Food processing sector - new era in Indian economy

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Vijaylaxmi Kasotia | 30 Jun, 2008
The agriculture sector has come a long way since independence. With the advent of green revolution, India has transformed itself from a country of shortages to a land of surpluses. With the rapid growth of the economy, a shift is also being seen in the consumption pattern, from cereals to more varied and nutritious diet of fruit and vegetables, milk, fish, meat and poultry products. This has resulted in the development of a sunrise industry namely the Food Processing Industries.

The food processing sector in the country with its vast potential has emerged as one of the major driver of economic growth. It is encouraging to note that while the country’s GDP growth rate had increase from 3.5 per cent in 2002-03 to 9 percent in 2006-07, the food processing sector has grown from 7 per cent to 13.1 per cent during the same period.

India is a country of over 1.10 billion consumers, there is a large untapped domestic market of 1,000 million consumers in the food processing sector and 200 million more consumers are expected to shift to processed food by 2010. It is the second largest producer of fruits and vegetables in the world. There is a huge wastage of perishable food items in the country due to lack of proper food processing facilities and the level of processing is only about 2.2 per cent. However, India has tremendous potential to unleash large scale process based farm activities to exploit the emerging global business opportunities.

Incredible Opportunities:
India’s homogeneous market size endowed with growing incomes and changing life styles has created incredible market opportunities for food producers, machinery makers, food technology and service providers. Food processing industries has great export and employment potential. The policies are investor-friendly and more importantly technological and human resources are available aplenty in the country.

The competitive edge enjoyed in terms of raw material and labour offers lucrative opportunities. However poor perception of quality and the indifferent image of Indian products is preventing Indian food products to penetrate global markets in a big way. While developing countries like Thailand have exploited the global markets in a big way by fine-tuning quality management aspects of their food processing industry, India are yet to make a headway on this front.

Production of high quality processed foods meeting international quality standards & regulations may very well open new frontiers for Indian food products. This will not only create a dynamic and competitive domestic food processing industry but will also enable India to become a major player in the global food market. An attitudinal change towards quality is essential.

Several thousand crore worth of farm produce is lost every year due to inefficient post-harvest practices for storage and processing. On one hand is the growing demand for food products, which are difficult to meet due to limited resources and on the other, there exist abnormally high wastage in farm sector due to inefficient technology in storage, processing and handling. It is, therefore, imperative to introduce state of the art technology in the food-processing sector to minimize post-harvest losses. It also calls for a concerted attention to a few selected food products where India has or can develop a competitive edge over other countries.

FDI:
The sector has been attracting substantial FDI also and is among the top ten sectors getting FDI equity. FDI up to 100 per cent equity is permitted under the automatic route in food and infrastructure like food parks and cold chains. There are many areas for investment in this sector which include mega food parks, agri-infrastructure, supply chain aggregation, logistics and cold chain infrastructure, fruit and vegetable products, animal products, meat and dairy, fisheries and seafood cereals, consumer foods/ready to eat foods, wine and beer, machinery/packaging.

Productivity and Progress:
It is essential to understand the dynamic relationship that exists between productivity and progress. The basic fact is that until both the farmers as well as the processors are convinced of benefits that accrue through productivity, the productivity campaigns will remain ineffective. So the main challenge is to introduce the concepts of productivity and make it work under a variety of constraints for the sustainable growth of the industry.

In the process of globalization, the Indian food processing industry will be facing increased competition, particularly in domestic markets in addition to the uncertainties prevailing in the international markets. It is in this context that emphasis must be given to improve productivity and quality. Undoubtedly, better performing firms will have a competitive edge over others. In order to maintain the tempo of productivity and quality, the National Productivity Awards have thus assumed much greater significance.

Ministry of Food Processing Industries on its part, is leaving no stone unturned to achieve the multiple objectives of stepping up the growth, higher farmer income, reduction in wastage, providing nutritious and safe food and enhancing employment opportunities. It has initiated measures to deal with the major constraints being faced by the industry such as affordability and cost of processed foods, linking of farmers and processors, supply chain and post harvest technology, infrastructure, finance, food safety, hygiene and taxes.

With the active support and cooperation of all the stakeholders the ministry is confident of providing the necessary momentum for the rapid growth of the food processing sector and usher in a new era in the Indian economy.

Vision 2015:
Given the strengths and opportunities of food processing sector, a Vision 2015 has been developed by the Ministry of Food Processing Industries, together with an appropriate strategy and implementable action plan so as to enhance farmer income, generate employment opportunities, provide choice to consumers at affordable price and contribute to overall national growth by increasing: the level of processing of perishables from 6% to 20%, value addition from 20% to 35% and share in global food trade from 1.5% to 3%.

The vision 2015 of the Government for the food processing sector aims at enhancing and stabilizing the income level of the farmers by assuring wider and better choice by enhancing dynamism, competitiveness, by ensuring safety and quality of food by introducing a transparent and scientific system of standards. To achieve these aims a transparent and industry friendly regulatory regime is proposed to be established. Making the sector attractive for both domestic and foreign investors.

Achieving integration of the food processing infrastructure from farm to market.

Having a transparent and industry friendly regulatory regime. Putting in place a transparent system of standards based on science.

To achieve the stated Vision, Ministry of Food Processing Industries, has prepared Action Plan for energizing the food processing sector during 11th Plan.

Main Initiatives:

Cold Chain: To address the situation and with a view to create a modern cold chain for preservation and value addition of perishables, during the 11th Plan, the Ministry is launching a revamped comprehensive Cold Chain Infrastructure Scheme for creating integrated cold chain infrastructure at different levels – farm level primary processing center-cum-cold chain, collection/aggregation centers and Strategic Distribution Centres (SDC). The SDCs will have integrated infrastructure facilities like material handling equipment, refrigeration, IQF/Blast freezing facility, Frozen/CA/MA Storage, Modern Packaging Facilities, ancillary equipment like X-ray, weigh bridge etc. The SDCs will be linked to retail supermarkets.

Mega Food Park: A new scheme of Mega Food Parks in the country is proposed which is envisaged to be a well defined agri/horticultural processing zone containing state of the art processing facilities with support infrastructure and well established supply chain. The proposed scheme aims to provide a mechanism to bring together farmers, processors and retailers and link agricultural production to the market so as to ensure maximization of value addition, minimize wastages and improve farmers’ income. The Mega Food Park is designed ultimately to link the farmers with the retail markets with minimizing of the intermediaries.

These food parks will function as sourcing hubs for the retail outlets.

Abattoirs: Hygienic and scientific slaughtering as well as optimum utilization of by-products are issues of grave concern of the Indian Meat Industry. It results in tremendous waste, contamination and avoidable cruelty to animals. Ministry is launching a comprehensive scheme for modernization of existing abattoirs/establishment of modern abattoirs at 100 locations across the country on a PPP mode.

Capacity Building: Ministry of Food Processing Industries has also taken up quality assurance, R & D, HACCP, Human Resource Development and Establishment of laboratories to support the Food Safety and Standards Act.

Ministry of Food Processing Industries have taken many steps to give impetus to this sector which include virtual delicensing of the sector, inclusion in the priority sector for lending, allowing 100% FDI except in alcoholic beverages and retail, several duty and tax reliefs, financial assistance for infrastructure building, setting up of food processing units etc. In case of export-oriented units, foreign investment is permitted even in case of items reserved for small scale sector. In addition, the export oriented units are given a number of incentives and concessions under the Export-Import Policy, such as, duty free import of capital goods, raw materials and intermediates, export income being exempt from Corporate Tax etc. FDI inflow in food processing is becoming stronger.

* The author is a Media & Communications Officer with Press Information Bureau (PIB), New Delhi.