Cabinet okays Rs 10,900 cr PLI for food processing units under 4 buckets

Indian FMCG majors like ITC, Adani Wilmar & Marico, apart from MNCs like Nestle are expected to benefit

The Union Cabinet on Tuesday approved the much-anticipated production-linked incentive scheme for the food processing sector, paving the way for a rapid expansion of Indian packaged food majors. With an approved outlay of Rs 10,900 crore, the scheme aims to boost local production and export of food items in four categories, apart from special support for innovative items and small and medium enterprises (SMEs) in the sector.

Effective from the financial year 2021-22, the scheme has been designed to offer incentives to select food producers from India to expand their presence in foreign markets by growing production base, retail presence, and marketing and branding in export markets. Taking 2021-22 as the base year, the government aims at achieving an incremental production of worth Rs 33,494 crore by 2027-28. It also estimates to add 250,000 jobs by 2026-27.

Primarily, four key categories -- ready to eat (RTE) and/or ready to cook (RTC), processed fruits and vegetables, marine products, and mozzarella cheese -- will be given preference, where manufacturers will get incentives based on their committed investments and incremental sales. SMEs with innovative and organic portfolios in free-range eggs and poultry meat will be covered by the scheme. 

A total of Rs 9,040 crore over six years have been allocated for larger producers against their incremental sales, with the biggest chunk of Rs 2,169 crore earmarked for 2025-26.

Further, Rs 1,500 crore will be offered as an incentive to large manufacturers for their efforts in brand building in foreign markets and marketing initiatives like in-store branding and shelf-space renting.

Announcing the measures, Commerce Minister Piyush Goyal said the scheme has potential to create employment opportunities. It is aimed at farmers getting better prices, while cutting farm produce wastage. he said, adding the plan will help increase the share of the processed food sector in India’s exports.

A senior government official said several domestic and global companies like Nestlé, Mother Dairy, Amul, ITC, Hindustan Unilever, and Kelloggs have already expressed willingness to avail of the scheme. According to Food Processing Secretary Pushpa Subramanyam, the ministry will issue an expression of interest (EoI) by the end of April.

According to sources, leading packaged food companies of Indian origin, such as ITC, Adani Wilmar, and Marico, are expected to benefit from the new PLI scheme as they have already chalked out expansion plans in the RTE and RTC categories.
 

While Adani Wilmar is rapidly growing its branded packaged RTC/RTE portfolio under its flagship Fortune brand, Marico has recently ventured into the space under its brand, Saffola. According to Pawan Agarwal, chief financial officer, Marico, growing the food business will be the firm’s primary focus area for the next couple of years.

 “The PLI scheme will be a game-changer, in boosting food processing investments, agri-exports, farmer incomes, and building Indian brands for global markets,” said Sanjiv Puri, chairman, ITC.

Apart from growing its presence in the RTE and RTC categories, ITC is working on expanding its processed vegetables, value-added dairy and marine products businesses. The conglomerate has an established exports business for packaged shrimps.

Varun Berry, MD, Britannia said, it will provide much-needed boost to the food processing sector and also promote growth and investments. "While the initiative paves the way for many Indian brands to go global, it will also generate sizeable employment opportunities in the sector."

Sudhir Sitapati, executive director, foods & refreshment at Hindustan Unilever said, as one of the largest food processing companies in India, it will readily assist in making the scheme a success. "Less than 10 per cent of food grown in India is processed compared to 40 per cent in South East Asia. We hope that the PLI dramatically increases value addition in the food sector, generates employment in agriculture, and boosts India’s exports".

Amul, according to sources, is keen on setting up additional production lines for mozzarella cheese.

Among foreign multinationals food and beverages major, Nestlé is expected to benefit from the scheme. Suresh Narayanan, chairman and managing director at the India unit, had earlier told Business Standard the company was open to availing the PLI benefits once details were in. Nestlé has already unveiled a Rs 2,600-crore capacity expansion plan (until 2024).

Currently, it exports instant noodles to a large number of countries having Indian diaspora; most of the items it sells in Nepal and Bhutan are exported from here. In 2020, it got Rs 647 crore or a little over 5 per cent from export sales.

Welcoming the new scheme, a Nestlé India spokesperson said: “We will be studying the details of the scheme and accordingly decide on next steps”.

To keep leakages in check, the government has kept a cap on fund and, in case, manufacturers exceed initial commitment, the allocation wouldn’t be raised. Further, the scheme would be monitored by the Empowered Group of Secretaries chaired by the cabinet secretary. The food processing ministry, the nodal agency for the scheme, will prepare an Annual Action Plan covering various activities for implementation of the scheme, apart from the selection of applicants for coverage under the scheme, and sanction and release of funds as incentives. Moreover, a third-party evaluation and mid-term review mechanism would be built in, the government said.

Besides supporting the farm sector and building global food brands, the scheme aims at cutting agri-waste. According to estimates, over Rs 90,000 crore worth of agri-produce gets wasted in India every year.

Mohit Singla, chairman of the Trade Promotion Council of India, said value-added exports will get a leg up with the expansion of processing capacity and branding abroad.