Coronavirus Breakout: Cabinet approves Rs 3Lac Cr scheme to support micro food processing companies

The Union Cabinet, headed by PM Modi, on Wednesday gave approval for a new central scheme with an outlay of Rs 10,000 crore for providing credit-linked subsidy to 3 lakh micro food processing units across the country.

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The ‘Scheme for Formalisation of Micro food processing Enterprises’ was announced as part of the Rs 20 lakh crore Atma Nirbhar package to tackle the economic slump resulting from COVID-19 pandemic.

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Under the scheme, meant for the unorganised sector, the expenditure will be shared by the central and state governments in the ratio of 60:40, an official statement said.

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The scheme, to be implemented for five years till 2024-25, will provide back-ended credit-linked subsidy to 2,00,000 units. It will have a cluster-based approach, with a focus on perishables.

“There are about 25 lakh unregistered food processing enterprises which constitute 98 percent of the sector and are unorganized and informal. Nearly 66 percent of these units are located in rural areas and about 80 percent of them are family-based enterprises. This sector faces a number of challenges…,” it said.

The challenges include the inability to access credit, high cost of institutional credit, lack of access to modern technology, inability to integrate with the food supply chain and compliance with health and safety standards, it added.

“Strengthening this segment will lead to a reduction in wastage, creation of off-farm job opportunities, and aid in achieving the overarching government objective of doubling farmers’ income,” the statement said.

To encourage micro-enterprises, the government said it will provide a credit-linked subsidy for 35 percent of the eligible project cost with a ceiling of Rs 10 lakh.

The beneficiary contribution would be a minimum 10 percent and the balance will come from a loan. The government will provide onsite skill training and handholding for detailed project reports and technical upgradation.

The government will also provide a seed capital of Rs 4 lakh per Self Help Group (SHG) to provide loans to members to meet their working capital requirement and for buying small tools.

A grant will also be provided to FPOs (Farmer Producers Organisation) for backward/forward linkages, common infrastructure, packaging, marketing and branding.

The government said the scheme is likely to generate 9 lakh skilled and semi-skilled jobs, benefit nearly 8 lakh micro-enterprises through access to information, better exposure and formalization. It will also enable them to formalize, grow and become competitive.

The scheme would be monitored by the central government’s inter-ministerial empowered committee, while the state-level committee will sanction and recommend proposals for the expansion of micro-units and setting up of new units.

States will also prepare annual action plans for the implementation of the scheme. There would be a third-party evaluation and mid-term review mechanism, the statement said.

The government will set up a national level portal where applicants/individual enterprises could apply to participate in the scheme. All scheme activities would be undertaken on the national portal, it added.