Infra blips hit food processing

Poor infrastructure facilities have weakened the flow of foreign direct investment (FDI) into India's food processing industry (FPI).

Although investors in the UK, of late, have shown keen interest in investing in the Indian FPI, according to a KPMG report, infrastructure is a major constraint in attracting more FDI.

The country's cold storage capacity, currently, caters to less than 15 per cent of the produce, with over 80 per cent designed only to handle potatoes. There is also a shortage of chilling infrastructure for milk and a lack of modern abattoirs for the meat processing sector.

Fish processing for exports, more specifically, requires a major infrastructure boost. Physical marketing and warehousing infrastructure also needs to be upgraded, the report said.

The FDI inflow into the food processing sector stood at a measly $1,282.06 million from August 1991 to June 2007.

Investments from the US stood at Rs 5499.74 crore since the early 90s, followed by the Netherlands with Rs 591.54 crore. While France invested Rs 464.68 crore, Italy and Thailand brought in Rs 438.18 crore and Rs 393.98 crore, respectively.

But the sector grew as consumption patterns changed in the country, which led to an increase in the demand for processed, ready-to-cook and eat food, and assisted by the country's status as the world's second-largest producer of fruits and vegetables.

According to industry estimates, the processed food market accounts for 32 per cent of the total food market, which is valued at EUR 67.9 billion. The total exports of the Food Processing Industry jumped from EUR 4.7 bn in 2002-03 to EUR 13.8 bn in 2006-07.

The Ministry of Food Processing Industries (MOFPI) aims to increase India's share in the global processed food trade to 3 per cent in the next 8 years from 1.6 per cent at present.

The country, according to the report, is well placed to take advantage of the growing food trade due to its strong agricultural base and can become a sourcing hub for food products.

The booming retail chain business is likely to lead to more consolidation in the fragmented food sector and be a force behind its growth.