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Developments in Food Processing Industry

The food processing industry in India is increasingly seen as a potential source for driving the rural economy as it brings about synergy between the consumer, industry and the farmer. However, food processing activity is still at a nascent stage in India with low penetration.

Importance of Food Processing Industry

  • It holds the potential of reducing enormous wastage of agricultural produce in the absence of processing technologies and cold chain facility
  • It is labour-intensive industry, which has the potential to employ 13 million people directly and 35 million people indirectly
  • This will also lead to increase in farm income, generate employment opportunities, foster forward and backward linkage effects, contribute to exports and integrate Indian economy with the rest of world

What is the magnitude and size of this industry?

India is strategically located at the centre of the Middle-East and South-East with a long coastal line and easy sea connectivity as well as plenty of raw material for long period which can attract multi-national companies instead of food processing.

It is the 5th largest industry and has the highest rate of growth as well as a very high employment elasticity. Currently, it accounts for nearly 16% of total employment in the organized manufacturing sector and 32% in unorganized sector.

What are the factors which can drive this industry?

  • India’s demographic profile with 65% of population below 30 years of age
  • Fast changing consumption patterns
  • Increase in disposable incomes of the people
  • Fast increase in the number of working women, who prefer the packaged food
  • Growth of organised food retail in India
  • Nearly 55% of the total expenditure on an average is spent on food and grocery in rural areas and nearly 40% in urban areas and only 10% of what we grow is processed in India

What are the challenges faced by FPI?

  • Indifference of policy makers as very little outlays are allocated in Five Year Plans. In the XI FYP, an outlay of Rs. 4000 crore was earmarked out of which significant proportion was not spent
  • The legislation’s like APMC Acts, Essential Commodities Act, etc restricts free movement of commodities
  • Very poor infrastructure i.e. near absence of technologies, incubation facilities, pre-cooling chambers, irradiation facilities, etc < Food Irradiation is a technology that improves the safety and extends the shelf life of foods by reducing or eliminating microorganisms and insects>
  • High tariffs in the form of high excise duties as well as import duties
  • Non-tariff barriers in the form of stringest regulation of laboratory testing, grading, sampling and packaging
  • Lack of entrepreneurship, as 70% of the total value of food processing items manufactured in India is dominated by the unorganised sector
  • Lack of training facilities related to this industry
  • Very low Research & Development
  • Indian agriculture focuses on traditional crops rather than market-oriented agriculure with diversified commercial crops

What are the Govt efforts to promote this industry?

XI Five Year Plan: Govt. recognized the potential of this sector and launched Mega Food Park. It also adopted various measures such as modernization of Abattoir (Slaughter houses), modernization of meat shops, upgradation of street food, effective implementation of Food Safety and Standards Act 2006, technology upgradation, entrepreneurship development programme, setting up of training institutes, etc

Mega Food Park

These are the parks with state-of-art infrastructure related to all of the facilities required for food processing industry with their captive power plants, transportation and other hygienic facilities to attract food processing units to avail of this infrastructure for manufacturing food-processed items.

The target was to set up 30 Mega Food Parks, but only 9 came up.

XII Five Year Plan: There was significant shift in govt. policy towards this industry in XII FYP, as it allocation to the tune of 4-times as compared to XI FYP, with an outlay of Rs. 15000 crore. It also launched National Mission on Food Processing, in the background of the success of National Mission on Horticulture.

National Mission on Food Processing

The mission has two main principles: Decentralization and Outreach.

The mission is totally centrally sponsored and the responsibility of its implementation lies with the state govt., who will have to take initiative in organizing the unorganized food processors into SHGs (Self-Help Group) and provide them training and other facilities. State govt. will have to bring about synergy between agriculture and food processing industries.

Budget 2016-17

Govt. has decided to allow 100% FDI in multi-brand retail for food products produced and processed in India will play a catalytic role in leapfrogging Indian economy.

Future

It will be the endeavor of policy makers to ensure that food processing industry conform to global standards of health and hygiene and adopt CODEX standards (related to food safety) laid down by Food & Agriculture Organization and WHO, for the protection of consumer health.

Food processing needs a fillip in the form of better logistics, access to credit, technology indigenisation and implementation of food safety laws.

Suggested Readings: 
Untapped potential of food processing – The Hindu
Food Processing in India – Make in India

Any doubts?


  1. BHASKAR SINGH

    can anyone tell me , how i bookmark this

    1. aman gajraj

      u cant

  2. Tanya Sinha

    5th largest country?

    1. Akash Sharma

      5th largest INDUSTRY

[op-ed snap] From Plate to Plough: Onion tears and how to wipe them

Image source

Note4students

Mains Paper 3: Agriculture | Major crops cropping patterns in various parts of the country,

From UPSC perspective, the following things are important:

Prelims level: Price stabilization fund

Mains level: Need for increased focus on food processing industries in India


Context

Onion prices spiked again

  1. Almost every alternate year, the roller-coaster of boom and bust in onion prices happens
  2. 2017 is interesting as it saw record low prices in May-June when farmers sold onions at around Rs 2/kg in several mandis in Madhya Pradesh

What causes high volatility in onion prices?

  1. One of the prime reasons behind high volatility in onion prices stems from a lack of storage facilities that have not kept pace with rising production
  2. The traditional storage practices incur losses as high as 40 percent
  3. About 60 percent of onion production is in the rabi season, sown in December-January and harvested in April-May
  4. This is the onion which is stored by farmers and traders and it meets export as well as domestic demand till the arrival of the Kharif onion crop, which is sown in May-June and harvested in October-November
  5. The late Kharif crop is sown in August-September and harvested in January-February
  6. Kharif onion is of rather poor quality and cannot be stored for very long
  7. The prices tend to rise in October-November when rabi onion stocks are almost depleted and Kharif onion is yet to hit the market, or if the Kharif crop is damaged, as is the case this year

What could be the way out?

  • The first policy action has to be to promote modern cold storages and develop a system akin to that of the warehouse receipt system for farmers
  1. While a bulk of the storage has to be undertaken by the private sector, the state can do some stocking under a price stabilization fund
  2. They can hire the services of specialized private sector agencies to carry out such operations on the government’s behalf
  • Second, use trade policy for price stabilization
  1. In case of a bumper crop, promote exports and in case of a deficit crop, encourage imports
  2. This has to be done well in advance — as soon as one comes to know the advance estimates of production
  • Third, encourage the setting up of onion dehydrating units and promote demand for dehydrated onions amongst large consumers (restaurants, fast food chains, army, hospitals, etc)
  1. Dehydrated onions are being exported to Japan, Europe, Russia, US and some African countries
  2. The Ministry of Food Processing and state governments can encourage entrepreneurs to avail grants for setting up onion dehydration and processing units

Conclusion

  1. Instead of raiding traders or banning exports et al, the Centre and the states would do better if they promote investment in scientific storage and processing facilities, and use trade policy more judiciously

India pitches for FDI in food-processing industry

  1. India is pitching for FDI in the food-processing sector: India has asked the U.S. companies to take advantage
    of its liberalised foreign investment rules, ready made infrastructure and improving business environment
  2. Positive Steps in this direction: Government has significantly liberalised FDI regulations, and has allowed
    100 per cent FDI in manufacturing of food products and 100 per cent FDI in trading including e-commerce in food products manufactured and produced in India.
  3. India’s food processing industry is experiencing significant growth and boasts existing infrastructure
    in new Mega Food Parks around the country as well as state-of-the-art Cold Chain facilities
  4. India has undertaken several national and state-level programmes to improve the nation’s standing in the
    World Bank’s annual Ease of Doing Business Index
  5. World Food India 2017: From November 3 to 5, New Delhi will host the World Food India 2017, a first-of-its kind mega-scale event showcasing the large agricultural or horticultural produce base of India
  6. Leading U.S. companies are invited to learn about India’s proactive policies and profitable opportunities available across the entire food-processing and food retail value chain

[op-ed snap] Powering up food: fortification is good but needs regulation

Context:

  1. A diversified diet meets all nutritional requirements is difficult to provide
  2. Fortification of food is relied upon by many countries to prevent malnutrition

World Health Organisation reports:

  1. WHO estimates that deficiency of key micronutrients such as iron, vitamin A and iodine together affects a third
    of the world’s population
  2. In general, insufficient consumption of vitamins and minerals remains problematic

India’s nutrition challenge:

  1. Viewed against the nutrition challenge India faces, processed foods with standards-based fortification can help advance overall health goals, starting with maternal health
  2. It is imperative to make iron-fortified food widely available, since iron deficiency contributes to 20% of maternal deaths and is associated with nearly half of all maternal deaths
  3. The shadow of malnutrition extends to the children that women with anaemia give birth to
  4. They often have low birth weight, are pre-term, and suffer from poor development and lower cognitive
    abilities
  5. Low intake of vitamins, zinc and folate also causes a variety of health issues, particularly when growing
    children are deprived

Fortification:

  1. It is a low-cost solutionThe benefit is maximised when there is focus on adequate intake of oils and fats
  2. Oils and fats are necessary for the absorption of micronutrients and something poorer households often
    miss in their diet

Food Safety and Standards Authority of India:

  1. The efficacy of the fortification standards introduced by the FSSAI will depend on enforcement
  2. It is important to ensure that all sections of producers meet the norms, since the FSSAI plans to get local flour mills to add premixed nutrients
  3. Making affordable, good quality fortified foods widely available is the key

Way ahead:

  1. Only standardised processes can provide micronutrients to women, and in turn to breastfed children in the first six months after birth
  2. A well-functioning PDS is the best channel to reach precisely those sections that need fortified food the most
  3. In the case of children, recent studies show that adding zinc to food during the six months to 12 years growth period reduced the risk of death from infectious diseases and all causes put together

More cold chains, food parks to boost farm incomes

  1. News: Govt plans to set up 100 new cold chain projects at a cost of Rs. 12,000 crore to Rs.13,000 crore
  2. It has also started the process to invite investors to set up six new mega food parks
  3. Aim: To boost farm sector incomes by establishing farm to fork linkages
  4. More than $1 billion of FDI has come into the sector in the past two years, including some very big multinational firms such as Kellogg’s, McCain Foods and Mars International
  5. A lot of projects are already operational on the ground
  6. Wastage: The Rs.9,000 crore invested in new cold storage capacity in the past two years has reduced 10% of the country’s food wastage
  7. India loses an estimated Rs.92,000 crore a year due owing to wasted food

FDI in food processing may cross $1 billion

  1. FDI in the food processing sector is expected to cross $1 billion in the next two years
  2. Reasons: Reforms in FDI space and streamlining of FSSAI regulations
  3. Efforts: The food processing ministry has permitted development of 17 new food parks across the country
  4. It is making efforts to operationalise all 42 parks by 2019 that will help double processing level of fruits and vegetables to 20%
  5. It has also approved setting up of 30 new cold chains in the country
  6. The government has announced 100% FDI in marketing of food products produced and processed in India in this year’s Budget

Cancer-causing chemicals in bread, says CSE

  1. Context: A study released by the Centre for Science and Environment (CSE)
  2. Chemicals: Commonly consumed bread contains potassium bromate and potassium iodate
  3. These chemicals can cause cancer

Modernization of Abattoirs

  1. News: Food processing industry is implementing the Centrally Sponsored Scheme for setting up/ modernization of Abattoirs (slaughter houses)
  2. Finance: Grant-in-aid is provided for setting up of new and modernisation of existing abattoirs to local bodies, PSUs, co-operatives, etc
  3. The scheme is a part of National Mission on Food Processing
  4. Agriculture ministry is also running a similar scheme for rural areas as a component under the National Livestock Mission
PIB

Govt mulls fresh study on post-harvest loss of farm produce

  1. Context: FY’17 Budget proposal of allowing 100% FDI in marketing of food products
  2. News: The Centre is planning a fresh study on the percentage of post-harvest losses of farm products
  3. Reason: There are contradictory findings available with govt with some show losses as high as 30%, while others put it at as low as 5%
  4. Challenge: Organisations of small retailers, street vendors and farmers have opposed the proposal by citing some of the findings which show low post-harvest losses

Govt calls for tying farming with industry

Union food processing minister called for “tying farming with industry” and stressed on “cooperative farming”

  1. Minister said, agriculture sector has the potential not only to drive the economy, but linked with food processing.
  2. According to India Meteorological Department, 302 districts across India, or nearly half of all districts, received deficit or scanty rainfall this year.
  3. At least half a dozen states declared drought and sought central assistance to deal with the agricultural crisis and farmers’ suicides.
  4. The Maharashtra CM said that countries in Europe and elsewhere are doing precision farming.


:( We are working on most probable questions. Do check back this section.







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