The unorganized food processing sector in the country comprises nearly 25 lakh food processing enterprises which are unregistered and informal. With only 7% of investment in plant & machinery and 3% of outstanding credit, the unorganized enterprises contribute to 74% of employment (a third of which are women), 12% of output and 27% of the value addition in the food processing sector. Nearly 66% of these units are located in rural areas and about 80% of them are family-based enterprises. Most of these units falls under category of micro manufacturing units in terms of their investment in plant & machinery and turnover.

The unorganized food processing industry in India faces challenges that limit its development and weakens performance. The challenges should be listed down:
(a) lack of productivity and innovation due to limited skills and access to modern technology and machinery for production and packaging;
(b) deficient quality and food safety control systems, including lack of basic awareness on good hygienic and manufacturing practices;
(c) lack of branding & marketing skills and inability to integrate with the supply chains, etc.;
(d) capital deficiency and low bank credit.

Unorganized micro food processing units, need intensive hand holding support for skill training, entrepreneurship, technology, credit and marketing, across the value chain, necessitating active participation of the state government for better outreach. In the last decade, Central and State Governments have made intensive efforts to organize farmers in Food Processing Organisations (FPOs) and women’s Self Help Groups (SHGs). SHGs have achieved considerable progress in thrift and their repayment record with 97% NPA level is among the best. Governments have made efforts to enable SHGs to undertake various manufacturing and service sector activities including food processing. However, there are few Government schemes to support FPOs and SHGs to make investment and upscale their operations.

PMFME scheme is a Centrally Sponsored scheme that is designed to address the challenges faced by the micro enterprises and to tap the potential of groups and cooperatives in supporting the upgradation and formalization of these enterprises.