Food Processing Industry in India: Growth Drivers, FDI Policy, Investment Opportunities; Schemes Related to Food Processing Sector.

Food Processing Industry in India:

A Snapshot

  • The Indian food industry is poised for huge growth, increasing its contribution to world food trade every year.
  • In India, the food sector has emerged as a high-growth and high-profit sector due to its immense potential for value addition, particularly within the food processing industry.
  • Accounting for about 32 per cent of the country’s total food market, The Government of India has been instrumental in the growth and development of the food processing industry.
  • The government through the Ministry of Food Processing Industries (MoFPI) is making all efforts to encourage investments in the business.
  • It has approved proposals for joint ventures (JV), foreign collaborations, industrial licenses, and 100 per cent export oriented units.
  • Food processing industry in India is a sunrise sector that has gained prominence in the recent years. Availability of raw materials, changing lifestyles and appropriate fiscal policies has given a considerable push to the industry’s growth.
  • This sector serves as a vital link between the agriculture and industrial segments of the economy. Strengthening this link is of critical importance to reduce waste of agricultural raw materials, improve the value of agricultural produce by increasing shelf-life as well as by fortifying the nutritive capacity of the food products; ensure remunerative prices to farmers as well as affordable prices to consumers.
  • Adequate focus on this sector could greatly alleviate our concerns on food security and food inflation.
  • India already is a leading exporter of several food products. To ensure that this sector gets the stimulus it deserves, Ministry of Food Processing Industries is implementing a number of schemes for Infrastructure development, technology up-gradation & modernization, human resources development and R&D in the Food Processing Sector.

The Ministry of Food Processing Industry defines Food Processing to include under food processing industries, items pertaining to these two processes viz

(a) Manufactured Processes: If any raw product of agriculture, animal husbandry or fisheries is transformed through a process [involving employees, power, machines or money] in such a way that its original physical properties undergo a change and if the transformed product is edible and has commercial value, then it comes within the domain of Food Processing Industries.

(b) Other Value-Added Processes: Hence, if there is significant value addition (increased shelf life, shelled and ready for consumption etc.) such produce also comes under food processing, even if it does not undergo manufacturing processes.

The Growth of Food Processing Industry in India

As seen in the graph above, the contribution of food processing sector to GDP has been growing faster than that of the agriculture sector.

If the contribution to GDP of both agricultural sector and food processing sector were growing at the same rate, then it would mean that the growth in food processing sector is only due to increased agricultural raw material supply.

However, what this graph indicates is that more and more agricultural products are being converted (in value terms) to food products. This means that the level of processing in value terms has been increasing in India.

Person Employed by the Food Processing Industries

Food Processing Industry is one of the major employment intensive segments constituting 12.13 per cent of employment generated in all Registered Factory sector in 2011- 12.

According to the latest Annual Survey of Industries (ASI) for 2011-12, the total number of persons engaged in registered food processing sector is 17.77 lakhs.

During the last 5 years ending 2011-12, employment in registered food processing sector has been increasing at an Annual Average Growth Rate of 3.79 per cent. Unregistered food processing sector supports employment to 47.9 lakh workers as per the NSSO 67thRound, 2010-11.

Export Performance of the Food Processing Sector

All agricultural produce when exported undergo an element of processing. Hence all edible agricultural commodities exported are included in the export data. The value of exports in the sector has been showing an increasing trend with Average Annual Growth Rate (AAGR) of 20.53 per cent for five years ending 2013-14.

The value of processed food exports during 2013-14 was of the order of US $ 37.79 Billion (total exports US $ 312 Billion) constituting 12.1 per cent of India’s total exports.

Food Processing Industry in India: Growth Drivers, FDI Policy, Investment Opportunities

Growth Drivers

Factors Contributing to Growth of the Food Processing Sector.

FDI Policy

Schemes Related to Food Processing Sector in India

Pradhan Mantri Kisan Sampada Yojana

  • PM Kisan SAMPADA Yojana is a comprehensive package which will result in creation of modern infrastructure with efficient supply chain management from farm gate to retail outlet.
  • It will not only provide a big boost to the growth of food processing sector in the country but also help in providing better process to farmers and is a big step towards doubling of farmers income, creating huge employment opportunities especially in the rural areas, reducing wastage of agricultural produce, increasing the processing level and enhancing the export of the processed foods.

Mega Food Parks

  • The Scheme of Mega Food Park aims at providing a mechanism to link agricultural production to the market by bringing together farmers, processors and retailers so as to ensure maximizing value addition, minimizing wastage, increasing farmers’ income and creating employment opportunities particularly in rural sector.
  • The Mega Food Park Scheme is based on “Cluster” approach and envisages creation of state of art support infrastructure in a well-defined agri/ horticultural zone for setting up of modern food processing units along with well-established supply chain.
  • Mega food park typically consists of supply chain infrastructure including collection centers, primary processing centers, central processing centers, cold chain and around 30-35 fully developed plots for entrepreneurs to set up food processing units.
  • The Mega Food Park project is implemented by a Special Purpose Vehicle (SPV) which is a Body Corporate registered under the Companies Act. However, State Government, State Government entities and Cooperatives are not required to form a separate SPV for implementation of Mega Food Park project. Subject to fulfillment of the conditions of the Scheme Guidelines, the funds are released to the SPVs.
  • So far Nine Mega Food Parks, namely, Patanjali Food and Herbal Park, Haridwar, Srini Food Park, Chittoor, North East Mega Food Park, Nalbari, International Mega Food Park, Fazilka, Integrated Food Park,Tumkur, Jharkhand Mega Food Park, Ranchi, Indus Mega Food Park, Khargoan, Jangipur Bengal Mega Food Park, Murshidabad and MITS Mega Food Park Pvt Ltd, Rayagada are functional .

Integrated Cold Chains and Value Addition Infrastructure

  • The objective of the Scheme of Cold Chain, Value Addition and Preservation Infrastructure is to provide integrated cold chain and preservation infrastructure facilities, without any break, from the farm gate to the consumer.
  • It covers pre-cooling facilities at production sites, reefer vans, mobile cooling units as well as value addition centres which include infrastructural facilities like Processing/ Multi-line Processing/ Collection Centres, etc. for horticulture, organic produce, marine, dairy, meat and poultry etc.
  • The integrated cold chain project is set up by Partnership/ Proprietorship Firms, Companies, Corporations, Cooperatives, Self Help Groups (SHGs), Farmer Producer Organizations (FPOs), NGOs, Central/ State PSUs, etc. subject to fulfilment of eligibility conditions of scheme guidelines.

Schemes for Creation/Expansion of Food Processing/Processing Facilities

  • The main objective of the Scheme is creation of processing and preservation capacities and modernisation/ expansion of existing food processing units with a view to increasing the level of processing, value addition leading to reduction of wastage.
  • The setting up of new units and modernization/ expansion of existing units are covered under the scheme. The processing units undertake a wide range of processing activities depending on the processing sectors which results in value addition and/ or enhancing shelf life of the processed products.
  • Scheme is implemented through organizations such as Central & State PSUs/ Joint Ventures/ Farmer Producers Organization (FPOs)/ NGOs/ Cooperatives/ SHG’s/ Pvt. Ltd companies/ individuals proprietorship firms engaged in establishment/ upgradation/ modernization of food processing units. Proposals under the scheme are invited through Expression of Interest (EOI) and Project Management Agencies (PMA) are engaged by MOFPI to assist in the implementation of the scheme.

Agro Processing Clusters:

  • The scheme aims at development of modern infrastructure and common facilities to encourage group of entrepreneurs to set up food processing units based on cluster approach. Under the scheme, effective backward and forward linkages are created by linking groups of producers/ farmers to the processors and markets through well-equipped supply chain consisting of modern infrastructure for food processing closer to production areas and provision of integrated/ complete preservation infrastructure facilities from the farm gate to the consumer.
  • Each clusters have two basic components i.e. Basic Enabling Infrastructure (roads, water supply, power supply, drainage, ETP etc.), Core Infrastructure/ Common facilities (ware houses, cold storages, IQF, tetra pack, sorting, grading etc) and at least 5 food processing units with a minimum investment of Rs. 25 crore. The units are set up simultaneous along with creation of common infrastructure.
  • The Project Execution Agency (PEA) which is responsible for overall implementation of the projects undertakes various activities including formulation of the Detailed Project Report (DPR), procurement/ purchase of land, arranging finance, creating infrastructure, ensuring external infrastructure linkages for the project etc. PEA may sell/ lease plots in agro-processing cluster to other food processing units but the common facilities in the cluster cannot be sold or leased out.

Scheme for Creation of Backward and Forward Linkages

  • The objective of the scheme is to provide effective and seamless backward and forward integration for processed food industry by plugging the gaps in supply chain in terms of availability of raw material and linkages with the market. Under the scheme, financial assistance is provided for setting up of primary processing centers/ collection centers at farm gate and modern retail outlets at the front end along with connectivity through insulated/ refrigerated transport.
  • The Scheme is applicable to perishable horticulture and non-horticulture produce such as, fruits, vegetables, dairy products, meat, poultry, fish, Ready to Cook Food Products, Honey, Coconut, Spices, Mushroom, Retails Shops for Perishable Food Products etc.
  • The Scheme would enable linking of farmers to processors and the market for ensuring remunerative prices for agri produce.

Food Safety and Quality Assurance Infrastructure

  • Quality and Food Safety have become competitive edge in the global market for food products. For the all-around development of the food processing sector in the country, various aspect of Total Quality Management (TQM) such as quality control, quality system and quality assurance should operate in a horizontal fashion.
  • Apart from this, in the interest of consumer safety and public health, there is a need to ensure that the quality food products manufactured and sold in the market meet the stringent parameters prescribed by the food safety regulator.
  • Keeping in view the aforesaid objectives, government has been extending financial assistance under the scheme under the following components:
  • Setting up and upgradation of quality control/Food Testing Laboratories.
  • HACCP/ISO Standards/Food Safety/Quality Management System

National Mission on food processing:

  • Ministry of Food Processing Industries (MOFPI) implemented a new Centrally Sponsored Scheme (CSS) National Mission on Food Processing (NMFP) on 1st April 2012 for implementation through States/UTs.
  • The NMFP visualizes establishment of a National Mission as well as corresponding Missions in the State and District level. The major objectives of this schemes are as follows:
  1. To augment the capacity of food processors working to upscale their operations through capital infusion, technology transfer, skill up gradation and handholding support.
  2. To support established self-help groups working in food processing sector to facilitate them to achieve SME status.
  3. Capacity development and skill upgradation through institutional training to ensure sustainable employment opportunities to the people and also to reduce the gap in requirement and availability of skilled manpower in food processing sector.
  4. To raise the standards of food safety and hygiene to the globally accepted norms.
  5. To facilitate food processing industries to adopt HACCP and ISO certification norms
  6. To augment farm gate infrastructure, supply chain logistic, storage and processing capacity.
  7. To provide better support system to organized food processing sector

Major Programs / Schemes to be covered under NMFP during 2012-13 are;

Food Processing Industry


Himanshu Arora
Doctoral Scholar in Economics & Senior Research Fellow, CDS, Jawaharlal Nehru University
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