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Food Processing Sector: An Overview

Food Processing Sector is considered an important segment of the Indian economy in terms of its contribution to GDP, employment and investment. It can help change the rural scene by providing better income for the farmers and creating jobs.

Despite being one of the largest producers of agricultural products in the world, India’s food processing industry, growing about at 7 percent per annum, is still in the nascent stage and desperately waiting for major breakthrough. The reason is not far to seek. About 42 per cent of India’s food processing industry is dominated by unorganized sector which is generally deprived of incentives being provided to the sector. Time has come for infrastructure push.

Poor Infrastructure Facilities

It is a repeated story that we are wasting over 40 percent of our fruits and vegetables, costing over Rs. 13,300 crores every year in the absence of developed processed food industry.

Poor infrastructure or inadequate infrastructure facilities like cold storage and roads, non availability of refrigerated transport, high tariffs, outdated food laws and unscientific post harvest facilities are very common factors cited time to time for the wastage of these resources. But not only that the availability of the trained manpower, consumers’ preferences for fresh foods are also responsible for untapped potential of the sector.

In order to arrest post-harvest losses of horticulture & non-horticulture produce, the Government has accorded approval to 42 Mega Food Parks and 236 Integrated Cold Chains. But out of 42 Mega Food Parks, so far only eight are operational. Similarly, out of 236 Cold Chains, only 100 Cold Chains have become operational.

According to the Industry, India has about 7000 cold storage facilities unevenly spread across the country, with an installed capacity around 32million metric tonnes. Studies have shown this is half the number of cold storage facilities that country actually needs. Availability of land is emerging a big issue for constructing such storage in hinterland, near to producing centers.

Similar situation is in fisheries sector. India is the third largest fish producer in the world and is the second in inland fish production. The fisheries sector contributes US$4.4 billion to the national income, which is about 1.4 per cent of the total GDP. India has vast potential for fisheries from both inland and marine resources.

But it is widely felt that India’s substantial fishery resources are under-utilized and there is tremendous potential to increase the output of this sector. The units in the fish processing sector are largely small scale proprietary/ partnership firms or fishermen co-operatives.

Need Investment

The food processing sector is capital intensive. High investments are required to set up processing units; this acts as an entry barrier for new players.

The sector needs big investment support as technology transfer for processing and packaging is a costly affair. In the current budget, the govt. has set up a special fund of Rs. 2000 crore in NABARD to make affordable credit available at concessional rate of interest to entrepreneurs for setting up of food processing units in designated Food Parks. However, this fund is still to be utilized at ground level.

Besides this, to encourage investment in food processing and retail sector, govt. has allowed 100% FDI in trading including through e-commerce, in respect of food products manufactured and / or produced in India. This may help in creating back-end infrastructure and significant employment opportunities.

According to DIPP data, in 2016- 17 (April-December), the food processing sector in the country has received USD 663.23 million worth of FDI, which shows that if properly managed the sector can emerge core sector for attracting FDI.

Reaching out MNCs

For the first time, a high-powered team of Indian officials led by Jagdish Prasad Meena, Special Secretary in the Ministry of Food Processing Industries had organized road shows in different cities of USA in the first week of May, holding meetings with high-level officials, food services, logistics and restaurant companies. Meena briefed them about the advantage of India’s liberalised foreign investment rules and improving ease-of-doing-business climate for the investment in Food Processing sector.

India will also host the World Food India 2017, from November 3 to 5, in New Delhi, a first-of-its-kind mega-scale event showcasing the large agricultural or horticultural produce base of India and immense investment opportunities for the entire food processing and food retail sector.

Skilled Manpower

Realizing the need of trained man power for the sector, the Ministry of Food Processing Industries has announced a scheme for Human Resource Development (HRD) in the food processing. The HRD scheme is being implemented through State Governments under the National Mission on Food Processing. The scheme has the following four components:

  • Creation of infrastructure facilities for degree/diploma courses in food processing sector
  • Entrepreneurship Development Programme (EDP)
  • Food Processing Training Centres (FPTC)
  • Training at recognised institutions at State/National level

 

The Road Ahead– Greater Convergence among Schemes required.

The government has been announced a number of schemes for food processing sector from time to time. Some of them are being implemented by the Center and others by State agencies. There is always lack of synergy in the implementation. As said earlier about a large number of players are still in unorganized sector which are deprived of the advantage of these schemes.

In the first week of May, Cabinet Committee on Economic Affairs, chaired by the Prime Minister Narendra Modi has given its approval for re-structuring the schemes of the Ministry of Food Processing Industries under new Central Sector Scheme.

SAMPADA (Scheme for Agro-Marine Processing and Development of Agro-Processing Clusters).

An allocation of Rs. 6,000 crore under the scheme is expected to leverage investment of Rs. 31,400 crore, handling of 334 lakh MT agro-produce valuing Rs. 1,04,125 crore, benefit 20 lakh farmers and generate 5,30,500 direct/ indirect employment in the country by the year 2019-20.

SAMPADA is an umbrella scheme intigrating ongoing schemes of the Ministry like Mega Food Parks, Integrated Cold Chain and Value Addition Infrastructure, Food Safety and Quality Assurance Infrastructure, etc. And also new schemes like Infrastructure for Agro-processing Clusters, Creation of Backward and Forward Linkages, Creation / Expansion of Food Processing & Preservation Capacities.

SAMPADA aims at seamless backward and forward integration for processed food industry by plugging gaps in supply chain and modernization/ expansion of existing food processing units

If implemented effectively, experts feel SAMPADA may result in creation of modern infrastructure with efficient supply chain management from farm gate to retail outlet. It will result in reducing wastage of agricultural produce, increasing the processing level, availability of safe and convenient processed foods at affordable price to consumers and enhancing the export of the processed foods.

Such a step was required to give renewed thrust to the food processing in the country. According to the CII’s estimates the sector has the potential to attract as much as US$ 33 billion of investment over the next 10 years and also to generate employment of nine million person-days.

(The author is a former Joint Director, PIB. Views expressed are personal.)