New Delhi: The government is considering a new incentive framework to boost the food processing sector, which may differ from the existing production-linked incentive (PLI) scheme that offers companies financial rewards based on incremental sales, according to two people aware of the development.
The Union food processing ministry is reviewing lessons from the current PLI programme and consulting industry stakeholders before finalizing the new framework. It has also held discussions with PLI beneficiaries to identify segments requiring additional policy support, including plant-based proteins, nutrition products, dairy by-products and technologies aimed at reducing food wastage.
“It’s not that we are going to have PLI 2.0, maybe in some other form to transform the food processing sector. The government has begun consultations with industry to assess the performance of the PLI for food processing and identify the contours of a successor programme. The discussions are focused on evaluating the scheme’s achievements, challenges and gaps, and drawing lessons from its six-year implementation,” said the first of the two persons cited above, both of whom spoke on condition of anonymity.
The financial outlay of the proposed scheme is yet to be worked out.
The exercise has generated strong interest among industry stakeholders, as the food processing PLI is one of the country’s most successful incentive schemes, this person added.
With an incentive outlay of ₹1.91 trillion, the PLI scheme covers 14 strategic sectors, including food processing, to strengthen India’s manufacturing ecosystem and global competitiveness.
Queries emailed to the ministry of food processing and the department for promotion of industry and internal trade (DPIIT) remained unanswered till press time.
Implemented as a six-year programme, the PLI scheme is set to expire at on 31 March 2027. It focuses on increasing value addition in the food processing sector, expanding processing capacity, and generating employment, particularly in rural areas and off-farm sectors.
Success story
The development assumes significance as the country’s ₹10,900-crore PLI scheme for the food processing sector has delivered on several fronts, drawing investments and expanding capacity. Against committed investments of ₹7,722 crore, companies have invested ₹9,207 crore across 22 states under the scheme for food processing.
The scheme has added around 3.4 million tonnes per annum of food processing and preservation capacity and generated an estimated 329,000 jobs, including direct and indirect employment. As of April, sales of PLI-supported products have risen at a compounded annual growth rate (CAGR) of 10.58%, while exports have registered a CAGR of 7.41%, despite a challenging global macroeconomic environment.
“The scheme has exceeded its targets, strengthening the case for a follow-on incentive programme that builds on the successes of the existing PLI framework while consolidating gains for industry, consumers and farmers,” said the second person cited earlier.
According to the official, a recently released Crisil report shows that India’s food processing level has risen from about 10% of its farm output in 2010 to 17% in 2023. The government is now targeting an increase to at least 25% by 2031, for which a supportive policy framework could be a game changer.
Experts said there is a need for a closer coordination between the government and industry to unlock the next phase of growth in India’s food processing sector.
“There is a need to move beyond broad-based consultations and establish time-bound industry-government working groups with clearly defined objectives, designated owners on both sides and measurable milestones that can be reviewed periodically,” said Anand Ramanathan, partner and consumer industry leader, Deloitte South Asia.
“The policy framework for exports, taxation and investment incentives must remain stable and predictable. Policy uncertainty tends to dampen private capital deployment even when the underlying economics are attractive,” he added.
According to a joint report by Deloitte India and the Federation of Indian Chambers of Commerce and Industry (Ficci), India’s food sector is undergoing a structural shift, fuelled by rising incomes, rapid urbanization and wider digital adoption. The report says consumers are becoming more quality-conscious, with growing demand for convenience, healthier products and better food experiences. This transition towards a value-driven food economy is expected to create a $600 billion processed food market by 2030.