PM Formalisation of Micro Food Processing Enterprises (PM FME)

India has an estimated 25 lakh unorganised micro food processing enterprises. They make pickles, papads, snacks, baked goods, milled flours, ghee, paneer, dried fish, processed meat and a long tail of regional specialities. Most are run from home or small premises, operate without FSSAI registration and have no access to formal credit. They earn modestly, employ family labour and serve local markets.

PM FME was launched in 2020 as a Centrally Sponsored Scheme with a five year outlay of Rs 10,000 crore and a target of formalising two lakh of these units. Formalisation means GST registration, FSSAI licensing, Udyam registration as a micro enterprise and access to a formal bank loan. With these in hand, the unit can scale beyond the local market, access institutional buyers and apply for further support.

The scheme is implemented through a state level nodal agency in each state, district level resource persons, and the Small Industries Development Bank of India as the central project management agency. Disbursement is bank linked, meaning the subsidy is released to the bank account after the loan is disbursed and the asset is created.

The scheme adopts a One District One Product approach. Each district has identified a focus food product based on existing concentration of processing units, raw material availability and market potential. For example, Ratnagiri in Maharashtra focuses on mango products, Anand in Gujarat on dairy, Coimbatore in Tamil Nadu on millet products, and Sambhal in Uttar Pradesh on honey.

A new unit aligning with the district ODOP gets priority in selection and easier access to common infrastructure created under the scheme. Common infrastructure typically includes processing centres, cold storage, sorting and grading facilities, packaging units and incubation centres where small entrepreneurs can use shared facilities at low cost.

A unit producing a non ODOP food product can still apply but needs additional justification on market potential and viability. Approval is at the discretion of the state level approval committee.

Subsidy is 35 percent of the eligible project cost subject to a maximum of Rs 10 lakh per individual unit. The project cost includes land development, civil works, machinery, equipment, packaging line, working capital margin and other prescribed heads.

A worked example: a millet processing unit in a Karnataka district with millets as the ODOP plans a project cost of Rs 18 lakh covering machinery, civil works and working capital. The applicant's contribution is the margin money required by the bank, typically 10 percent or Rs 1.8 lakh. The bank loan is Rs 16.2 lakh. After project implementation, the PM FME subsidy of 35 percent of Rs 18 lakh, that is Rs 6.3 lakh, is credited to the loan account, reducing the principal to Rs 9.9 lakh. The effective borrowing is just over half the project cost.

For SHG members, the structure is different. Each member of an SHG engaged in food processing receives Rs 40,000 as seed capital. For a 10 member SHG, total seed capital is Rs 4 lakh. This can be used for small machinery, working capital and FSSAI registration costs. SHGs additionally have access to bank credit through the broader DAY NRLM ecosystem.

The application is online at pmfme.mofpi.gov.in. Register with Aadhaar, PAN and mobile number. Fill in personal details, project details and product details. The portal validates the ODOP alignment automatically based on the district selected.

Upload the project report, premises proof, quotations and bank consent. A district resource person, typically a chartered accountant or agribusiness specialist, helps applicants prepare the project report and refine cost estimates. Engage the DRP early; their fee is paid through the scheme.

After submission, the application moves through district and state level appraisal. If approved in principle, the bank conducts its credit appraisal. On loan sanction and disbursement, the subsidy is credited to the loan account within 60 days of asset creation as verified by the bank and the DRP.

Avoid inflated machinery quotations. Appraisers cross check unit costs against published indicative rates. Inflation by even 15 to 20 percent above the indicative rate leads to project cost reduction during appraisal, lowering the subsidy.

Choose a bank with experience in food processing financing. Public sector banks with food processing cells in their large branches process the loan faster than branches that rarely see this product.

Plan for FSSAI registration from day one. The unit cannot legally operate without it. Basic registration for units with turnover under Rs 12 lakh costs Rs 100 per year. State licence for units up to Rs 20 crore turnover costs Rs 2,000 to Rs 7,500 per year depending on capacity.

Keep working capital planning realistic. The subsidy reduces the loan principal but not the working capital cycle. A 60 day raw material plus packaging plus distribution cycle requires working capital equivalent to two months of operating expenses, which should be funded through cash credit limits or a separate working capital loan.

• 01Existing or new individual micro food processing enterprise with project cost up to Rs 35 lakh
• 02Self help groups engaged in food processing activities; seed capital available to all members
• 03FPOs, cooperatives and producer companies for common infrastructure
• 04Applicant must be 18 years or above with educational qualification of at least eighth class for individual units
• 05Unit must align with the One District One Product framework or seek approval for an alternative product

• §Aadhaar and PAN of the applicant
• §Project report including capacity, machinery list and financial projections
• §Proof of premises, ownership or rent agreement
• §Quotations for machinery from registered vendors
• §Bank consent letter or sanction in principle for the term loan
• §For SHGs, the SHG resolution and bank linkage documents

• Project not aligned with the district's ODOP and no special approval obtained
• Project cost above Rs 35 lakh, making the unit ineligible for the micro category
• Bank refuses term loan due to weak project viability or poor credit history
• Premises lacks food safety compliance potential as assessed by the FSSAI inspector
• Incomplete machinery quotations or inflated costs flagged at appraisal

• PM Formalisation of Micro Food Processing Enterprises scheme portal, Ministry of Food Processing Industrieslink ↗
• PM FME operational guidelines, Ministry of Food Processing Industrieslink ↗