Organised dairy players to gain from recent PLI scheme: Report

The organised players in the dairy sector will gain from the recent production-linked incentive (PLI) scheme and mainly, the value-added products (VADP) are likely to fuel incremental investments of about Rs 500-600 crore, according to a report.

The recently announced PLI scheme, involving a total outlay of Rs 10,900 crore, by the government for the food processing sector will benefit the domestic dairy sector, mainly the VADPs like mozzarella cheese and ready-to-consume product categories, Icra said in the report.

The scheme offers incentives based on sales growth based on investment incurred by companies between FY22 and FY27, with the base year being FY20 for the eligibility criteria for the first four years.

Icra expects the scheme to fuel incremental investments of about Rs 500-600 crore by organised players in the designated products over the said time period.

"The scheme is a welcome step towards encouraging investments by dairy sectors in VADPs and help in integrating the entire dairy supply chain. Companies with a significant presence in product categories like mozzarella cheese and ready-to-consume milk-based processed beverages will benefit from PLI incentives.

"In the first phase, four large dairy players have been shortlisted in category-I of the scheme," Icra Vice-President and Sector Head Sheetal Sharad said.

Within the dairy sector, the VADP segment has been growing at a healthy pace aided by rising disposable incomes, changing dietary preference and healthy demand from institutional and QSR segments, the report noted.

The government has also been supporting dairy processing and value addition through the Dairy Processing and Infra Development Fund and the Animal Husbandry Infrastructure Development Funds.

The National Dairy Plan (NDP) Phase-II, with an outlay of Rs 8,000 crore, will carry forward the Mission Milk initiatives for the next period of five years.

"Incremental sales CAGR (compound annual growth rate)-linked incentives will push the dairy players to augment their dairy processing capacities. Healthy growth prospects post-COVID-19 impact will enable them to help achieve incentive targets.

"The industry is expected to continue with moderate capex (capital expenditure) plans to aid the growth in organised dairy segments with portfolio expansion," Sharad added.