pradhan-mantri-formalisation-of-micro-food-processing-enterprises-pmfme-scheme

Context

  • On June 29, 2020, Prime Minister, founded a Pradhan Mantri Formalisation of Micro food Processing Enterprises (PMFME) Scheme, under the ‘Aatmanirbhar Bharat Abhiyan’ and ‘Vocal for Local’ campaigns, to deliver technical, financial and business assistance to micro food processing units in the nation. 

Government Funding

  • The total funds allotted for this scheme were esteemed at Rs. 10,000 crores (US$ 1.3 billion) and will be expended from 2020 to 2025. 
  • The government plans to deliver direct financial and technical help to about 200,000 micro food processing units under this scheme. 
  • The central government has been enduring 100% of all outlays in the first year (2020–21), if incurred by the centre or the states, and the exact outlays will be modified in certain ratios in the funds being spent to states equally in the next 4 years.

Need for this Scheme

  • The Indian food processing industry has a vast variety of food products and the biggest production base. 
  • There are over 25,00,000 food processing divisions in the unorganised food processing sector in India, with 66% of them found in rural areas and over 80% possessed by family-based firms delivering an income source to rural residents. 
  • Yet, these sloppy processing units face consequential challenges such as the absence of institutional finance, the key to modern equipment & technology and branding & marketing expertise. 
  • To manage these challenges the Government of India has instituted several programs to promote investments in the food processing industry, via the Ministry of Food Processing Industries (MOFPI). 
  • In acquisition, the government has allowed 100% FDI under the automated route in food processing industries, consequently, FDI inflows in this sector have increased from US$ 628 million in 2018–19 to US$ 904 million in 2019–20. 
  • According to KPMG, in 2019, the food processing industry was esteemed at US$ 290 billion and is anticipated to reach over US$ 500 billion by 2025.

Objectives of the PMFME Scheme: The scheme furnishes:

  1. Credit access to existing micro food processing businesses, Farmer Producer Organisations (FPOs), co-operatives, and Self-Help Groups (SHGs), for technology boost.
  2. Contribution to 200,000 existing micro food processing units to convert them into methodical units, by amplifying their marketing & branding and incorporating the supply chain with formal units
  3. Improved access to shared services, such as storage, incubation facilities, and packaging
  4. Professional and technical aid for food processing entrepreneurs
  5. Proper training and analysis for individual or group-owned food processing establishments

One District-One Product (ODOP) Approach

  • The PMFME Scheme has embraced the ODOP approach from the ODOP programme launched by the Uttar Pradesh (UP) government in 2018. 
  • Under this system, the state recognises and selects a food product for the district, which could be a perishable agricultural crop, such as grains, or a food product that is mainly produced in the district. 
  • Tomato, mango, potato, litchi, millet-based goods, fishery, poultry, meat, and animal feeds are a few of the food products protected by the ODOP. 
  • Classic and ingenious products like honey, minor forest products in tribal areas, and herbal items like turmeric are also funded by the scheme. 
  • Under the PMFME scheme, help in the form of new micro food processing units and marketing & branding support is exclusively given to micro food processing enterprises (owned individually or collectively) following the ODOP approach. 
  • As of June 2021, there were over 707 districts in 35 states and union territories that had selected ODOP, including 137 unique products.

Components of the PMFME Scheme: The scheme especially has 4 components to address the requirements of the Indian food processing sector:

  1. Support for food processing units: Under the scheme, unorganised micro food processing units are suitable for a credit-linked capital grant worth 35% of the project cost, with the highest ceiling of Rs. 10 lakhs (US$ 13,500) per unit, for upgradation.
  2. Marketing and branding support: Marketing & branding asset is delivered to FPOs, co-operatives, SHGs and regional or state-level Special Purpose Vehicles (SPVs) of micro food processing enterprises. 
  3. Support for common infrastructure development: Under the scheme, enterprises such as FPOs, co-operations, Self Help Groups, state agencies, and private enterprises receive aid to create common infrastructure, including incubation centres, common processing facilities, warehouses, laboratories, and cold storage.
  4. Capacity building and research: Training is a critical element in the process of transforming unorganised micro food processing units into organised units. Individuals and institutions receiving grants are needed to follow the training to enhance their aptitudes.

Recent Developments: State governments are continuously executing reforms to maximise the advantages of the PMFME scheme. Some current developments across various states are:

  1. The Kerala government recently disclosed plans to build an online platform to sell products manufactured by micro food processing units.
  2. On October 24, 2021, the Madhya Pradesh government declared a credit outreach programme in all its 52 districts. The programme will sustain sanctions and disbursement of loans associated with all central schemes, including Pradhan Mantri Mudra Yojna, Stand Up India and PMFME.
  3. In January 2021, the Odisha government presented 30 different products for 30 districts under the PMFME’s ODOP scheme and will enable these products in the global market with a primary emphasis on micro food processing units utilised by women SHGs.
  4. In November 2020, the Andhra Pradesh (AP) government declared a total outlay of Rs. 450 crores (US$ 60.75 million) for the PMFME scheme, which will be disbursed over a span of five years to support 10,035 micro food processing units in the state.
  5. In October 2021, the AP government reported a credit outreach programme, to disburse and approve loans to different government schemes.

Way Forward

  • The food processing industry is one of the most extensive sectors in India in terms of production, consumption, and exports. 
  • Fundamental crises faced by the food processing sector are voids in supply chain infrastructure, access to modern technology & equipment and the lack of marketing & branding expertise. 
  • Yet, the widespread adoption of continuous reforms and industry-friendly policies from the central and state governments to improve the nation’s unorganised food processing sector is anticipated to manage these challenges in the forthcoming years, driving the sector forward.