Asandas and Sons, one of India’s leading exporters of frozen foods, has taken legal action against the central government by filing a case in the Delhi High Court. The dispute revolves around the Rs 10,900-crore Production-Linked Incentives (PLI) scheme designed to boost the food processing industry, according to sources familiar with the matter.
The company, renowned for its production of items such as French fries and potato wedges under the HyFun brand, alleges that the government made arbitrary changes to the terms of the PLI scheme without prior consultation, even after companies had already submitted their applications. Asandas and Sons claims that this lack of consultation violates the principles of natural justice.
Furthermore, the company contends that the government implemented these changes without issuing any formal amendments to the scheme notice, initially issued in April 2021. Despite efforts to seek clarification, emails sent to both the Ministry of Food Processing Industries and Asandas and Sons remained unanswered as of Wednesday.
The PLI scheme for the food processing industry, effective for a six-year period from FY22 to FY27, was introduced by the government to foster the growth of global food manufacturing champions within India. Currently, 33 companies have been granted admission to the scheme.
In May 2021, the government released guidelines for the scheme, outlining that total sales and exports during the scheme’s duration, as well as fresh investments made, would be used to calculate incentives for participating companies.
Sources indicate that Asandas and Sons filed a writ petition in January 2022, asserting that the government retroactively imposed a significantly lower cap on the maximum benefits a company could receive under the scheme. While the guidelines initially stipulated that no company would receive more than 25% of the total scheme budget as incentives, Asandas claims that this has been reduced to just 8% after their application submission.
The company further argues that the government has now imposed restrictions on benefits, limiting them to a maximum sales growth rate of 15%. This means that even if a company’s sales grow at a compounded rate higher than 15%, it will not receive additional incentives.
The legal battle between Asandas and Sons and the central government raises questions about the fairness and transparency of the PLI scheme for the food processing industry, which was intended to promote growth and innovation in the sector. This case will be closely watched as it unfolds in the Delhi High Court, with potential implications for other companies participating in the scheme.