Food growers can be processors too

A higher level of processing would generate additional income for farmers and off-farm employment and entrepreneurship opportunities for rural people

The food-processing industry, despite impressive growth over the past few years, has failed to effectively serve its prime objectives of bolstering farmers’ incomes and curtailing wastage of farm produce. While the gains from the value-addition of agricultural products are accruing largely to the industry rather than the farmers, the post-harvest losses of farm output continue to be rather high — up to 40 per cent in some perishable items. In monetary terms, these losses are assessed at Rs 60,000-80,000 crore annually.

This can be attributed to numerous reasons, such as inept post-harvest handling, transportation, storage, and marketing the produce; a low level of on-farm processing to enhance the value and extend the shelf-life of the harvested stuff; and lack of direct linkage between growers and processors. Hardly 10 per cent of the farm harvest is subjected to some kind of value-enhancing treatment or processing. This level needs to be stepped up substantially, at least to 25 per cent, to reduce spoilage, facilitate the year-round availability of seasonal agricultural products, and soften volatility in their prices. A higher level of processing would also generate additional income for farmers and off-farm employment and entrepreneurship opportunities for rural people. Small-scale and cottage-level processing units located near production hubs can prove more useful than large industrial ventures in Indian conditions, where holdings are small and growers need to supplement their income through other economic activities.
 

Given that India is among the world’s top producers of many key farm commodities, the scope for the value-addition of surplus agricultural output is immense. The country ranks first in the production of milk; second in that of fruit, vegetables and fisheries; and third in eggs. It also produces a variety of health foods and therapeutically important herbs which can be processed into nutritious snacks and other kinds of high-value products for domestic and export markets.

Going by official estimates, the gross value added (GVA) of the food-processing sector has surged from Rs 1.34 trillion in 2014-15 to Rs 2.37 trillion in 2020-21. A recent study report released by the Federation of Indian Chambers of Commerce and Industry indicates that this sector may grow at an even faster pace of around 15 per cent a year from now on. This study reckons the inflow of foreign investment into the Indian food-processing sector, either directly or through mergers and acquisitions, at more than $11 billion between April 2000 and March 2022. A favourable policy environment is said to have played a major role in the rapid expansion of this sector. The government has allowed 100 per cent foreign direct investment under the automatic route for manufacturing and retail trading, including e-commerce, of food products made in India. Besides, it has extended the Production-Linked Incentive Scheme to this industry to impart further impetus to its growth.

The two notable government initiatives targeted specifically at promoting small-scale or cottage-level food processing for the benefit of producers are the Pradhan Mantri Kisan SAMPADA Yojana and the PM-Formalisation of Micro Food Processing Enterprises Scheme. While the first scheme aims primarily at creating modern post-harvest infrastructure for value-addition in farm products and their down-the-line value-chain, the second one is meant to provide financial, technical, and business support for setting up small-scale ventures and the upgrade of the existing micro food-processing units on the basis of the one-district-one-product approach.

There, indeed, are several distinct characteristics of the Indian farm sector that make small and micro food-processing units economically more viable than the larger ones. The notable ones among them are the perishable and seasonal nature of farm produce and its scattered availability in small lots; paucity of commodity-specific warehousing and transportation facilities; and the issues related to product quality, especially in terms of its suitability for processing. The obligation of processing units to procure raw material from markets operated by agricultural produce marketing committees (regulated mandis) also acts as a formidable constraint. Only some states have done away with this provision by amending their marketing laws to allow direct purchases from farmers. The needed logistics infrastructure is also found wanting in most places.

With this being the ground reality, the best course would be to promote small-scale and village-level agro-processing units even while continuing to support the organised sector food-processing industry. In fact, the small- and medium-scale sectors should get preferential treatment because they directly impact farm incomes. Farmers also need to be encouraged to set up mini or micro agro-processing centres, individually or collectively, through cooperatives or farmers’ producer organisations. Such centres can have small machines like mini rice mills, atta chakkies, masala grinders, mini feed mills, small dal mills and similar others. Such ventures do not require much land or large investment but can yield good income for the ruralites.

surinder.sud@gmail.com