Budget may allocate ₹28,000 crore to food processing schemes to aid farmers

This proposed allocation is for two schemes—Pradhan Mantri Formalisation of Micro Food Processing Enterprises (PMFME) Scheme and the Pradhan Mantri Kisan Sampada Yojana (PMKSY) that are set to lapse at the end of FY26. Under PMFME, additional funds will help expand credit-linked subsidies, technology upgradation, branding and marketing support for micro food processing units, including self-help groups (SHGs) and farmer producer organizations (FPOs). PMKSY focuses on creating modern infrastructure such as cold chain networks, agro-processing clusters and food testing laboratories.

An allocation of ₹15,000 crore is being considered for PMFME, which was launched in June 2020 with a total outlay of ₹10,000 crore for FY2020-25 and was later extended up to FY26. As much as ₹13,000 crore is being considered for PMKSY, which was launched on 23 August 2017 (the scheme was renamed from SAMPADA to PMKSY) with an allocation of ₹6,000 crore for FY2016-20 and later extended till FY21, the government officials cited earlier said on the condition of anonymity. The PMKSY scheme was further extended till FY26 with an increased allocation of ₹6,520 crore.

“A consolidated proposal for the two schemes is being resubmitted after an enhanced allocation for them was separately sought earlier by the ministry of food processing industries. This plan is under consideration of the finance minsitry," said the first of the two government officials cited earlier.

SAMPADA, or Scheme for Agro-Marine Processing and Development of Agro-Processing Clusters, was renamed as the Pradhan Mantri Kisan SAMPADA Yojana (PMKSY) in August 2017. The government will present the budget for FY27 on 1 February.

The development assumes significance given that a higher allocation will help accelerate project execution, enhance private investment and generate rural employment. The move aligns with the government’s broader strategy to promote food processing as a key growth driver in agriculture for increasing farm income and creating off-farm jobs, and reducing post-harvest losses. Agriculture and allied sectors contribute around 18% to India’s gross domestic product (GDP), with around 46% of India's workforce dependent on agriculture.

“Over the years, the project cost has gone up. Also, the Union budget for FY26 announced a major update to the New MSME (micro, small and medium enterprises) classification by increasing the investment limit by 2.5 times and doubling the turnover limits," said the second government official.

From 1 April 2025, the government updated the rules defining MSMEs. Under the new norms, a micro enterprise has investment limit up to ₹2.5 crore and turnover up to ₹10 crore. A small enterprise can have up to ₹25 crore investment and ₹100 crore turnover, while a medium enterprise can have up to ₹125 crore investment and ₹500 crore turnover. With these higher limits, more businesses now qualify as MSMEs.

Queries emailed to the ministries of finance and food processing industries on 16 January remained unanswered till press time.

Experts say focus should now be on better price realization for farmers.

"Higher allocations to PMFME and PMKSY must be backed by stronger market linkages at the ground level. Unless farmers are connected to organized buyers, processors and cold chains through FPOs and digital platforms, higher spending alone will have limited impact. The focus should now shift to turning infrastructure and formalisation support into steady demand and better price realisation for farmers," said Pravesh Sharma, agri-policy expert and former managing director of the Small Farmers’ Agribusiness Consortium (SFAC), an Indian government body promoting agribusiness for small farmers through FPOs, venture capital, and market linkages.

To be sure, the government takes a final call on allocations closer to the budget announcement, keeping in mind revenue and economic growth forecasts as well as savings in revenue expenditure, which is used to pay salaries and pensions of government employees, food and fertilizer subsidies, and interest payments on government loans.

PMFME provides financial, technical and business assistance to entrepreneurs for setting up new units or upgrading existing ones. The expenditure under the scheme is to be shared in a 60:40 ratio between central and state governments.

In the case of North-Eastern and Himalayan states, the Centre’s share goes up to 90%. The scheme’s target is to benefit 200,000 enterprises through credit-linked subsidy. Since its inception, over 172,000 micro food processing units have been sanctioned, with a total project cost of ₹16,000 crore. The projects have been sanctioned to individual beneficiaries, FPOs, SHGs and producer cooperative societies as on 31 December 2025. Under the scheme, support is provided through credit-linked grants covering 35% of project costs for unit upgradation, capital expenditure and common infrastructure and assistance of up to 50% of expenditure for marketing and branding, subject to prescribed limits.

New Delhi: The Centre is considering a significant expansion of its flagship food processing schemes, with a proposed allocation of around ₹28,000 crore over the next five years in the upcoming Union budget to boost value addition, reduce post-harvest losses and improve farmers’ incomes through better market linkages, according to two government officials aware of the matter.

This proposed allocation is for two schemes—Pradhan Mantri Formalisation of Micro Food Processing Enterprises (PMFME) Scheme and the Pradhan Mantri Kisan Sampada Yojana (PMKSY) that are set to lapse at the end of FY26. Under PMFME, additional funds will help expand credit-linked subsidies, technology upgradation, branding and marketing support for micro food processing units, including self-help groups (SHGs) and farmer producer organizations (FPOs). PMKSY focuses on creating modern infrastructure such as cold chain networks, agro-processing clusters and food testing laboratories.

An allocation of ₹15,000 crore is being considered for PMFME, which was launched in June 2020 with a total outlay of ₹10,000 crore for FY2020-25 and was later extended up to FY26. As much as ₹13,000 crore is being considered for PMKSY, which was launched on 23 August 2017 (the scheme was renamed from SAMPADA to PMKSY) with an allocation of ₹6,000 crore for FY2016-20 and later extended till FY21, the government officials cited earlier said on the condition of anonymity. The PMKSY scheme was further extended till FY26 with an increased allocation of ₹6,520 crore.

“A consolidated proposal for the two schemes is being resubmitted after an enhanced allocation for them was separately sought earlier by the ministry of food processing industries. This plan is under consideration of the finance minsitry," said the first of the two government officials cited earlier.

SAMPADA, or Scheme for Agro-Marine Processing and Development of Agro-Processing Clusters, was renamed as the Pradhan Mantri Kisan SAMPADA Yojana (PMKSY) in August 2017. The government will present the budget for FY27 on 1 February.

The development assumes significance given that a higher allocation will help accelerate project execution, enhance private investment and generate rural employment. The move aligns with the government’s broader strategy to promote food processing as a key growth driver in agriculture for increasing farm income and creating off-farm jobs, and reducing post-harvest losses. Agriculture and allied sectors contribute around 18% to India’s gross domestic product (GDP), with around 46% of India's workforce dependent on agriculture.

“Over the years, the project cost has gone up. Also, the Union budget for FY26 announced a major update to the New MSME (micro, small and medium enterprises) classification by increasing the investment limit by 2.5 times and doubling the turnover limits," said the second government official.

From 1 April 2025, the government updated the rules defining MSMEs. Under the new norms, a micro enterprise has investment limit up to ₹2.5 crore and turnover up to ₹10 crore. A small enterprise can have up to ₹25 crore investment and ₹100 crore turnover, while a medium enterprise can have up to ₹125 crore investment and ₹500 crore turnover. With these higher limits, more businesses now qualify as MSMEs.

Queries emailed to the ministries of finance and food processing industries on 16 January remained unanswered till press time.

Experts say focus should now be on better price realization for farmers.

"Higher allocations to PMFME and PMKSY must be backed by stronger market linkages at the ground level. Unless farmers are connected to organized buyers, processors and cold chains through FPOs and digital platforms, higher spending alone will have limited impact. The focus should now shift to turning infrastructure and formalisation support into steady demand and better price realisation for farmers," said Pravesh Sharma, agri-policy expert and former managing director of the Small Farmers’ Agribusiness Consortium (SFAC), an Indian government body promoting agribusiness for small farmers through FPOs, venture capital, and market linkages.

To be sure, the government takes a final call on allocations closer to the budget announcement, keeping in mind revenue and economic growth forecasts as well as savings in revenue expenditure, which is used to pay salaries and pensions of government employees, food and fertilizer subsidies, and interest payments on government loans.

PMFME provides financial, technical and business assistance to entrepreneurs for setting up new units or upgrading existing ones. The expenditure under the scheme is to be shared in a 60:40 ratio between central and state governments.

In the case of north-eastern and Himalayan states, the Centre’s share goes up to 90%. The scheme’s target is to benefit 200,000 enterprises through credit-linked subsidy. Since its inception, over 172,000 micro food processing units have been sanctioned, with a total project cost of ₹16,000 crore. The projects have been sanctioned to individual beneficiaries, FPOs, SHGs and producer cooperative societies as on 31 December 2025. Under the scheme, support is provided through credit-linked grants covering 35% of project costs for unit upgradation, capital expenditure and common infrastructure and assistance of up to 50% of expenditure for marketing and branding, subject to prescribed limits.

In the case of PMKSY, around 1,618 projects totaling ₹21,917 crore have been approved under various component schemes of PMKSY, since its launch. Of these, 1,185 projects have been operational, resulting in processing and preservation capacity of 27.05 million tonnes. The approved projects, on their operationalization, are expected to benefit about 5.1 million farmers and create more than 722,000 direct and indirect employment opportunities.