SCHEME FOR FORMALISATION OF MICRO FOOD PROCESSING ENTERPRISES

Introduction

The food processing enterprise in India is considered as one of the most important industries.
It is broadly recognized as the ‘sunrise industry’  having a large capacity for inspiring the
rural economic system, the advent of large scale processed food manufacturing and food
chain facilities, and the consequent technology of employment and export earnings. The
Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, has approved to a new
Centrally Sponsored Scheme – “Scheme for Formalisation of Micro food processing
Enterprises (FME)” for the Unorganized Sector on All India basis with an outlay of
Rs.10,000 crore. The expenditure will be shared by government of India and the States in
ratio of 60:40. There are about 25 lakh unregistered food processing enterprises which
constitute 98% of the sector and are unorganized and informal. Nearly 66 % of these units are
located in rural areas and about 80% of them are family-based enterprises. This sector faces
many challenges including the inability to access credit, high cost of institutional credit, lack
of access to modern technology, inability to integrate with the food supply chain and
compliance with the health &safety standards. Strengthening this segment will lead to
reduction in wastage, creation of off-farm job opportunities and aid in achieving the
overarching Government objective of doubling farmers’ income.

What is the Scheme

Through this scheme, nearly eight lakh micro-enterprises will benefit through access to
information, better exposure and formalization. Credit linked subsidy support and hand-
holding will be extended to 2,00,000 micro-enterprises for expansion and upgradation. It will
enable them to formalize, grow and become competitive. It is expected that the project will
generate about 9 lacs skilled and semi-skilled jobs. The scheme envisages increased access to
credit by existing micro food processing entrepreneurs, women entrepreneurs and
entrepreneurs in the Aspirational Districts. It will also create increased access to common
services like sorting, grading, processing, packaging, storage etc.

The main objectives are to increase in access to finance by micro food processing units,
increase in revenues of target enterprises, enhance compliance with food quality and safety
standard, strengthen capacities of support systems, make transition from the unorganized
sector to the formal sector, to focus specially on women entrepreneurs and aspirational

1
districts; and to encourage Waste to Wealth activities and to focus on minor forest produce in
Tribal Districts.

Salient Features

The salient features of the scheme are listed below:

• Centrally Sponsored Scheme- Expenditure to be shared by Government of India and States

at 60:40.

• 2,00,000 micro-enterprises are to be assisted with credit linked subsidy.

• Scheme will be implemented over a 5 year period from 2020-21 to 2024-25.

• Cluster approach.

• Focus on perishables.

 Support to Individual micro units:

• Micro enterprises will get credit linked subsidy @ 35% of the eligible project cost with
ceiling of Rs.10 lakh.

• Beneficiary contribution will be minimum 10% and balance from loan.

• On-site skill training & Handholding for DPR and technical upgradation.

 Support to FPOs/SHGs/Cooperatives:

• Seed capital to SHGs for loan to members for working capital and small tools.

• Skill training & Handholding support.

• Credit linked capital subsidy.

 Implementation schedule:

• The scheme will be rolled out on All India basis.

• Back ended credit linked subsidy will be provided to 2,00,000 units.

• Seed capital will be given to SHGs (@Rs. 4 lakh per SHG) for loan to members for working
capital and small tools.

2
• Grant will be provided to FPOs for backward/forward linkages, common infrastructure,
packaging, marketing & branding.

 Administrative and Implementation Mechanisms

• The Scheme would be monitored at Centre by an Inter-Ministerial Empowered Committee

(IMEC) under the Chairmanship of Minister, FPI.

• A State/ UT Level Committee (SLC) chaired by the Chief Secretary will monitor and
sanction/ recommend proposals for expansion of micro units and setting up of new units by
the SHGs/ FPOs/ Cooperatives.

• The States/ UTs will prepare Annual Action Plans covering various activities for
implementation of the scheme, which will be approved by Government of India.

• In the programme, a third party evaluation and mid-term review mechanism will be created.

 State/ UT Nodal Department & Agency

• The State/ UT Government will notify a Nodal Department and Agency for implementation
of the Scheme.

• State/ UT Nodal Agency (SNA) would be responsible for implementation of the scheme at
the State/ UT level including preparation and validation of State/ UT Level Upgradation Plan,
Cluster Development Plan, engaging and monitoring the work of resource groups at district/
regional level, providing support to units and groups, etc.

 National Portal & MIS

• A National level portal would be set-up wherein the applicants/ individual enterprise could
apply to participate in the Scheme.

• On this National portal, all the scheme activities would be undertaken.

 Convergence Framework

• Support from the existing schemes under implementation by the Government of India and
State Governments would be availed under the scheme.

3
• The Scheme would attempt to fill in the gaps, where support is not available from other
sources, especially for capital investment, handholding support, training and common
infrastructure.

 Impact and employment generation:

• Eight lakh micro- enterprises will be benefitted through access to information, better
exposure and formalization.

• Credit linked subsidy support and hand-holding will be extended to 2,00,000 micro
enterprises for expansion and up gradation.

• This shall help them to formalize, grow and become competitive.

• This project is expected to create 9 lacs skilled and semi-skilled jobs.

• Scheme envisages increased access to credit by existing micro food processing

entrepreneurs, women entrepreneurs and entrepreneurs in the Aspirational Districts.

• Better integration with organized markets.

Relevant Legal Provisions

The Ministry of Food Processing Industries was established in July, 1988. The mandate given
to the Ministry included processing and refrigeration of some of the food items viz. milk,
poultry, egg, meat, fish, fruits & vegetables, grain milling. Furthermore, the Ministry was
mandated for planning, development & control of industries relating to bread, oilseeds,
breakfast food, biscuits, protein & allied items, beer, alcoholic drinks (non-molasses base),
aerated water & soft drinks etc.

The regulation that dealt with food safety in India turned into the Prevention of Food
Adulteration Act, 1954. The PFA has been in the region for over a long time and there has
been a want to change because of various reasons which consist of the converting necessities
of our food processing industry. The act gave birth to the Food Safety and Standards Act,
2006.

FSSA harmonizes India's food regulations as per international standards. It establishes a new
national regulatory body, the Food Safety and Standards Authority of India to develop
science based standards for food and to regulate and monitor the manufacture, processing,

4
storage, distribution, sale and import of food so as to ensure the availability of safe and
wholesome food for human consumption.

A unified act like FSSA enables unidirectional compliance. The administrative control of the
FSSA has been assigned to the Ministry of Health and Family Welfare thereby establishing a
single reference point for all matters and eradicating any possibility of multiplicity of orders
or the chance that any coordination problems are caused. Apart from the harmonization of
laws relating to food quality and standards with established international norms, FSSA aims
at regulating food hygiene and safety laws in the country in order to systematically and
scientifically develop the food industry.

Critical Analysis

In line with the vision to promote "Vocal for Local" with global outreach, the Central
Government's scheme for formalisation of micro food enterprises will help them become
more competitive and enable economies of scale across the production value chain. The
scheme aims to help nearly two lakh unorganised micro-food enterprises achieve technical
upgradation in line with FSSAI's standards as well give them marketing and branding
support. The government will adopt a cluster-based approach across states for products such
as mangoes, kesar, foxnuts, tapioca, chills, ragi, among other products. The government is
also hoping to focus on scaling up the value chains with focus on health and wellness,
nutritional, herbal and organic products. It has decided to extend Operation Greens Scheme,
implemented by the Ministry of Food Processing Industries from tomato, onion and potato
crops to include all fruits and vegetables for better price realisation for farmers and reduction
in wastage.

Conclusion

The new scheme for micro-food processing enterprises, with an outlay of ₹10,000 crore,
shall leverage the collective strength of our FPOs, SHGs, Cooperatives and existing FP
enterprises in unorganized sector, to position India as a World Food Factory. The
announcements leverage on India's bio-diversity through the cluster-based approach. It is
important to build on health and wellness product value chains, and India’s ancient grains
have the answer to this. Marketing this on a global scale requires lots of investments, and the

5
government’s move on this is a positive step. The micro FP enterprises constitute almost 98
per cent of the sector and 66 per cent amongst them are based in rural areas. Their potential
was hitherto untapped. They shall now act as the new growth engine for India’s rural
economy.