PLI success prompts Centre to explore next phase for food processing sector
The Ministry of Food Processing Industries (MoFPI) has begun industry consultations to design the next phase of incentives for the food processing sector, following the outcomes of the current Production Linked Incentive Scheme for Food Processing Industry (PLISFPI).
A high-level stakeholder meeting reviewed performance data from the existing scheme and gathered inputs from PLI beneficiaries on segments needing additional policy support.
Special focus areas identified for future support include nutraceuticals, functional foods, plant-based proteins, dairy ingredients, marine value-added products, pet food, and advanced food processing technologies.
Industry representatives recommended a more flexible, outcome-oriented incentive framework for the next phase, including differentiated incentives tied to exports, import substitution, R&D, and technology adoption.
Production Linked Incentive (PLI) Scheme for Food Processing Industry (PLISFPI)
PLISFPI is a central sector scheme approved by the Union Cabinet in 2021 to build global food manufacturing champions and support Indian food brands internationally. It is one of 14 PLI schemes launched across sectors since 2020 to boost domestic manufacturing, reduce import dependence, and generate employment, with incentives paid on incremental sales of manufactured goods over a base year.
Key Details
- Total outlay: ₹10,900 crore, implemented over six years (2021-22 to 2026-27).
- Nodal ministry: Ministry of Food Processing Industries (MoFPI).
- Three components: (1) incentivising manufacturing of four major segments — Ready to Cook/Ready to Eat foods including millet-based products, Processed Fruits & Vegetables, Marine Products, and Mozzarella Cheese; (2) support for innovative/organic SME products including free-range eggs, poultry meat, and egg products; (3) branding and marketing support abroad for Indian food brands.
- Implemented through a Project Management Agency (PMA) responsible for appraisal, eligibility verification, and disbursement of claims.
- Reported outcomes: sales of PLI-supported products grew at a CAGR of about 10.8% (₹58,758 crore in FY 2019-20 to ₹1,08,854 crore in FY 2025-26); exports grew at a CAGR of about 11%; beneficiary investment exceeded ₹9,200 crore against a committed ₹7,722 crore.
The consultations mark the transition point where the government evaluates a maturing PLI scheme's outcomes before designing its successor — a pattern relevant to other PLI sectors nearing review (e.g., mobile manufacturing, textiles) and testable as a general PLI policy-design question.
Production Linked Incentive (PLI) Scheme — General Framework
The PLI mechanism, first used for mobile phone and electronics manufacturing in 2020, ties government incentive payouts directly to a firm's incremental production/sales rather than upfront capital subsidies, aligning incentives with actual output and reducing leakage.
Key Details
- PLI schemes span 14 sectors including electronics, pharmaceuticals, telecom, textiles, food processing, white goods, automobiles/auto components, specialty steel, drones, and Advanced Chemistry Cell batteries.
- Administered by the respective sectoral ministry/department, with disbursement typically linked to independently verified incremental sales/investment.
- Objective: reduce import dependence, achieve economies of scale, and integrate Indian manufacturers into global value chains.
The food processing PLI's move toward a more "outcome-oriented" second phase illustrates how PLI design is evolving from a flat incremental-sales incentive to differentiated incentives targeting exports, R&D, and import substitution.
- PLISFPI outlay: ₹10,900 crore; implementation period 2021-22 to 2026-27.
- Sales of PLI-supported food products: ₹58,758 crore (FY 2019-20) to ₹1,08,854 crore (FY 2025-26); CAGR ~10.82%.
- Export CAGR under the scheme: ~11.05%.
- Beneficiary investment: over ₹9,207 crore against a committed ₹7,722 crore (about 20% above target).
- Four major manufacturing segments covered: RTC/RTE foods (incl. millets), processed fruits & vegetables, marine products, mozzarella cheese.