Budget 2026 Eyes Major Boost for Food Processing Sector
The upcoming Union Budget for FY27 might bring substantial good news for India's agricultural sector. Government officials reveal that the Centre is actively considering a massive allocation of approximately ₹28,000 crore. This funding is earmarked for two crucial food processing schemes over the next five years.
The primary goal of this financial push is clear. It aims to significantly improve farmers' incomes across the country. By investing in value addition and creating stronger market links, the government hopes to tackle the persistent issue of post-harvest losses.
Focus on Two Key Schemes: PMFME and PMKSY
The proposed ₹28,000 crore package targets two specific programs. These are the Pradhan Mantri Formalisation of Micro Food Processing Enterprises (PMFME) Scheme and the Pradhan Mantri Kisan Sampada Yojana (PMKSY). Both schemes are currently scheduled to conclude at the end of the current financial year, FY26.
Officials indicate that around ₹15,000 crore is under consideration for the PMFME scheme. This initiative, launched in June 2020, originally had a ₹10,000 crore outlay for the period up to FY25 and received an extension to FY26. The additional funds would expand its support mechanisms.
For the PMKSY scheme, authorities are looking at an allocation of roughly ₹13,000 crore. This program started in August 2017, initially named SAMPADA, with a ₹6,000 crore allocation for FY2016-20. It has seen several extensions, with its funding increased to ₹6,520 crore until FY26.
How the Funds Will Be Utilized
The planned expansion has distinct objectives for each scheme:
- PMFME Support: Additional resources will boost credit-linked subsidies for micro food processing units. The scheme also focuses on technology upgrades and provides branding and marketing assistance. It specifically aids self-help groups (SHGs) and farmer producer organizations (FPOs).
- PMKSY Infrastructure: This scheme concentrates on building modern agricultural infrastructure. Key projects include developing extensive cold chain networks, establishing agro-processing clusters, and setting up advanced food testing laboratories.
A consolidated proposal for this enhanced funding is currently with the finance ministry. The Ministry of Food Processing Industries had previously submitted separate requests for increased allocations for both programs.
Broader Economic Impact and Strategic Goals
This potential budget move carries significant weight for India's economy. A higher allocation is expected to speed up project implementation. It should also attract more private investment into the food processing sector and generate substantial rural employment opportunities.
The strategy aligns perfectly with the government's vision. Promoting food processing is seen as a vital growth engine for agriculture. It directly addresses the dual challenge of raising farm income while creating valuable off-farm jobs.
Consider these critical statistics. Agriculture and its related sectors contribute about 18% to India's Gross Domestic Product (GDP). More importantly, nearly 46% of the nation's workforce relies on agriculture for their livelihood.
Context of Changing MSME Definitions
The need for increased funding is partly driven by rising project costs. Furthermore, recent changes in MSME classification rules have expanded the number of eligible businesses.
From April 1, 2025, the government updated the criteria defining Micro, Small, and Medium Enterprises (MSMEs). The new norms are as follows:
- A micro enterprise can now have an investment up to ₹2.5 crore and a turnover up to ₹10 crore.
- A small enterprise may have up to ₹25 crore in investment and ₹100 crore in turnover.
- A medium enterprise can have investment up to ₹125 crore and turnover up to ₹500 crore.
These revised, higher limits mean many more businesses now qualify for MSME benefits and support under schemes like PMFME.
Expert Opinion and Implementation Focus
While the proposed allocation is promising, experts emphasize that execution is key. Agri-policy specialist Pravesh Sharma, former MD of the Small Farmers’ Agribusiness Consortium, highlights a crucial point.
He states that higher budget allocations must connect to stronger market linkages at the ground level. Simply increasing spending will have limited impact unless farmers gain better access to organized buyers, processors, and cold chains.
The real focus, according to experts, should shift towards converting infrastructure and formalization support into consistent demand. This approach ensures farmers achieve better price realization for their produce.
Current Scheme Performance and Future Targets
The PMFME scheme operates on a shared funding model. The central and state governments split expenditure in a 60:40 ratio. For North-Eastern and Himalayan states, the Centre's contribution rises to 90%.
This program aims to assist 200,000 enterprises through credit-linked subsidies. As of December 31, 2025, it has already sanctioned over 172,000 micro food processing units. The total project cost for these sanctioned units stands at ₹16,000 crore.
Support under PMFME includes credit-linked grants covering 35% of project costs for upgrades and infrastructure. It also offers assistance of up to 50% for marketing and branding expenses, within set limits.
The PMKSY scheme has also shown progress. Since its launch, it has approved 1,618 projects with a total value of ₹21,917 crore. Of these, 1,185 projects are now operational, creating a processing and preservation capacity of 27.05 million tonnes.
Once fully operational, these approved projects are projected to benefit approximately 5.1 million farmers. They are also expected to generate more than 722,000 direct and indirect employment opportunities.
The government will present the final Union Budget for FY27 on February 1. Allocations are typically finalized closer to the announcement date, considering revenue forecasts, economic growth projections, and expenditure savings.
