India’s ₹10,900 crore production-linked incentive (PLI) scheme for the food processing sector has delivered on several fronts, drawing investments and expanding capacity. But questions remain on whether it has actually delivered as expected.
With the Indian Institute of Management Ahmedabad (IIM-A) now examining why several PLI schemes have underperformed expectations, Mint explains whether the needle has moved beyond headline investments to sustained value addition.
What does the PLI scheme for food processing entail?
The PLI scheme for the food processing sector is designed to support food manufacturing companies that meet minimum sales thresholds and commit to investments for expanding processing capacity and building global brands.
The scheme, being implemented for six years till FY26-27, seeks to create globally competitive food manufacturing champions. A key focus is on promoting branding and marketing abroad to help domestic companies scale up exports.
It also aims to generate employment opportunities, particularly in off-farm sectors, while ensuring better price realisation for agricultural produce. By improving value addition and strengthening the supply chain, it is expected to raise farmer incomes and support the agricultural economy.
Its core goals include reducing wastage of agricultural produce, increasing value addition, generating employment, and boosting exports. It also sought to strengthen supply chains and promote innovation, particularly in high-potential product categories.
Has the scheme attracted investment?
Yes. It has drawn interest from major domestic and global food companies. Several firms have committed investments in expanding processing capacity, modernising facilities, and launching new product lines.
The investment performance under the scheme has been highly encouraging. Against a committed investment of ₹7,722 crore, a cumulative investment of ₹9,207 crore has been made under the scheme in 22 states, indicating that companies have invested more than their initial commitments.
Around 3.4 million tonnes per annum of processing and preservation capacity has been added under the scheme. The scheme has also generated direct and indirect employment for around 329,000 people.
The sale of PLI products increased by CAGR of 10.58% from ₹62,496 crore in 2019-20 to ₹103,339 crore in 2024-25. Similarly, export sales increased by 7.41% from ₹13,789 crore in 2019-20 to ₹19,717 crore in 2024-25.
Is the scheme skewed towards large players?
Under the scheme, 128 companies have been approved, covering 274 units across the country. It has also seen strong participation from 68 MSME applicants and 40 contract manufacturing units.
This underscores the scheme’s inclusive approach, benefiting both large food processing firms and small and medium enterprises. The initiative has driven notable capacity creation, technology upgrades, and modernisation of food processing units across states.
However, its long-term success will hinge on addressing structural challenges and ensuring that the benefits reach a broader segment of the industry, including smaller players and farmers.
Has it improved value addition and reduced wastage?
There are early signs of improvement in value addition, especially in sectors like processed fruits and vegetables, marine products, mozzarella cheese and ready-to-eat foods. About 3.4 million tonnes per annum of processing and preservation capacity has been created. By encouraging processing closer to farm-gate levels, the scheme has the potential to reduce post-harvest losses.
However, the overall impact on wastage reduction remains gradual, as it depends on parallel improvements in infrastructure such as cold chains and logistics.
What are the challenges and bottlenecks?
India’s food processing sector continues to face several structural challenges that hinder its growth and efficiency. Among the major bottlenecks are inadequate cold chain infrastructure, leading to high post-harvest losses, especially in perishable commodities.
Fragmented supply chains and small landholdings limit consistent raw material availability. Additionally, gaps in logistics, storage, and processing technology reduce value addition. Addressing these issues remains critical to unlocking the sector’s full potential and boosting farmer incomes.
What has been the impact on exports and global competitiveness?
Some beneficiary companies have reported increased exports and improved product quality aligned with global standards. The export sales of PLI products increased despite challenging macroeconomic factors from ₹13,789 crore in FY20 to ₹19,717 crore in FY25.
"It has ensured that value addition is carried out entirely within India, thereby boosting domestic manufacturing, enhancing farmers’ incomes, and reinforcing the farm-to-fork value chain,” said D. Praveen, joint secretary, ministry of food processing.