Most people who start looking for a food processing subsidy find the same three or four scheme names, and then get stuck on which one actually fits their project. The honest answer is that it depends on the size of the unit, whether it is a new or existing business, who is applying, and what the unit processes. This guide compares the main options for food processing units in India (PMFME, the Agriculture Infrastructure Fund, PMKSY and credit guarantee cover) and explains how to match a scheme to your project before you spend money.
Last reviewed: September 2026. PMFME is in a transition period as this is written, so read the status section below before you plan around it.
Start with project size, not scheme names
Government support for food processing is not one programme. It is a set of schemes designed for different scales. A small unit making pickles, papad, namkeen or spice blends sits in a different scheme than a larger plant with a bank term loan and storage infrastructure. The easiest way to shortlist is to ask three questions:
- Is this a micro unit, or a larger project with significant machinery and building cost?
- Are you an individual or business owner, or a farmer group, SHG or cooperative?
- Will the project include storage, primary processing or post-harvest infrastructure?
PMFME: for micro food processing units
The Pradhan Mantri Formalisation of Micro Food Processing Enterprises (PMFME) scheme is aimed at micro units. It gives a credit-linked capital subsidy of 35% of the eligible project cost, capped at ₹10 lakh per unit for individual micro enterprises. Groups such as FPOs, SHGs and cooperatives can receive 35% for common infrastructure.
Who can apply
Individual entrepreneurs, proprietorship and partnership firms, FPOs, NGOs, cooperatives, SHGs and private limited companies that have set up, or propose to set up, a micro food processing unit. The scheme is organised around One District One Product (ODOP), which means the product you process affects how your application is looked at in your district.
How the finance works
You need at least 10% of the project cost as your own contribution, and the rest comes as a bank loan. The subsidy is credit-linked, so it depends on the bank sanctioning the loan first. Repayment can run up to 10 years, with a moratorium of 6 to 24 months.
Current status (as of late September 2026)
Reports in August 2026 said PMFME had a temporary extension until 30 September 2026 and that the Ministry of Food Processing Industries had proposed a further five-year extension (2026-31) with revised norms, which could include a higher subsidy ceiling than ₹10 lakh. That extension had not been announced in the sources reviewed. If you are planning a micro unit, ask your bank and your District Resource Person about the position on the day you apply, and do not assume the ₹10 lakh figure will stay the same.
Agriculture Infrastructure Fund (AIF): storage, primary processing and post-harvest assets
AIF is relevant when your project includes post-harvest management infrastructure such as cold storage, warehouses or primary processing units. It provides 3% interest subvention on loans up to ₹2 crore for up to 7 years, and CGTMSE credit guarantee cover on eligible loans up to ₹2 crore, with the fee borne by the government. Loans can be larger, but the benefits are limited to ₹2 crore. Applications are online through the AIF portal with a project report. Check the current loan-sanction window on the portal, since the official note from August 2025 said disbursement under the current phase was due to complete by the end of 2025-26.
PMKSY: larger food processing and preservation projects
The Pradhan Mantri Kisan SAMPADA Yojana (PMKSY), run by the Ministry of Food Processing Industries, supports food processing, preservation and integrated cold chain infrastructure. It is the route usually considered for larger projects than PMFME can support. The available components, rates and eligibility depend on the current guidelines, so it needs a proper check against your project before you rely on it.
CGTMSE: collateral-free credit cover
Credit guarantee under CGTMSE helps eligible loans go through without collateral. In the PMFME framework, MSME borrowers can use CGTMSE for collateral-free loans, and other applicant categories can use the MUDRA credit guarantee scheme. It works alongside a subsidy scheme rather than replacing it.
Which scheme fits which situation
| Your situation | Schemes worth checking first |
|---|---|
| Micro unit making pickles, spices, namkeen, bakery or similar products | PMFME with a bank loan and CGTMSE |
| FPO, SHG or cooperative building common facilities | PMFME group support |
| Project with cold storage, warehouse or primary processing | AIF interest support, and MIDH / NHB for horticulture cold storage |
| Larger processing or integrated cold chain project | PMKSY components, with a bank term loan |
| Dairy-based processing | AHIDF, PMKSY and AIF, depending on the project |
Why the order of steps matters
A project can qualify on paper and still lose its benefits. Common reasons include an application filed too late, production or purchases started too early, or a loan and subsidy structure that was not planned together. The rules are scheme-specific, but the pattern is consistent: settle the site, decide the finance structure, and confirm the approval sequence before you buy machinery or begin construction.
Documents and details to have ready
- Business registration, PAN and bank account details for the applicant
- Land or lease documents for the proposed unit
- A project report with cost estimates and means of finance
- Product details and, for PMFME, the ODOP product for your district
- Quotations for machinery and civil work
How Food Mitra can help
Food Mitra works with food processing units, pack houses, spices, grains and other agro-processing projects, and helps structure the finance and identify the schemes that apply. The starting point is our Land, Loan and Subsidy process, supported by project finance structuring, bank loan assistance and subsidy claim assistance. Our Food & Agro-processing page lists the schemes we track, and larger storage components are covered on the Cold Chain & Warehousing page. If you are weighing options for a specific unit, you can reach out to the Food Mitra team before you finalise the loan.
Frequently asked questions
For individual micro enterprises, PMFME provides a credit-linked subsidy of 35% of the eligible project cost, up to ₹10 lakh per unit. A revision of the ceiling has been proposed as part of the extension, so confirm the current figure when you apply.
The scheme covers entities that have established or propose to establish a micro food processing unit, so new units can be considered, subject to the current guidelines and the bank’s appraisal.
PMFME requires a minimum 10% margin of the project cost, with the balance financed by a bank loan after the subsidy is accounted for. Banks may ask for more depending on their appraisal.
Larger projects typically look at a bank term loan combined with schemes such as AIF (for storage and primary processing components) and PMKSY components. Which ones apply depends on the project type, location and current guidelines.
Not always. Credit guarantee cover such as CGTMSE can allow collateral-free loans up to the applicable limits for eligible borrowers. The lender makes the final decision.
As of the reports reviewed in late September 2026, PMFME had a temporary extension to 30 September 2026, with a longer extension proposed. Check with your bank or the PMFME portal for the current position.
Sources: SBI: PMFME scheme details; Business Standard: PMFME extension report (August 2026); AIF portal FAQs; PIB note on the Agriculture Infrastructure Fund.