Giving a leg-up to the food processing sector

A robust food processing sector can help enhance farm productivity, combat wastage, and contribute greatly to govt's objective of doubling farmers' incomes by 2022

India enjoys a wide range of agro-climatic zones, soil types, and terrain, with a huge variety of agricultural produce from grains and cereals to fruits and vegetables and micro nutrients. 

With these resources, India is a natural home for the food processing industry. However, less than 10 per cent of agri-produce is processed, while an estimated 30 per cent is lost in wastage. Food processing can enhance farm productivity, combat wastage, and contribute greatly to the government’s objective of doubling farmer incomes by 2022.

The sector is a vital component of both the agricultural and manufacturing sectors. In agriculture, it helps add to farmer incomes by providing growth and value-addition opportunities.With agricultural marketing reforms, encouragement to farmer producer organisations, and a focus on irrigation, the farm sector is a strong foundation for food processing. The industry ensures that produce is optimally utilised and reaches the consumer in a safe and hygienic condition.

Besides, the food processing sector is one the most employment-intensive among the manufacturing industries. It accounts for more jobs per unit of output than many other capital-intensive sectors, particularly for women. It thus also fills a social need for our rural economy, farmer incomes, and gender empowerment. 

Currently, the processing sector accounts for 32 per cent of the country’s total food market, and is one of the largest industries in India, ranked fifth in terms of production, consumption, export and expected growth. The food industry, valued at $40 billion in 2013, is expected to grow to $100 billion by 2020. 

Food processing in India comprises five segments — dairy, fruit and vegetable processing, grain processing, meat and poultry processing, fisheries and consumer foods such as packaged foods and beverages. India ranked first in the world in terms of milk production at 155.5 million tonnes in 2015-16. It is the leading producer of buffalo meat, livestock and millets; the second largest producer of cereals, fruits and vegetables; and ranks second in the world in overall food production. 

The government has made special efforts for the development of the food processing industry, which has been recognised as a priority sector under Make in India to generate jobs, especially for women.

The ministry of food processing industries has developed mega food parks across the country to capture the best specialty produce of each region. These food parks are to be equipped with world-class infrastructure including research facilities, testing labs, development centres and linkages to transport. The ministry has approved 41 mega food parks, and nine are operational. More than 100 cold chains are in operation and 236 have been sanctioned.

Several initiatives have been undertaken to augment infrastructure and storage facilities, tackle food wastage and add value to benefit both producers and consumers. The Scheme for Agro Marine Processing and Development of Agro Processing Clusters (or Sampada), with an allocation of ~6,000 crore, can enable investment of $5 billion to modernise processing. 

The government has set up a special fund for concessional loans to designated food parks, and food and agro-based processing units as well as cold chain infrastructure are eligible for priority sector lending by banks.

Leveraging its large population of 1.3 billion and a growing consumer market estimated at $4 trillion by 2025, India seeks to attract FDI in food processing to bring in technology and quality practices. Hundred per cent FDI is permissible in post-harvest facilities and cold chain infrastructure, and was recently allowed in trading, including through e-commerce, for food products manufactured or produced in India. 

Given the popularity of Indian cuisine overseas as well as the exportable surplus in agri-produce, such FDI can also contribute to exports of processed food products. World Food India, which concludes today, aims to raise awareness on the potential of the food industry and bring together overseas investors, states and industry on the same platform. It also aims to boost start-ups and innovation in the food sector.

There are several challenges however. Inadequate transport and storage infrastructure from farms to consumers result in high wastage. Fragmented land-holdings, low usage of technology and low agricultural productivity hinder the sector. The regulatory environment for food safety and packaging is still evolving. Safety and quality issues as well as lack of skilled manpower also impact the food processing sector.

Going forward, better food safety and quality assurance mechanisms, technology upgradation, relaxation of export norms and greater access to credit can transform the sector. We hope that the National Food Processing Policy, based on consultations with state governments conducted earlier this year, can be quickly brought out. Moreover, contract farming, reform of agricultural marketing, and raising farm productivity through irrigation and better inputs can link agriculture with the food industry to increase farmers’ incomes. Permitting FDI in food retail can also help attract overseas investments.

The food processing sector is a key instrument to transform the lives of our farmers, workers and women. World Food India 2017 has for the first time opened up the Indian food sector to the globe and showcased our rich culinary culture.   

The writer is Director General, Confederation of Indian Industry