PLI – Incentivising Food Industry in India

Background:

In the Union Budget 2021-22, presented on 1st February 2021, the Finance Minister announced an outlay of INR 1.97 Lakh Crores for the Production-Linked Incentive (PLI) Schemes for 13 key sectors, to create national manufacturing champions and generate employment opportunities for the country’s youth. This means that minimum production in India as a result of PLI Schemes is expected to be over US$ 500 billion in 5 years. PLI Schemes are a cornerstone of the Government’s push for achieving “Atmanirbhar Bharat”.

Food Industry in India:

In 2017-18, the food processing industry accounted for 7.9 per cent of manufacturing GVA and 9.5 per cent in agricultural value added. It is also a major employment provider, contributing to 11.4 per cent of organised manufacturing employment.  Food processing industry (FPI) is one area which has the potential to add value to farm output, create alternate employment opportunities, improve exports and strengthen the domestic supply chain. India, with about 11.2 per cent of total arable land in the world, is ranked first in the production of milk, pulses and jute, second in fruits and vegetables and third in cereals (Government of India, 2019). It is also the sixth largest food and grocery market in the world (Law, et al., 2019).

Production Linked Incentive Scheme:

Production Linked Incentive scheme for food processing industry is a new central sector scheme with estimated outlay of Rs. 10,900 cr. The scheme is being implemented by Ministry of Food Processing Industries (MoFPI) for a tenure of 6 years from FY 2021-22 to FY 2026-27.

Objectives of the Production Linked Incentive Scheme:

The objectives of the PLI scheme for food Industry are:

1. To support creation of global food manufacturing champions. The scheme is expected to facilitate expansion of processing capacity to generate processed food output of Rs 33,494 crore.

2. To support Indian brands of value added food products in international markets. Rs. 27,816 crore increase in export sales is expected in 6 years.

3. To increase employment opportunities for off-farm jobs. The scheme is aimed at generating employment for nearly 2.5lakh persons by the year 2026-27.

4. To ensure remunerative prices of farm produce and higher income to farmers.

Components of the Production Linked Incentive Scheme:

The objectives are sought to be achieved through the introduction of a Production Linked Incentive (PLI) Scheme. The scheme has three broad components.

CATEGORY 1: Incremental Sales based incentives to large companies:

This category is for incentivising large manufacturers of food products who commit to make prescribed minimum investments and achieve incremental sales as per the prescribed growth rates. The incentive is for manufacturing of food products in the following four segments:

• Ready to Cook/ Ready to Eat (RTC/ RTE) including millet-based foods,
• Processed Fruits & Vegetables,
• Marine Products &
• Mozzarella Cheese.

Eligibility:

S.NO	SEGMENT	Minimum Sales of All Food Products in 2019-20 (Rs Crore)	Minimum Investment (Rs. Crore)
1.	RTE/RTC	500	100
2.	Processed Fruits& Vegetables	250	50
3.	Marine	600	75
4.	Mozzarella Cheese	150	10 MTPD PLANT-Rs 23 Cr.

Incentive:

The incentive under the scheme would be paid for 6 years from FY 2021-22 to FY 2026-27 on incremental sales over the base year. The incentive payable for a particular year will be due for payment in the following year.

Rates of Incentives on Sales over Years:

Year	Ready to Cook/ Ready to Eat	Processed Fruits & Vegetables	Marine Products*	Mozzarella Cheese
2021-22	10%	10%	6%	10%
2022-23	10%	10%	6%	10%
2023-24	10%	10%	6%	10%
2024-25	10%	10%	6%	8%
2025-26	9%	9%	5%	6%
2026-27	8%	8%	4%	4%

* 10% incentive rate for Value Added Marine products for all 6 years.

** Base year for calculation of incremental sales would be 2019-20 for the first 4 years. For 5^th & 6^th years, the base year would shift to 2021-22 & 2022-23 respectively. 

CATEGORY 2: Incremental Sales based incentives to SMEs

Small & Medium Enterprises (SMEs) which manufacture Innovative/ Organic food products would be provided incentive on incremental sales above the base year as is provided to large entities. SMEs across all the above four food product segments including Free Range – Eggs, Poultry Meat & Egg Products can apply under this category.

The condition of minimum sales and committed investment is not applicable to SMEs. Selection of SMEs would be based on the nature of product, stage of product, market development, business plan and potential for scalability.

Eligibility:

I. Udyog Aadhar/ Udyami Registered;

II. Achieved Minimum Sales of Rs 1 crore during 2019-20 for each of the innovative/ organic products proposed to be incentivised;

III. Applicant for Organic Product must be registered with APEDA for the organic product proposed to be incentivised.

CATEGORY 3: Grants to marketing companies

Under this category, grants would be provided to marketing/branding companies for promotion of Indian brands abroad. Branding & marketing includes in-store branding, shelf space renting, listing fee, commercial advertisements etc. It does not cover trade discounts, expenditure on distribution, and overseas logistics expenditure.

Incentive:

GOI would reimburse 50% of expenditure on branding/marketing abroad, subject to a maximum grant of 3% of sales of food products or Rs. 50 crore p.a., whichever is less.

Eligibility:

I. Only Indian Brands are covered for selling food products completely manufactured in India.

II. Applicants must commit to spend atleast Rs. 5 crore over a period of 5 years.

III. The applicant would be required to furnish a 5-year plan for branding in the target markets abroad.

Imp Note: The applications can be filed online on portal: https://plimofpi.ifciltd.com. Last date for submission of application is 17.06.2021 upto 5:00 PM.

Special thanks to CA Vini Patni for vetting this article and valuable suggestions.

For any further clarifications reach at Mail – Sameeksha@Hiregange.com