The Union Cabinet, headed by PM Narendra Modi, gave approval for a new central scheme with an outlay of Rs 10,000 crore for providing credit-linked subsidy to two lakh micro food processing units across the country.

The ‘scheme for formalisation of micro food processing enterprises’ was announced as part of the Rs 20 lakh crore Atmanirbhar package to tackle the economic slump resulting from COVID-19 pandemic.

Significance of the scheme

There are about 25 lakh unregistered food processing enterprises which constitute 98 per cent of the sector and are unorganised and informal. Nearly 66 per cent of these units are located in rural areas and about 80 per cent of them are family-based enterprises. This sector faces a number of challenges.

The challenges include 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 health and 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, the ministry of food processing industries said in a statement.

The government said the scheme is likely to generate nine lakh skilled and semi-skilled jobs, benefit nearly eight lakh micro enterprises through access to information, better exposure and formalisation. It will also enable them to formalise, grow and become competitive.

How will the scheme be implemented?

Under the scheme, meant for the unorganised sector, the expenditure will be shared by the central and state governments in the ratio of 60:40.

The scheme, to be implemented for five years till 2024-25, will provide back ended credit-linked subsidy to two lakh units. It will have a cluster-based approach, with focus on perishables.

To encourage micro enterprises, the government said it will provide credit-linked subsidy for 35 per cent of the eligible project cost with a ceiling of Rs 10 lakh.

The beneficiary contribution would be minimum 10 per cent and the balance will come from loan. The government will provide onsite skill training and handholding for detailed project reports and technical upgradation.

The government will also provide a seed capital of Rs 4 lakh per Self Help Group (SHG) to provide loans to members to meet their working capital requirement and for buying small tools.

A grant will also be provided to FPOs (Farmer Producers Organisation) for backward/forward linkages, common infrastructure, packaging, marketing and branding.

The scheme would be monitored by the central government’s inter-ministerial empowered committee, while state level committee will sanction and recommend proposals for expansion of micro units and setting up of new units.

States will also prepare annual action plans for implementation of the scheme. There would be a third-party evaluation and mid-term review mechanism, the statement said.

The government will set up a national level portal where applicants/individual enterprises could apply to participate in the scheme. All scheme activities would be undertaken on the national portal.

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