From plough to plate -an overview of Indian food processing sector

Introduction: 

It is quite common that a certain degree of value addition takes place in every farm product from

cultivation to consumption (plough to plate). In the value chain, value addition takes place through sorting,grading,packaging,brandingetc.,whichmakesthe \     

             Dr. D.L.Maheswar, Vice Chancellor UHS BGK

product attractive, more usable, gives choice and awareness to customers and also enhances shelf life of products. Apart from this service rendered by various intermediaries to pass on product from the primary producer to the customer is also valuable. Most of the agricultural products are not consumable in their original form, for which they are processed into different value added products. The left over part of crop product is further processed into other useful products such as rice husk is processed to get some useful product such as rice bran oil, cattle feed, Sugarcane bagasse is
used for power generation. Therefore food processing not merely adds value to the farm products, but also increases their utility.

Overview of food industry in India: 

Indian Food Processing Industry is estimated to be more than $135 billion industry which is growing at about 8%  annually. Indian food is known worldwide for its unique taste and aroma. The regional and cultural diversity of India is perfectly reflected in the food types. Every state has  something unique to offer in food. But these unique foods have not been able to make inroads in other countries the way Mc Donald’s, Domino’s, KFC  etc., have done in India. This is mainly because of lack of

creativeness, innovation, branding and most importantly shallow pockets of Indian manufacturers. The country is  known for producing pulses, mangoes, banana, milk, ginger. It is the 2nd largest producer of rice, wheat, potato, garlic, cashew nut, groundnut, dry onion, green  peas, pumpkin, gourds, cauliflowers, sugarcane, and  tea in the world. Around 17 % of the global total of vegetables and 14 % in the case of fruits, about 40 % of  the world’s mangoes and 30 % of the world’s bananas

and papayas are produced in India. Though India is the net exporter of agricultural products but value addition of product remains quite low. Indian food industry ha snot moved much ahead in value chain. The post harvest wastage problem is prominent in India. In case of fruits and vegetables it is about 30-40%. This wastage can be attributed to factors such as non-availability of facilities

for sorting, grading, packaging, storage, transportation, cold chain and low level of processing of agricultural produce. The food processing only can halve this loss which can bring greater benefits to the farmers and the consumers. The food processing industry is employment intensive industry; it can provide solution to the unemployment problem. Currently, only 3% of employment is in this industry while in developed countries it encompasses about 14 per cent of the population. Again, much of the employment will be created into rural India. This can also provide remedy to the problem of distress migration of rural people. India is strategically located and its proximity to food-importing nations

(especially Middle East and Africa) makes India favorable for the export of processed foods. The world economies are integrating even rapidly year by year and we have no option but to remain competitive. India’s food processing sector ranks 5th in the world in exports, production and consumption.

Infrastructure Needs:

The movement of any farm product from primary producer to consumer is called as supply chain which involves both time and costs. Adequate storage facilities, direct farming, contract farming and

negotiable warehouse receipt system are mechanisms to streamline, strengthen and shorten the supply chain. Apart from these issues other major interventions and investments are needed in infrastructure sector, which is the backbone of food processing industry. India is biggest producer of numerous horticultural crops especially fruits and vegetables most of which are perishable in nature and have very short shelf life thus leading to high wastage. Their shelf life can be increased by adequate investment in infrastructure such as cold storage, reefer vans, irradiation units etc.

Storage facilities for farm products:

The Food Corporation of India deals mainly with food grains. The distribution of these facilities is not uniform throughout the country. About 67 per cent of the storage capacity is seen in the six major procuring states namely, Punjab, Haryana, Uttar Pradesh, Andhra Pradesh, Rajasthan and Uttrakhand. Under the National Storage Policy, the bulk grain handling facilities are now being created on the Built Own Operate (BOO) basis at identified locations in the country. There is a severe shortage of cold storage facilities for storing various horticulture products. These facilities are being created

with assistance from National Horticultural Board (NHB), National Horticultural Mission (NHM), Agricultural and Processed Food Products Export Development Authority (APEDA), Ministry of Food Processing Industries and Department of Animal Husbandry & Fisheries. Majority of the cold stores in India are dedicated to potatoes. There are some that provide storages for chilies, dry fruits, spices, vegetables etc. Cold storage for meat, fish, milk and milk products and for other commodities such as spices account for only 1 percent of the total cold storage capacity.

Value Addition & Integration:

Suppliers to a producers or trader lie on upstream side, where as customers lies on downstream side. This will change according person under observation. For a farmer, supplier of seeds and fertilizers lie on upstream, while cold store owners, farm contractors, mill owners, traders in agro output lies on downstream. When a particular person in supply chain assume role of two levels it is said integration. If PepsiCo instead of procuring potatoes (for chips) from farmers get potatoes captively from its own lands, it will be called backward integration. On other hand if farmer puts up a processing plant for chips, or a cold storage, this will be called forward integration. Direct farming is also a forward integration, where farmer assumes role which was played by commission agent in APMC. Forward and backward integration, also called vertical integration, is common in any business and it saves the costs associated with supply chain. Business which pursues integration strategy, earns a competitive edge. In farming and food processing, vertical integration can work wonders. For this farmer needs financial and technical support. Agriculture in India already is over employed. This with seasonal nature of majority of farming crops gives farmers a compelling reason to get into food processing business.

Institutions in food sector:

• Ministry of Food Processing Industries (MOFPI)

• Agricultural &Processed Food Products Export

Development Authority (APEDA)

• Department of Animal Husbandry, Draying &

Fisheries

• National Horticultural Board (NHB)

Foreign Direct Investment (FDI):

Foreign Direct investment to the tune of 100% is allowed in the automatic route for most food products except for items reserved for micro and small enterprises. Again 100% FDI is permitted for alcoholic beverages, with the requirement of an industrial license. For pickles, mustard oil, groundnut oil and bread – items reserved for the micro small and medium sector, 24% foreign direct investment is allowed under the automatic route, with the requirement of prior approval from the Foreign Investment Promotion Board for FDI amounting to more than 24%.

Vision-2015:

Vision 2015 which was adopted in 2010 provides for enhancing the level of processing of perishable to 20%, enhancing value addition from 20% to 35% and increasing India’s share in global food trade from 1.5% to 3%. Vision 2015 provides for establishment of 30 Mega Food Parks in public-private partnership, so far 21 such projects have been approved and approval of 4 projects is pending. ‘Tumkur Integrated Food Park’ in Karnataka is one among them. This is the first integrated food park

which has been developed with partnership from the Ministry of Food Processing Industries, and the State government.

Scheme on Mega Food Parks:

According to Vision-2015, Mega Food Parks, are to be based on ‘cluster approach’. We have are regional horticultural crops, which are dominantly grown in a particular area. In these areas there is generally cluster of similar farmers, factories, and traders etc. who dominantly deal in same agro product. Scheme aims to strengthen such clusters by providing world class infrastructure facilities. This will result in smoothening of supply chain – ‘Farm to Market’. The Hub and spoke model is adopted, as per which there will be a strong central processing unit, which will cater to the needs of

surrounding areas. In surrounding areas, there will be smaller, ‘primary processing centers’ which will be fed from numerous ‘collection centers’. These collection centers will have direct interface with the farmer and farmer groups.

Special Purpose Vehicle(SPV):

SPV shall be a body corporate (company) registered under companies act. It mobilizes funds, expertise and experience of more than one organization towards a common goal. A company will be formed by pooling funds of interested parties and this company will be called SPV. SPV is responsible for ‘execution, ownership and management’ of Mega Food Parks.

NABARD’s Special Fund:

Government of India instituted a Special Fund in National Bank for Agriculture and Rural Development (NABARD) with a corpus of Rs. 2000 Crore during 2014-15 for providing direct term loans to establish infrastructure in the Mega Food Parks as also to the individual processing

units to be set up in the designated Food Parks, at affordable rate of interest of around 10% p.a.

Scheme of Cold Chain, Value Addition and Preservation

Infrastructure:

The scheme aims at facilitating the establishment of cold chain facility for agricultural, horticultural, dairy, fish & marine, poultry & meat products by establishing linkage from farm gate to the consumer, end to end, to reduce losses through efficient storage, transportation and minimal processing Cold Chain for Non-Horticulture Products is also being funded under National Mission on

Food Processing which provides Capital subsidy of 35% of cost of project or Interest subvention by 6% (max 5 crore). Also subsidy of 50% is available on investment in ‘reefer vehicles’ (max.50 lakhs). NABARD also provides concessional finance for construction of warehouses, godowns, silos and cold storage units.

Small scale and unorganized sector:

The small scale and unorganized sector constitutes about 70% of the food processing sector. Employment intensity is significantly higher in this sector as compared to the organized sector for the same level of investment. This sector suffers from low efficiency due to reasons such as lack of access to credit, technologies, managerial knowledge, efficient tools, marketing network and intense competition from large scale players. Cooperative sector experiments can also bring small scale sectors into organized form as was seen in success of AMUL.

Food Safety & Standards Act:

Framing of Regulations to ‘lay down the Standards and guidelines’ for articles of food and specifying ‘appropriate system of enforcing’ various standards so laid. Laying down mechanisms and guidelines for accreditation of certification bodies engaged in certification of food safety management system for food businesses. Laying down procedure and guidelines for accreditation of laboratories and notification of the accredited laboratories. To Collect and collate data regarding food consumption, incidence and prevalence of biological risk, contaminants in food, residues of various, and contaminants in foods products, identification of emerging risks and introduction of rapid alert system. Creating an information network across the country so that the public, consumers, Panchayats etc. receive rapid, reliable and objective information about food safety and issues of concern. Provide training program for persons who are involved or intend to get involved in food businesses. Contribute to the development of international technical standards for food, sanitary and

phyto-sanitary standards apart from creating general awareness about food safety and food standards.

CODEX:

Codex Alimentarius Commission is an international agency on food standards in which almost all members of WHO, and Food and Agriculture Organization of United Nations (FAO) are members. All members agree to adopt standards on food established by CODEX. There is also reference, endorsing use of CODEX standards, in WTO’s SPS agreement. Any member nation willing to set

standards over and above CODEX need to give scientific justification and explanation for that matter.

Conclusions & Future of food processing industry: The food processing industry has a promising future, provided adequate support is extended by the government. Food is the biggest expense for an urban Indian household. About 38 per cent of the total consumption expenditure of households is generally spent on food. This share is declining consistently. As mentioned, food processing has numerous advantages which are specific to Indian context. It has capacity to lift millions out of under-nutrition. Government has challenge to develop this industry in a way which takes care of small scale industry along with attracting big ticket domestic and foreign investments.