Food Processing Industry: Scope, Schemes & Challenges
November 8, 2017

In early November 2017, the Union Ministry of Food Processing Industries (MoFPI) successfully organized the World Food India 2017 in New Delhi. The 3-day long event showcased India’s potential to become the ‘World Food Factory’ to the participating countries and the leading multinational corporations like Pepsi Co, Nestle, Cargill, etc.

During the event, business worth USD 11.25 Billion with 50 MoUs has been transacted between the MoFPI and private sector. Significantly, various State governments also signed an additional USD 2.5 Billion worth MoUs at this event.

It is against this backdrop, it is pertinent to know the scope of the food processing industry, schemes and programmes announced by the government to develop the sector and the challenges ahead in realizing its full potential.

Scope of food processing industry in India

As per an estimate, India’s current food processing industry is estimated at USD 130 Billion and expected to attract huge domestic and foreign investment. Some of the key factors which are likely to increase the demand for processed food and consequently the food processing industry in the coming years are -

• India is a country of over 1.25 billion population. With rising middle class having a considerable disposable income, the domestic market offers 1.25 billion opportunities for the sector.
• India ranks no 1 in the world in the production of milk, ghee, ginger, bananas, guavas, papayas and mangoes. Further, India ranks no 2 in the world in the production of rice, wheat and several other vegetables & fruits. If the surplus production of cereals, fruits, vegetables, milk, fish, meat and poultry, etc are processed and marketed both inside and outside the country, there will be greater opportunities for the growth of the sector.
• Due to rapid urbanization, food habits are changing rapidly towards value-added foods. The change is accentuated by the fact that over 65% of India’s population is 35 or under, who are inclined to have processed food.
• Next to China, India is among the fastest growing economies in the world. The recent quantum jump in the ease of doing business ranking of the World Bank (from 130 to 100) indicates the conducive business climate in the country and expected to attract foreign investment into this sector.
• As per an estimate, around 40 percent of total food production is wasted due to the inadequate facilities for transportation, storage, processing and marketing. If these deficiencies are addressed, there is a huge scope for the development of the sector.
To take advantage of the above mentioned factors, the government has initiated the following measures for the development of the food processing sector.

To take advantage of the above mentioned factors, the government has initiated the following measures for the development of the food processing sector.

• Pradhan Mantri Kisan Sampada Yojana (PMKSY): In August 2017, the CCEA gave its nod for the PMKSY. It is an umbrella scheme that incorporates various ongoing schemes like Mega Food Parks, Integrated Cold Chain, Value Addition Infrastructure, Food Safety and Quality Assurance Infrastructure, Infrastructure for Agro-processing Clusters, Creation of Backward and Forward Linkages and Creation and Expansion of Food Processing and Preservation Capacities.
• Mega Food Parks Scheme: It aims at providing a mechanism to link agricultural production to the market by bringing together farmers, processors and retailers to maximize value addition, minimizing wastage, increasing farmers’ income and creating employment opportunities particularly in the rural sector. A Mega Food Park entails an area of a minimum of 50 acres and works in a cluster based approach based on a hub and spokes model.
• Scheme of Cold Chain, Value Addition and Preservation Infrastructure: The objective of the scheme 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.
• Modernisation of Abattoirs scheme: The main objective of the Scheme is a creation of processing and preservation capacities and modernization and expansion of existing food processing units with a view to increasing the level of processing, value addition leading to reduction of wastage.
• Make In India: As part of the Make In India campaign, food processing sector was identified as one of the 25 focus areas. Accordingly, the policy ecosystem has been revamped to attract financial, technological and human resources into the sector. Allowing 100% FDI through automatic route into this sector is also a significant step in this direction.
• Food Processing Fund: A special fund in the NABARD worth INR 2,000 crore, designated as the Food Processing Fund, was set up in the FY 2014-15 for providing affordable credit to food processing units in Mega & Designated Food Parks.

Despite the above mentioned schemes and measures, the food processing sector has been facing the following challenges.

• Lack of adequate infrastructure: Though the government has initiated various measures for the development of the food processing industry related infrastructure, they are not sufficient to meet the growing needs of the sector. Lack of cold storages facilities and road and rail connectivity to hinterlands is still a major concern.
• Credit facilities: Despite the creation of the  Food Processing Fund over a couple of years ago, the sector has been facing a resource crunch. Though the foreign investment has picked up now, it is still doesn’t match the requirements of the industry.
• Lack of comprehensive policy: The food processing industry is a sunrise sector. Lack of a comprehensive policy addressing the various needs of the food processing industry is obstructing its growth. The MoFPI should announce the National Food Processing Policy at the earliest to fill the policy vacuum.

Conclusion

As per an estimate, India’s food consumption is currently valued at USD 370 Billion and is expected to reach USD 1 trillion by 2025. The development of food processing industry is necessary due to the rise in the disposable income in the hands of middle class, changing food habits and rapid urbanization, the changing dietary preferences towards the processed and packaged food. Besides, a well-developed food processing sector with higher level of processing helps in the reduction of wastage, improves value addition, promotes crop diversification, ensures a better return to the farmers, promotes employment as well as increase export earnings. This sector is also capable of addressing critical issues of food security, food inflation and providing wholesome, nutritious food to the masses.