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Production Linked Incentive Scheme for Food Processing Industry: Explained

calendar14 Mar, 2022
timeReading Time: 4 Minutes
Production Linked Incentive Scheme

Production Linked Incentive Scheme for Food Processing Industry seeks to support the creation of global food manufacturing champions, advocate Indian brands, escalate job opportunities relating to off-farm jobs, and ensure remunerative prices for farm produce and healthy income for farmers. The GOI implemented this scheme on March 31st, with an outlay of Rs 10,9000 crore.

Background

  • The Indian food processing sector covers manufacturing facilities across all segments from micro to large industries.
  • India has the upper hand in terms of the large domestic market, resource endowment, and scope of advocating value-added products.
  • Sector seeks revitalization of Indian companies for achieving full potential. Companies must improve their current standing in terms of productivity, the scale of output, value addition & their linkages with the global value chain.
  • The Government has formulated the Production Linked Incentive Scheme for the Food Processing Industry based on the Production Linked incentive scheme of NITI Aayog to improve India’s manufacturing and export capabilities.

Objectives of Production Linked Incentive Scheme for Food Processing Industry

  • Assist Food manufacturing facilities with stipulated minimum Sales and investment to augment processing capacity and branding abroad to promote the emergence of prominent Indian Brands.
  • Empower food businesses to become global food manufacturing champions;
  • Strengthen prominent Indian brands for increased acceptance in the global markets;
  • Ramping up employments opportunities relating to off-farm jobs
  • Ensuring remunerative prices relating to farm produce and increased income of farmers

Salient features of Production Linked Incentive Scheme for Food Processing Industry

  • Central Sector Scheme having worth around Rs. 10900 crore
  • The first component relates to advocating manufacturing of four prominent food articles segment viz. Ready to Eat/Ready to Cook foods including Processed Fruits & Vegetables, Millets based products, Marine Products, Mozzarella Cheese.
  • Innovative/Organic items of SMEs, including Free Range- Poultry, Eggs, Meat, in these segments are also encompassed under the above component.
  • The selected applicant shall be required to make funding, as cited in the application (Subject to the prescribed minimum) in facility and machinery/equipment in the first two years in 2021-22 and 2022-23.
  • Funding made in 2020-21 also to be considered for fulfilling the underlying investment.
  • The norms around stipulated Minimum Sales and mandated investment shall not encompass companies selected for making unique/organic products.
  • The second component relates to bolster for marketing and branding abroad to promote the emergence of prominent Indian brands.
  • For incentivization of Indian brand abroad, the scheme aims grant to the applicant companies for in-store branding, shelf space marketing and renting.
  • Scheme shall be implemented over six years from 2021-22 to 2026-27.

Implementation strategy and targets under Production Linked Incentive Scheme for Food Processing Industry

  • The scheme shall be implemented on Pan Indian basis.
  • The scheme shall be introduced via a Project Management Agency (PMA).
  • The Project Management Agency would, inter-alia, be liable for appraisal of applications, vetting of eligibility for support, an inspection of claims eligible for incentive’s disbursement.
  • The incentive available under the scheme would be rendered for six years ending 2026-27. The incentive payable for a given year shall be due for payment in the subsequent year. The scheme duration shall be six years, i.e. 2021-22 to 2026-27.
  • The scheme has fund limitation; meaning- cost shall be confined to the validated amount. The maximum incentive available to the beneficiary shall be fixed beforehand at the time of approval of such beneficiary. The maximum incentive shall remain unchanged irrespective of performance
  • The scheme shall facilitate the augmentation of processing capacity to generate processed food worth Rs Rs 33,494 crore and create 2.5 lakh jobs by the year 2026-27.

Administrative and Implementation Mechanisms under Production Linked Incentive Scheme for Food Processing Industry

  • The Scheme would be tracked by the Empowered Group of Secretaries managed by the Cabinet Secretary[1]
  • Inter-Ministerial Approval Committee shall deal with the applicant’s selection, sanction and disbursement of funds as incentives.
  • The Ministry shall draft an Annual Action Plan catering to various activities for the scheme’s implementation.
  • A third-party validation and mid-term vetting mechanism shall be calculated in the programme.

Major impact, including employment creation potential

  • The scheme shall ensure the expansion of processing capacity to produced process food output worth Rs Rs 33,494 crore and;
  • Create around 2.5 lakh jobs by the year 2026-27.

Selection process under Production Linked Incentive Scheme for Food Processing Industry

  • All eligible applicants shall be ranked depending on the mark secured in the evaluation criteria as mentioned in Appendix-E. The applicant obtaining the highest marks shall be placed at the first position, followed by the applicant obtaining the second highest marks and so on. The applicants’ selection shall be in the order of their ranks. The waitlisted applicants shall be maintained along with selected Applicants.
  • The budget availability shall be considered as the limiting factor for the applicant selection process.
  • The maximum and minimum incentive outlay has been limited to 25% and 5% of the overall budget of the respective segment, respectively. However, companies from the Fruits & Vegetable segment may get the relaxation of 5 per cent for minimum incentive outlay.
  • Inter-segment allocation of funds shall be accessible for the Fruits and Vegetable Segment.
  • The reduction for Inter-segment allocation of funds is not available for Branding & Marketing abroad, and it may be increased in future.

Conclusion

Production Linked Incentive Scheme for Food Processing Industry serves various objectives including global food manufacturing champions, incentivization of Indian brands, and creation of job opportunities. In a nutshell, the scheme targets various pain points within the food sector and strive to address them with proactive measures.

Read our Article:Market Intervention Price Scheme (MIPS) for Farmers: An Overview

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