India approves production incentive scheme to encourage investment in food processing

INDIA-  The government of India has introduced direct fiscal incentives in the form Production Linked Incentives (‘PLI’) to boost manufacturing in the country’s food processing sector.

To ensure overall development of the sector, the food processing PLI policy targets 3 broad categories with specific incentives aimed at attracting more investments.

Firstly, the policy provides sales based incentives ranging from 10% to 4% on incremental sales (whether domestic or exports) for large manufacturers operating in Ready to Cook/ Ready to Eat, Fruits & Vegetables, Marine & Mozzarella Cheese for a period of 6 years.

 The incentives are being offered only to the pre-established players in the market with an investment and incremental sales commitments during the operative period of the policy.

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To support the success of the policy, India’s government has allocated a total of US$1.19 billion towards the implementation of policies under this category

Secondly, India has allocated a total of US$33.15 million to the support of Small and Medium Enterprises (‘SME’) operating in the category of innovative/ organic products. The condition for minimum sales and committed investment has however not been made applicable in this category.

The selection of SME(s) under this category would be based on the nature of product, stage of product, market development, business plan and potential for scalability.

Thirdly, in order to promote the Indian brands and help them in establishing themselves in the global market a budget of US$198 million towards the branding & marketing incentive scheme has been allocated.

 Under the PLI Scheme for food processing sector, 50% of the expenditure incurred by the companies on branding & marketing of Indian brands abroad shall be provided as an incentive subject to specified conditions.

The incentive under this scheme shall also be eligible to companies which otherwise are not eligible for incremental sales-based incentive.

Further, for the successful implementation of the scheme, US$14.5 million have also been allocated to take care of the administration costs.

In order to ensure, the ripple effect of the scheme is seen in the Indian economy, the Government has added an additional condition of mandatory local manufacturing, for claiming the incentives.

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The launch of the new policy is timely as only a small portion of the India’s agriculture output is currently being processed in the country.

An expanded food processing sector will ensure India reaps maximum value from its agricultural commodities while at the same time creating new employment opportunities for locals.

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