Unlocking India's Food Processing Potential

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Unlocking India's Food Processing Potential

  • The challenge to feed the 10 billion population by mid-century is being deliberated on several fronts.
  • It demands efficient ways of production that are both economically viable and ecologically sustainable.
  • New technologies are emerging that revamp the traditional approach of farm to fork and with a lower environmental footprint.
  • One of the largest producers of fruits and vegetables in the world to boost processed food in large quantities, India has formulated a unique Production-Linked Incentive Scheme (PLIS) which aims to incentivise incremental sales.

Food processing

  • Food processing is the transformation of agricultural products into food, or of one form of food into other forms.
  • Food Processing = Transformation + Value Addition

Significance of Food Processing Industries in India

  • Consolidation of India’s position as a major food producer: India ranks 1st in the production of milk, ginger, banana, guava, papaya, mango etc. It ranks 2nd in the production of rice, wheat, potato, sugarcane, cashew nut, tea etc. It is among the top 5 countries in the production of coffee, tobacco, spices, seeds etc. With such a huge raw material base, we can easily become the leading supplier of food items in the world.
  • Resource advantage of India: Diverse soil and climate types for the cultivation of diverse food crops, long coastal line suitable for fishing, a huge resource of domestic animals etc.
  • Increasing employment: Expected to create more than 1 million new jobs.
  • Curbing Migration: Provides employment in rural areas, hence reduces migration from rural to urban.
  • The future driver of Indian growth: Food processing corresponds to around 10% of GDP in the agriculture-manufacturing sector. It has potential for more.
  • Doubling of farmers’ income: With the rise in demand for agri-products there will be tremendous rise in the price paid to the farmer, thereby increasing the income.
  • Curbing Food Inflation: Processing increases the shelf life of the food thus keeping supplies in tune with the demand thereby controlling food-inflation.
  • Crop-diversification: Food processing will require different types of inputs thus creating an incentive for the farmer to grow and diversify crops.
  • Enhances consumer choices: By allowing food from other parts of the world to be transported to our local market and vice versa.

Initiatives for Development of food processing Industry in India

  • Vision 2015 for food processing: It suggested the strategy to ensure faster growth of the sector. The adopted Vision 2015 provides for enhancing the level of processing of perishables from 6% to 20%, enhancing value addition from 20% to 35% and increasing India’s share in global food trade from 1.5% to 3% by the year 2015. To achieve these targets, investment of Rs.100 thousand crores was estimated by the year 2015, out of which Rs.10,000 crores was to come from the Government.
  • National Mission on food processing: A new Centrally Sponsored Scheme(CSS) of Ministry of food processing Industry launched on 1st April 2012. It aims at the decentralization of implementation of food processing related schemes for ensuring substantial participation of State Governments/UTs.
  • Mega food parks Scheme: It aims at providing a mechanism to link agricultural production to the market by bringing together farmers, processors and retailers so as to ensure maximizing value addition, minimizing wastages, increasing farmers’ income and creating employment opportunities particularly in the rural sector.
  • Modernization of abattoirs Scheme: It will augment the essential supply base of hygienic raw material to the meat processing industry, both for domestic consumption and exports, besides discouraging unauthorized slaughtering.
  • Scheme for Integrated Cold Chain, Value Addition and Preservation Infrastructure: It aims to encourage setting up of cold chain facilities to provide integrated cold chain and preservation infrastructure facilities without break from the farm gate to the consumer.
  • Scheme for Quality Assurance, Codex, R&D and Other Promotional Activities: It is aimed to create an infrastructure of food testing laboratories in the country to establish a quality monitoring system for food processing, implement HACCP/ISO22000, ISO14000/GHP/GMP and other quality management systems.
  • Production-Linked Incentive Scheme (PLIS): A sum of ₹10,900 crore has been earmarked for the scheme which incentivises firms for incremental sales and branding/marketing initiatives taken abroad. Beneficiaries have been obliged to commit a minimum investment while applying for the scheme.

Challenges in the growth of food processing Industries

  • Small size of food processing industry: Indian food processing companies are small and not in competition with global giants which invest heavily on R&D.
  • Lack of state of the art laboratories in India: Food export to US and EU demands high-quality standards. India lacks state of the art laboratories to check contamination in food.
  • Lack of skilled workforce: The number of skilled graduates in Food Technology are very less.
  • Lack of support from the government at the right time.
  • Lack of viable transport infrastructure.
  • Lack of cold-storage facilities.
  • Lack of organised retail.
  • Limitations in supply chains.
  • Limitations in the quality.
  • Lack of modern regulations.

Impact of pandemic

  • Due to novel coronavirus pandemic, the past two years have been witnessing a significant number of people working from home.
  • This has accelerated the demand for products from the ready-to-eat market which saw a rise of approximately 170% in sales volume between March-June 2020.
  • The pandemic has bolstered consumer awareness of functional foods, which is expected to provide a launchpad for health-orientated start-ups and micro-food processing units.
  • However, the access of micro, small, and medium enterprises (MSMEs) to finance is a perennial problem in the country, predominating due to a lack of proper credit history mechanism for MSMEs.
  • Smart financing alternatives such as peer-to-peer (P2P) lending hold potential for micro-food processors.
  • Access to working capital has in theory been addressed by the Trade Receivables Discounting System (TReDS), a platform for facilitating the financing/discounting of trade receivables of MSMEs through multiple financiers.
  • However, the platform requires considerable scaling-up and simultaneous enforcement of stringent measures for corporates to comply with.
  • Integrating the TReDS platform with the Goods and Service Tax Network’s e-invoicing portal will make TReDS more attractive and give relief to financiers.

Way forward

  • With growing populations, changing food habits and unrestricted use of natural resources, nations must come together and lay out a road map for a common efficient food value chain.
  • New alternatives are being explored which have immense potential in replacing the staples of rice and wheat in the form of Nutri-cereals, plant-based proteins, fermented foods, health bars and even fresh fortified foods for pets.
  • By welcoming the new brands in the category, PLIS aims to create an enabling ecosystem for innovation in both food products and processes.
  • Other measures include:
  • Development in storage capacities and infrastructure.
  • Develop the agricultural facility to ensure diversification of crops.
  • Backward linkages to farmers need to be made more robust.
  • Contract farming can be promoted. This would shield farmers from price volatility, subject to quality commitments.
  • Slaughter animal rules should be framed in a comprehensive policy framework.
  • Encouraging the domestic startups and industry than the international companies.
  • Post the 1929 Great Depression, hemlines of a skirt were indexed to predict the financial state.
  • Almost a century later, luminosity and night lights data obtained from satellites indicate the extent of economic progress.
  • No wonder, 50 years hence, the progress of nations will be benchmarked to their ability to sustainably feed their populations.