Pradhan Mantri Formalisation Of Micro Food Processing Enterprises Scheme, 2020

Policy Update
Mannat Ghumman

In a significant step towards enhancing the competitiveness of the food processing industry in India, the Ministry of Food Processing Industries (MoFPI) launched the Pradhan Mantri Formalisation of Micro Food Processing Enterprises (PM FME) Scheme. Launched on 29th June 2020, PMFMPE is a Centrally Sponsored Scheme by the Ministry of Food Processing Industries, designed to address the challenges faced by the micro-enterprises and to tap the potential of groups and cooperatives in supporting the upgradation and formalization of these enterprises.

This initiative is a cornerstone of the Aatmanirbhar Bharat Abhiyan, aimed at uplifting micro-enterprises in the unorganized segment of the food processing industry. With an outlay of ₹10,000 crores over five years, the scheme is designed to formalize and modernize the sector, impacting 2,00,000 micro food processing units directly.

The scheme, with an outlay of ₹10,000 crores over five years (2020-21 to 2024-25), follows a funding pattern where the expenditure is shared between Central and State Governments in a 60:40 ratio, 90:10 with North Eastern and Himalayan States, 60:40 with Union Territories (UTs) with legislature, and 100% by the Center for other UTs. The scheme aims to assist 2,00,000 micro food processing units directly with credit-linked subsidies while supporting common infrastructure and institutional architecture to accelerate the sector’s growth.

The implementation of the scheme involves multiple stakeholders, including Central and State Governments, financial institutions, and various support organizations. A robust framework ensures efficient disbursement of grants and subsidies, capacity building, and technical support. The scheme’s focus on the ODOP approach ensures localized, product-specific support, maximizing the potential of each district’s unique offerings.

Aims and Objectives

The unorganized food processing sector in India comprises nearly 25 lakh enterprises, contributing significantly to employment (74% of which are women), output (12%), and value addition (27%) in the food processing sector. Most of these units are family-based and located in rural areas. The PM FME Scheme aims to address the challenges faced by these micro-enterprises by:

Enhancing access to credit and integrating them with organized supply chains.
Transitioning 2,00,000 enterprises into a formal framework.
Providing common services and strengthening institutions, research, and training.
Offering professional and technical support.

The PM FME Scheme is structured around two primary aims:

To enhance the competitiveness of existing individual micro-enterprises in the unorganized segment of the food processing industry.
To support Farmer Producer Organizations (FPOs), Self Help Groups (SHGs), and Producers Cooperatives along their entire value chain.

These aims translate into specific objectives designed to build the capability of microenterprises, including:

Increased access to credit for existing micro food processing entrepreneurs, FPOs, SHGs, and cooperatives.
Integration with an organized supply chain by strengthening branding and marketing.
Support for transitioning 2,00,000 enterprises into a formal framework.
Increased access to common services such as processing facilities, laboratories, storage, packaging, marketing, and incubation services.
Strengthening institutions, research, and training in the food processing sector.
Enhanced access to professional and technical support for enterprises.

Salient Features of the Scheme

Marketing and Branding Support: The scheme emphasizes the importance of marketing and branding, providing a 50% financial grant for these activities to groups of FPOs, SHGs, cooperatives, or Special Purpose Vehicles (SPVs) of micro food processing enterprises. The One District One Product (ODOP) approach ensures that marketing and branding support are tailored to products at the state or regional level. Eligible items for support under the scheme include:

Training related to marketing.
Developing common brand and packaging, including standardization.
Marketing tie-ups with national and regional retail chains and state-level institutions.
Quality control to ensure product standards.

Capacity Building: Capacity building under the PM FME Scheme involves training beneficiaries on food processing entrepreneurship. This training covers essential functions of enterprise operations, marketing, bookkeeping, registration, FSSAI standards, Udyog Aadhar, GST registration, general hygiene, and specific training for ODOP products or unit-produced items.

Credit Linked Subsidy: Individual micro food processing units seeking upgradation can avail of a credit-linked capital subsidy of 35% of the eligible project cost, with a maximum ceiling of ₹10 lakh per unit. The beneficiary must contribute a minimum of 10%, with the remaining amount to be sourced as a bank loan.

One District One Product (ODOP): The ODOP approach is pivotal in the PM FME Scheme, designed to leverage the benefits of scale in procurement, common services, and marketing. The scheme approves 713 districts in 35 states and UTs, each focusing on unique products like mango, potato, litchi, tomato, millet-based products, fisheries, poultry, and traditional items like turmeric and amla. ODOP provides a framework for value chain development and alignment of support infrastructure.

Seed Capital for SHGs: The scheme provides seed capital at ₹40,000 per member of SHGs for working capital and purchasing small tools, up to ₹4 lakhs per SHG. This seed capital is granted to the SHG Federation by SRLM/SULM through the State Nodal Agency (SNA) and is extended to members as loans through the SHGs.

Support for Clusters and Groups: The scheme supports clusters and groups like FPOs, SHGs, and cooperatives along their entire value chain. This includes grants of 35% with credit linkage for capital investment, training support, and a credit-linked capital subsidy for common infrastructure. The common infrastructure includes facilities for assaying agricultural produce, sorting, grading, warehouse, cold storage, common processing facilities for ODOP produce, and incubation centers.

Impact

Since January 2023, a total of 51,130 loans have been sanctioned under the credit linked subsidy component of the PMFME scheme, which is highest achievement during any calendar year since launch of the scheme. An amount of Rs 440.42 crore has been released as seed capital assistance to 1.35 Lakh Self Help Group (SHG) members. 4 Incubation Centers have been completed and inaugurated during the period providing product development support to grass-root Micro Enterprises.

Since the inception of the scheme, so far, a total of 65,094 loans have been sanctioned under the credit linked subsidy component of the PMFME scheme to individual beneficiaries, Farmer Producer Organizations (FPOs), Self Help Groups (SHGs) and Producer Cooperative Societies. An amount of Rs 771 crore has been released as seed capital assistance to 2.3 Lakh Self Help Group (SHG) members.

Bhaskaran, E. (2024) discussed the PM FME Scheme, a key initiative by the Government of India and State Governments. The study examined the scheme’s performance and the government’s 35% credit-linked capital subsidy on eligible project costs up to Rs. 10.0 lakhs. Findings highlighted the need to reduce the gap between submitted and bank-forwarded applications, recommending thorough review and assistance by District Resource Persons. Banks should ensure 100% sanction and prompt disbursement of applications, addressing rejections due to technical feasibility, financial viability, and CIBIL scores. Entrepreneurs are advised to form clusters under Section 8 companies to access government funding and adopt a Cluster Development Approach to reduce costs and increase profits.

Conclusion

The Pradhan Mantri Formalisation of Micro Food Processing Enterprises Scheme is a transformative initiative aimed at formalizing and modernizing India’s vast unorganized food processing sector. By providing financial, technical, and infrastructural support, the scheme seeks to enhance the competitiveness of micro-enterprises, promote their integration into organized supply chains, and foster sustainable growth. The scheme’s focus on capacity building, marketing, branding, and the ODOP approach ensures a comprehensive support system for micro food processing units, paving the way for a more robust and resilient food processing industry in India.

References

Bhaskaran, E. (2024). The Performance of Pradhan Mantri Formalisation of Micro Food Processing Enterprises Scheme in India. 1. 12. 10.13140/RG.2.2.19569.49760.
“Year End Review 2023- Achievements & Initiatives of Ministry of Food Processing Industries.” 2023. Pib.gov.in. 2023. https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1991108.
“Welcome to PMFME-MOFPI.” 2024. Mofpi.gov.in. 2024. https://pmfme.mofpi.gov.in/pmfme/#/Home-Page.
“Pradhan Mantri Formalisation of Micro Food Processing Enterprises.” 2020. MyScheme – One-Stop Search and Discovery Platform of the Government Schemes. 2020. https://www.myscheme.gov.in/schemes/pmfmpe.