For a bigger spread

| Updated on April 02, 2021

Food processing PLI scheme should serve niche, small-scale innovators, too

The ₹10,900-crore Production-Linked Incentive scheme for the food processing industry is likely to end up helping large players ramp up capacity in the specified sectors such as ready-to-cook/eat; processed fruits and vegetables; marine products and mozzarella cheese. The budgeted sum (for a five-year period) will be given on achieving a certain threshold of sales and investment. The PLI scheme’s focus is on sales promotion and branding — essential in an industry where demand creation and product differentiation are important. Industry majors have unsurprisingly welcomed these proposals. But informal sector players could do with such support as well. According to the Dalwai panel report on doubling farmers’ incomes, the informal sector accounts for 43 per cent of the GVA of grain mill products, starches and prepared animal feeds and 35 per cent of the GVA in the processing of meat, fish, fruit, vegetables, oils and fat. The PLI scheme focusses on dairy products and manufactured foods, sectors in which the informal sector accounts for 13 per cent and 22 per cent, respectively, of the GVA. These sectors are more capital intensive than the rest. The question is whether the PLI scheme will encourage dominance of a few.

Indeed, the model of creating a few leaders is not convincing for food products, where niche offerings by small players can well have a discernible market impact. India’s culinary diversity should be promoted to appeal to diverse tastes. Some may even qualify for a GI tag. Given India's resource endowment and potential for promoting value-added goods, the PLI scheme could go a long way in encouraging Indian brands to step up presence in global value chains. The scheme can complement the Centre’s Atmanirbhar package for food processing MSMEs under which one food product will be identified for a district with a cluster approach to inputs, services and marketing. Basically, the idea must be to enhance quality and productivity per unit of capital employed, besides providing market access. The PLI scheme could go some way in helping some emerging players do this and achieve a critical size in global markets.

Another looming constraint is the absence of an identified market. For example, the nascent market for ‘super foods’ can be developed through awareness drives, more so in the context of the concern over co-morbidities. Food processing needs to shed its ‘junk food’ tag to realise a larger market, even as the working population increasingly buys food off the shelf. That calls for a change in production processes and competent certification. India’s local organic foods can go global — with a dash of policy help.

Published on April 02, 2021

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