Food Processing Industry: Issues and Developments

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.