FME - Formalization of Micro Food Processing Enterprises Scheme

The PM FME scheme is a central sector scheme with an outlay of INR 10,000 cr to support the unorganized micro food processing units in the country.

FME - Formalization of Micro Food Processing Enterprises Scheme
FME - Formalization of Micro Food Processing Enterprises Scheme
PM FME scheme Launch Date: Jun 29, 2020

PM Formalization of Micro Food Processing Enterprises Scheme

Why in News

The Pradhan Mantri Formalisation of Micro food processing Enterprises (PMFME) Scheme, launched under the Atmanirbhar Bharat Abhiyan

The Ministry of Food Processing Industries (MoFPI) has launched the PM Formalization of Micro Food Processing Scheme on 29th June 2020. The PM FME scheme intends to provide financial, technical and business support to upgrade existing micro food processing enterprises.

PM FME – Why in News?

MoFPI has launched the capacity building component of the PM FME in November 2020. The facts of the PM FME scheme will be useful for all the competitive examinations including the IAS Exam. This article will talk about the objectives of the scheme, its significance, and brief about micro food processing enterprises in India

Key Points

  • Nodal Ministry:
    • Ministry of Food Processing Industries (MoFPI).
  • Features:
    • One District One Product (ODOP) Approach:
      • The States would identify food products for districts keeping in view the existing clusters and availability of raw material.
      • The ODOP could be a perishable produce based or cereal based or a food item widely produced in an area. E.g. mango, potato, pickle, millet based products, fisheries, poultry, etc.
    • Other Focus Areas:
      • Waste to wealth products, minor forest products and Aspirational Districts.
      • Capacity building and research: Academic and research institutions under MoFPI along with State Level Technical Institutions would be provided support for training of units, product development, appropriate packaging and machinery for micro units.

, completed its one year on 29th June.

  • The PMFME Scheme is currently being implemented in 35 States and Union Territories (UTs).
    • Financial Support:
      • Upgradation of Individual Micro Food Processing Units: Existing individual micro food processing units desirous of upgrading their units can avail credit-linked capital subsidy at 35% of the eligible project cost with a maximum ceiling of Rs.10 lakh per unit.
      • Seed Capital to SHG: Initial funding of Rs. 40,000- per Self Help Group (SHG) member would be provided for working capital and purchase of small tools.
  • Implementation: Over a period of five years from 2020-21 to 2024-25.
  • Funding Details:
    • It is a centrally sponsored scheme with an outlay of Rs. 10,000 crore.
    • The expenditure under the scheme would be shared in 60:40 ratio between Central and State Governments, in 90:10 ratio with North Eastern and Himalayan States, 60:40 ratio with UTs with legislature and 100% by Centre for other UTs.
  • Need:
    • The unorganized food processing sector comprising nearly 25 lakh units contributes to 74% of employment in the food processing sector.
    • The unorganised food processing sector faces a number of challenges which limit their performance and their growth. The challenges include lack of access to modern technology & equipment, training, access institutional credit, lack of basic awareness on quality control of products; and lack of branding & marketing skills etc.
  • Status of Indian Food Industry:
    • The Indian food and grocery market is the world’s sixth largest, with retail contributing 70% of the sales.
    • The Indian food processing industry accounts for 32% of the country’s total food market, one of the largest industries in India and is ranked fifth in terms of production, consumption, export and expected growth.
    • It contributes around 8.80 and 8.39% of Gross Value Added (GVA) in Manufacturing and Agriculture respectively, 13% of India’s exports and 6% of total industrial investment.
  • Other Schemes Related to Food Processing:
    • Production Linked Incentive Scheme for Food Processing Industry (PLISFPI): Aims to give companies incentives on incremental sales from products manufactured in domestic units.
    • Mega Food Park Scheme: Mega Food Parks create modern infrastructure facilities for food processing along the value chain from farm to market with strong forward and backward linkages through a cluster-based approach.
    • The salient facts about the PM FME for UPSC Prelims are:

      1. It was launched on 29th June 2020.
      2. It is a part of Atmanirbhar Bharat Abhiyan.
      3. It is a centrally sponsored scheme. The share of expenditure under the PM FME scheme is as follows:
        • 60:40 between the central government and state governments and UTS with the legislature
        • 90:10 between central and North Eastern and Himalayan states
        • 100 percent central assistance for UTs without legislatures.
      4. It will run for five years – 2020-21 to 2024-25. The central government will bear the expenditure for the first year irrespective of who incurs it; later will be adjusted in the ratio mentioned above; in the next four years.
      5. The central government will provide funds to the state based on the approved Project Implementation Plan (PIP).
      6. One-District One-Product Approach (ODOP) plan to be implemented to encompass input procurement, common services availability, and product marketing.
      7. The Inter-Ministerial Empowered Committee (IMEC) is established at the national level. The structure of IMEC under PM FME is:
        • Chairman – Minister of Food Processing Industries
        • Vice-Chairman – Minister of State of Food Processing Industries
        • Member-Secretary
        • Members

Objectives of PM FME Scheme

The PM Formalization of Micro Food Processing Enterprises Scheme has the following objectives:

  1. Capacity Building of Micro Food entrepreneurs
    • They will be provided with technical knowledge
    • Skill training is another component
    • Hand holding support services to be given
  2. Technology up-gradation of the existing Micro Food Processing Enterprises by increasing access to credit to the entrepreneurs.
  3. Enable microenterprises to avail common services through supporting Farmer Producer Organizations (FPOs), Self Help Groups (SHGs), Producers Cooperatives & Cooperative Societies along their entire value chain
  4. A regulatory framework to encompass existing unorganized micro food processing enterprises to bring them into a formally compliant framework.
  5. Branding and marketing to be strengthened in order to support the integration of existing enterprises with organized supply chains.

Four Main Components of PM FME

To address the need of the micro food processing sector, the following four components have been encompassed in the scheme:

  1. Support to individual and groups of micro-enterprises
  2. Branding and Marketing support
  3. Support for strengthening of institutions
  4. Setting up a robust project management framework

    What is One-District One-Product (ODOP) Approach?

    Under the ODOP approach, product-specific traditional industrial hubs to be established under PM FME Scheme. It is inspired by Uttar Pradesh’s ODOP programme launched across its 75 districts to encourage indigenous and specialized products.

    What is One-District One-Product?

    The following are considered as ODOP under PM FME:

    1. Perishable agri-produce
    2. Cereal based product
    3. Food product widely produced in a district and allied sectors

    The important points to remember about ODOP for UPSC Prelims are:

    1. It will provide a framework for value chain development and alignment of support infrastructure.
    2. Each state will identify one product per district which will be based on the raw materials’ availability and existing clusters.
    3. One cluster can belong to one and more districts.
    4. Those existing enterprises to produce products under the ODOP approach are to be given preference.
    5. Assistance for common infrastructure and marketing and branding will be only available for such foods that are available under the ODOP program. (Exception provided)
    6. The ODOP approach complements the existing promotional efforts of the government:
      • Agriculture Export Policy
      • National Rurban Mission

    Need of FPU under PM – FME 

    • The unorganized food processing sector comprising nearly 25 lakh units contributes to 74% of employment in the food processing sector.
    • The unorganized food processing sector faces a number of challenges that limit their performance and their growth. The challenges include lack of access to modern technology & equipment, training, access to institutional credit, lack of basic awareness on quality control of products; and lack of branding & marketing skills, etc.
    • Owing to these challenges; the unorganized food processing sector contributes much less in terms of value addition and output despite its huge potential.
    • Nearly 66% of these units are located in rural areas and about 80% of them are family-based enterprises supporting the livelihood of rural households and minimizing their migration to urban areas. These units largely fall within the category of micro-enterprises.