vocal for local’. The centrally sponsored scheme was launched on 29th June, 2020. This scheme is currently being implemented in 35 states and union territories with the goal of improving the existing micro-enterprises in the unorganized segment of the food processing industry and the formalisation of the sector. It also includes US$ 487.76 (Rs. 40,000) in financial assistance for working capital and the purchase of small tools for each member of the Self-Help Group (SHG) involved in food processing operations.

Objectives

• Entrepreneurs' capacity is being built through technical knowledge, skill training, and hand-holding support services.
• Increased credit availability to existing micro food processing companies for technology upgrades.
• Farmer Producer Organisations (FPOs), Self-Help Groups (SHGs), Producers Cooperatives, and Cooperative Societies receive assistance along the entire value chain, allowing microenterprises to access common services.
•  Assistance in the transformation of current businesses into a formal structure for regulatory registration and compliance.
• Integration with a well-organized supply chain through improved branding and marketing.

Coverage of States/ UTs and Funding Pattern

It is an All India Centrally Sponsored Scheme with a US$ 1.21 billion (Rs. 10,000 crore) budget for a 5-year period covering 200,000 firms from 2020-21 to 2024-25. The scheme's budget would be split 60:40 between the Central and State Governments, 90:10 between the North-Eastern and Himalayan States, 60:40 between UTs with legislatures, and 100% by the Centre for all other UTs. Expenditures in the first year of 2020-21, whether incurred by the Centre or the States, would be borne entirely by the Central Government. The spending for the first year would be adjusted in the ratio mentioned above in the money being transferred to the states evenly over the next four years. Funds under the Scheme would be distributed to states in accordance with the approved Project Implementation Plan (PIP).

• Salient Features
  • The states would pick food products for each area, keeping in mind the scheme's emphasis on perishables. The ODOP could be a perishable agricultural product, cereal-based product, or food product that is commonly produced in a district and its related sectors.
  • Preference would be given to those producing using the ODOP strategy for support to existing individual micro units. Units manufacturing other items, on the other hand, would be subsidised as well. In the case of organisations, those primarily active in products under the ODOP method would be supported. Support for groups processing other products in such districts would be limited to those who already process those items and have adequate technical, financial, and entrepreneurial strength.
  • Support for shared infrastructure and marketing and branding would only be available for products under the ODOP model. In the event of support for marketing and branding at the state or regional level, the same product of districts that do not have that product as ODOP could also be included.
  • The scheme would also fund the building of backward and forward links, the provision of shared facilities, incubation centres, training, R&D, marketing, and branding, the majority of which would be for ODOP products. Furthermore, this approach would supplement and benefit from the government's existing promotional efforts, such as the development of Agriculture Crop Clusters under the Agriculture Export Policy, the cluster approaches of the Ministry of Agriculture and the Ministry of Rural Development through the National Rurban Mission.
• Upgradation of Individual Micro Food Processing Units
  • Individual Category
    Individual micro food processing plants would be eligible for credit-linked capital subsidies of up to 35% of the eligible project cost for expansion/technology upgradation, with a maximum limit of US$ 12,193.94 (Rs.10 lakh) per unit. The beneficiary should contribute at least 10%, with the remainder funded by a bank loan.
  • Group Category
    The Scheme would provide support to organisations such as FPOs, SHGs, and producer cooperatives in clusters along the entire value chain. SHGs, FPOs, and Producer Cooperatives would receive the following assistance-      
    • Grant at 35% with credit linkage for capital investment with a maximum ceiling as prescribed.
    • Training assistance.
    • Support for marketing and branding for ODOP goods in order to build a common brand.
  • Seed Capital to SHG
    The scheme provides Seed Capital of US$ 487.76 (Rs. 40,000) to every member of a SHG involved in food processing for working capital and the purchase of small tools. Seed capital would be supplied as a grant at the federation level of SHGs, which would then be extended to members as a loan through SHG.        
• Support to Food Processing Organizations (FPOs) / Self-Help Groups (SHGs) / Cooperatives
  The initiative would assist clusters and groupings such as FPOs/SHGs/producer cooperatives across the entire value chain for sorting, grading, assaying, storage, common processing, packaging, marketing, agri-produce processing, and testing laboratories. They would be provided with the following support:
  • Credit-linked grant of 35% of project cost with a maximum award of US$ 12,193.94 (Rs 10 lakh) to existing unorganised food processing enterprises for upgrading.
  • Credit-related grant of 35% of the project cost to SHGs/FPOs/cooperatives for capital investment, with a maximum ceiling as prescribed.
  • As a working capital, people involved in food processing will receive a seed capital of US$ 487.76 (Rs. 40,000) per member.
  • Credit-linked grant at 35% of project cost for the common infrastructure, with a maximum ceiling as specified.
  • Support for marketing and branding up to 50% of the expenditure, with a maximum limit as prescribed.
• Capacity Building & Research
  • Training is an essential component in the technological advancement and formalisation of micro-food processing firms. All people and members of institutions who will receive grants will also receive training to improve their skills. Furthermore, training support would be provided to other existing individual units and groups in the district that produce ODOP products, even if they are not supported by a credit-linked grant.
  • The National Institute for Food Technology Entrepreneurship and Management (NIFTEM) and the Indian Institute of Food Processing Technology (IIFPT), both national-level food processing technology organisations under MOFPI, have been tasked to drive capacity building and research. At the state level, they would collaborate with a State Level Technology Institution in food processing technology chosen by the state government to conduct capacity building and training.
  • Individual and group recipients will receive training in entrepreneurship development, basic functions of business operations, bookkeeping, registration, FSSAI standards, Udyog Aadhar, GST Registration, general hygiene, packaging, marketing, and so on. Specific training focused on the ODOP model and vertical specialty goods will be provided closer to the entrepreneurs' workplace. The existing infrastructure of Rural Self Employment Training Institutes (RSETI) and other district-level institutions will also be used for training.

• Common Infrastructure

FPOs/ SHGs/ Producer Cooperatives/State Agencies or private firms would be assisted in the development of collaborative facilities, such as a common processing facility, incubation centre, laboratory, warehouse, cold storage, and so on. A project's eligibility under this category would be determined based on its benefit to farmers and the industry at large, viability gap, lack of private investment, criticality to the value chain, and so on. Credit-linked grants would be provided at 35% with a maximum ceiling as specified.

• Branding and Marketing Support
  • Under the scheme, marketing and branding support will be provided to FPOs/SHGs/Cooperatives or a special purpose vehicle (SPV) of micro food processing enterprises for developing common packaging and branding with provisions for quality control, standardisation, and adhering to food safety parameters for consumer retail sale.
  • Support for marketing and branding requires a minimum volume, which can be achieved through the active involvement of FPOs, SHGs, and cooperatives in bringing a significant number of producers together. These organisations will be sponsored based on a Detailed Project Report (DPR) provided by them detailing key project elements. The State Nodal Agency would provide funding of up to US$ 6,096.97 (Rs. 5 lakh) for the preparation of DPR for proposals for branding and marketing.
  • Support for branding and marketing would be limited to 50% of total spending, with a maximum limit as specified. Proposals from states or national level institutions, organisations, or partner institutions for branding and marketing will be supported at the national level for vertical products. Under the proposal, no financial assistance would be offered for the establishment of retail stores.

• Partner Institutions

The initiative prioritises SC/STs, women, aspirational areas, and FPOs, SHGs, and producer cooperatives. Under the Ministry of Rural Development, TRIFED, National SC Development Finance Corporation, NCDC, Small Farmer Agri-Business Consortium (SFAC), and National Rural Livelihood Mission have been working in these areas. The aforementioned institutions may converge their activities by simplifying the identification of units/clusters of STs, SCs, cooperatives, FPOs, and SHGs, respectively, and feeding this into state PIPs.

Progress

The PM Formalisation of Micro Food Processing Enterprises Scheme (PMFME), which provides a credit-linked subsidy to set up or improve micro food processing facilities, has received over 1,02,515 loan applications so far. A total of 25,774 loan applications were approved out of the total number of applications received.

As on March 2023, 27,003 loans have been sanctioned in the country under the credit-linked subsidy component of the PMFME Scheme, with 5,864 loans sanctioned in Maharashtra.

 Source: Press Information Bureau

One District One Product (ODOP) has been approved for 713 districts in 35 states/UTs, out of a total of 766 districts in 36 states/UTs. A GIS-ODOP digital map has been developed by the MoFPI. 710 districts from 35 states and UTs have been identified for ODOP. The map also depicts districts covering 216 Integrated Tribal Development Areas, 112 Aspirational districts, and 35 districts with more than 40% SC population. Under the PMFME Scheme, MoFPI has sanctioned 76 Incubation Centres across the country with an investment of US$ 25.11 million (Rs. 205.95 crore) to provide support to existing / potential entrepreneurs for capacity building, new/innovative product creation, and so on across the value chain.

Under the scheme's branding and marketing component, 12 brands have been developed to promote various ODOPs. The Inter-Ministerial Empowered Committee (IMEC) approved the National Agricultural Cooperative Marketing Federation of India (NAFED)'s branding and marketing plan for phase 2 totalling US$ 2.40 million (Rs.19.75 crore). States/UTs, as well as NIFTEM/IIFPT, are hosting 51 ODOP Webinars/Offline Workshops. 4 State levels for Branding & Marketing, two from the state of Karnataka under the brand names "Seemi" and "Bhima" and two from the state of Andhra Pradesh under the brand names "Madugula Halwa" and "Aamodam" authorised by the IMEC. 35 states/UTs have appointed agencies to perform research for the State Level Upgradation Plan (SLUP).

State Rural Livelihood Mission (SRLM) has been granted US$ 30.91 million (Rs. 252.53 crore) as seed capital for 79,693 SHG members. A seed capital of US$ 6.83 million (Rs. 56.06 crore) has been provided to State Urban Livelihood Mission (SULM) for 16,159 members. Over 1 lakh SHG members have been identified and a total of US$ 24.74 million (Rs. 203 crore) has been granted.

As of March 2023, 25 training workshops/sessions have been held for 486 product-specific master trainers, 76 sessions for 983 district-level trainers, 1,085 sessions for 27,949 beneficiaries, etc. As of December 2022, 760 training modules (ODOP) were created, which included Presentations, Videos, DPR, and Course Content/Handbook, 486 Master Trainers from 35 states and territories were trained, the training of 931 District Level Trainers for Educational Development Plan (EDP) and Food Processing has been completed in 26 states/UTs and is continuing in others, 10,910 beneficiaries were trained in 26 states and territories and in 32 states/UTs, 972 DRPs were taught on EDP and ODOP.

Road Ahead

The Indian food processing industry is one of the largest in the world, with an estimated worth of US$ 535 billion by 2025-26. The Covid-19 pandemic has increased the acceptability of processed meals as a result of social media and digital knowledge, while customer desire for more ethical and environmentally friendly products is growing. Agriculture and related sectors are the backbone of the Indian economy. More than half of the Indian population relies on it for a living. The Prime Minister’s Formalization of the Micro Food Processing Enterprise (PMFME) Scheme has positively impacted the concerned beneficiaries in the past few years and is expected to drive the growth of the Indian food processing industry.