Micro Food Processing Enterprises (FMEs)

Micro Food Processing Enterprises (FME)

Union Cabinet has given its approval for "Scheme for formalization of Micro Food Processing Enterprises (FME)", a Centrally Sponsored Scheme for the unorganized sector.

Scheme for formalisation of Micro Food Processing Enterprises (FME)

21st May 2020 Current Affairs

Source | Press Information Bureau


GS Paper II: Welfare schemes for vulnerable sections of the population by the Centre and States and the performance of these schemes; mechanisms, laws, institutions and Bodies constituted for the protection and betterment of these vulnerable sections.

Context: Union Cabinet has given its approval for “Scheme for formalization of Micro Food Processing Enterprises (FME)”, a Centrally Sponsored Scheme for the unorganized sector.

Micro Food Processing Enterprises (FMEs)


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About Scheme for Formalisation of Micro Food Processing Enterprises (FME)

Key Objectives of the Scheme

  • To increase in access to finance by micro food processing units.
  • Further increase in revenues of target enterprises.
  • To ensure enhanced compliance with food quality and safety standards.
  • Strengthening capacities of support systems.
  • To ensure a transition from the unorganized sector to the formal sector.
  • Provide a special focus on women entrepreneurs and Aspirational districts.
  • To encourage Waste to Wealth activities.
  • To enlarge its focus on minor forest produce in Tribal Districts.

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Salient Features of the Scheme

  • The Scheme has been launched on an all India basis with an overall outlay of Rs 10,000 crore.
  • Being a Centrally Sponsored Scheme, the expenditure would be shared by the GoI and the States in the ratio of 60:40.
  • As part of the Scheme, approximately 2,00,000 micro-enterprises are to be assisted with credit linked subsidy.
  • This Scheme will be implemented over a 5 year period from 2020-21 to 2024-25.
  • Further, the scheme will follow a cluster approach and will focus on the perishables.
  • Support to Individual Micro Units:
    • As part of the Scheme, the micro enterprises will get credit linked subsidy @ 35% of the eligible project cost with ceiling of Rs.10 lakh.
    • Further, the beneficiary contribution will be minimum 10% and the remaining balance from loan.
    • There will be facility for the on-site skill training & Handholding for DPR and technical upgradation.
  • Support to FPOs/SHGs/Cooperatives:
    • The Scheme provides seed capital to SHGs for loan to members for working capital and small tools.
    • It also ensures a grant for backward/ forward linkages, common infrastructure, packaging, marketing & branding.
    • Further, it provides the necessary Skill training & Handholding support.
    • There is also provision for the Credit linked capital subsidy.

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Implementation of the Scheme

  • The Scheme will be implemented on an All India Basis with back ended credit linked subsidy provided to 2,00,000 units.
  • As part of the implementation process, seed capital will be given to SHGs (@Rs. 4 lakh per SHGs) for loan to members for working capital and small tools.
  • Further, grant will be provided to FPOs for backward/forward linkages, common infrastructure, packaging, marketing & branding.

Administration of the Scheme

  • CENTRE: The Scheme would be monitored at Centre by an Inter-Ministerial Empowered Committee (IMEC) under the Chairmanship of Minister, FPI.
    • A National level portal would be set-up wherein the applicants/ individual enterprise could apply to participate in the Scheme.
    • All the scheme activities would be undertaken on the National portal.
  • STATE: A State/ UT Level Committee (SLC) chaired by the Chief Secretary will monitor and sanction/ recommend proposals for expansion of micro units and setting up of new units by the SHGs/ FPOs/ Cooperatives.
    • The States/ UTs will prepare Annual Action Plans covering various activities for implementation of the scheme, which will be approved by Government of India.
  • A third party evaluation and mid-term review mechanism would be built in the programme.

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What is the significance of this Scheme for Micro Food Processing Enterprises (FMEs)?

  • With the help of this scheme, nearly 8 lakh micro- enterprises will benefit through access to information, better exposure and formalization.
  • Further, the credit linked subsidy support and hand-holding will be extended to 2,00,000 micro enterprises for expansion and upgradation. It will make them capable to formalize, grow and become competitive.
  • In terms of employment generation, the project is likely to generate 9 lakh skilled and semi-skilled jobs.
  • Scheme envisages a better integration with organized markets and will provide increased access to common services like sorting, grading, processing, packaging, storage etc.

What is the need of “Scheme for formalisation of Micro Food Processing Enterprises (FME)”?

There are approximately 25 lakh unregistered food processing enterprises which constitute 98% of the sector and are unorganized and informal. Nearly 66 % of these units are located in rural areas and about 80% of them are family-based enterprises.

Also, this sector faces a number of challenges which includes :

  • Inability to access credit
  • High cost of institutional credit
  • Lack of access to modern technology
  • Inability to integrate with the food supply chain
  • Compliance with the health &safety standards.

Hence, there is a need to strengthen this segment which will ultimately lead to reduction in wastage, creation of off-farm job opportunities and aid in achieving the overarching Government objective of doubling farmers’ income.


Read More: Major Stimulus Package for MSMEs amid COVID-19



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