The government is considering extending and recalibrating the production-linked incentive (PLI) scheme for food processing beyond its current tenure, as a large part of the allocated outlay remains unutilised and several companies continue to fall short of revenue and capital expenditure targets, officials said.
The five-year PLI scheme for the sector runs from 2021-22 to 2026-27. With the final year approaching, policymakers are assessing changes to eligibility thresholds and compliance conditions to improve utilisation and better align the scheme with industry realities.
Industry participants seek review of policy parameters
Industry participants have sought a review of the parameters, stating that the targets were set during a more benign growth phase and are proving difficult to meet amid slower demand and execution delays.
As of February 28, 2025, 171 companies had been approved under different segments of the scheme. Incentives of about Rs 1,155 crore have been disbursed so far, against a total outlay of Rs 10,900 crore. Disbursements to micro, small and medium enterprises remain limited, with Rs 13.27 crore paid across 20 eligible cases.
Officials warn of underutilisation of funds
Officials said close to Rs 6,000 crore of the allocated funds could remain unused unless the scheme is adjusted.
Companies Fe spoke to pointed to tight compliance conditions as a key constraint. Only investments that are fully installed, operational and invoiced qualify for incentives, leaving little room for delays in equipment delivery or inspections. Several firms said supply chain disruptions and longer lead times for imported machinery have pushed projects beyond qualifying windows, leading to lower payouts or forfeiture of incentives.
Domestic sourcing requirements have also emerged as a sticking point. A senior executive at Nestle India said companies dependent on imported ingredients face penalties even when domestic substitutes do not meet quality or export standards. In some cases, firms received only a fraction of their potential incentive despite meeting capex commitments.
Large consumer goods companies such as Hindustan Unilever, ITC, Nestle India, Britannia Industries, Gujarat Cooperative Milk Marketing Federation and Dabur India are among those approved under the scheme. Smaller food companies, including Bikaji Foods, Balaji Wafers, Anmol Industries, Haldiram Snacks, MTR Foods and Tasty Bite Eatables, as well as dairy and seafood processors such as Parag Milk Foods, Avanti Frozen Foods and Nekkanti Sea Foods, are also participants.
Under the scheme, companies must meet category-specific sales growth and investment targets, with penalties for shortfalls that can result in partial or complete loss of incentives. Officials said any extension or redesign would aim to preserve the scheme’s original objective of boosting capacity and value addition, while making it more workable for a wider set of firms.