Food Processing: Potential Driver of Agri-Business
2nd Sep, 2020
Food processing in India has treaded a long path of transformation, from merely a household activity to a prominent industrial sector impacting national economy, especially the rural one. Food processing units/industries promote industrial growth in rural areas, create livelihood/ employment opportunities, check rural-urban migration and ultimately improve rural economy for greater socio-economic benefits.
- Significant rise in demand of agricultural produce for processing ensures better price to farmers, even during glut season.
- Most importantly, this sector links unorganised farming community with formal industrial sector to advance rural economy.
- The Ministry of Food Processing Industries is striving to create and ensure a conducive environment for healthy growth of the food processing industry.
- During the last five years ending 2017- 18, food processing sector has been growing at an average annual growth rate of around 8.19 percent as compared to around 3.45 percent in agriculture at 2011-12 prices.
- Despite its low capital intensity, food processing sector has the largest number of factories and engages largest number of persons as compared to other industrial sectors in the country.
Potential and Strategies
- In addition to rich and diversified agricultural the country due to its technological resources, strength can provide a perfect blend of traditional and hygienic foods, processed and packaged according to global standards with state-of-art technology.
- On domestic front, as consumers are becoming more health conscious, the demand for nutritious food is growing proportionately.
- Rising number of working women in urban areasand growing trend of nuclear families are also pushing demand for ready-to-eat and frozen food.
- Growth of organised retail and penetration of e-commerce companies have further helped increase in demand of processed food products.
- The Ministry of Food Processing Industries has formulated strategies andimplemented initiatives to address unique challenges of food processing.
- As a long term strategy, the Government is providing financial support and declared several fiscal incentives for creation of common supply chain infrastructure, such as expansion of processing facilities, cold chain, dry storage, packaging, logistics, etc.
- Ministry is strategically promoting processing clusters and creating strong backward and forward linkages from farm gate to retail outlets for the benefit of farmers and processors equally.
- Under fiscal incentives, provisions of income tax and corporate tax have been rationalized in favour of foodprocessing industries.
- Profit linked tax holiday and investment linked deductions have been allowed in this sector.
- To attract investment, 100 percent Foreign Direct Investment (FDI) is permitted under the automatic route.
- Additionally, government has allowed 100 percent FDI in e-commerce or e-retailing segment of this sector through government approval route.
- To maintain an easy and accessible credit flow, loan to food and agro-based processing units and cold chain has been classified under agricultural activities for Priority Sector Lending.
- A special fund of Rs. 2,000 crore has been set up in NABARD to provide credit at affordable rates.
Making Local Brand Go Global—Formalisation of Micro Food Processing Enterprises
- In alignment with Prime Minister's clarion call to be M 'vocal for local', Ministry of Food Processing Industries has recently launched a scheme for formalisation of micro food processing enterprises.
- During first year of implementation,the total expenditure will be borne by Central government, but in successive years centre and states will share the expenditure in 60:40 ratio.
- Under the scheme, capacity building of entrepreneurs will be undertaken through technical knowledge, skill training and hand holding support services. Credit flow to micro food processing industries will be strengthened along with support for their integration with organised supply chain by providing brand and marketing facilitation.
- As per guidelines, the scheme will adopt a cluster approach to reap the benefit of scale in terms of procurement of inputs, availing common services and marketing of products. 'One district, one product' approach initiated in some states will be a guiding force for value chain development and alignment of support infrastructure.
- The scheme provides for credit linked grant to enterprises with provision of seed capital to SHGs for meeting working expenses and purchase of small tools.
- There is need to create on-farm cooling and grading arrangements with cold-chain infrastructure to increase income of farmers.
- With a view to attract and augment private investment for building desired infrastructure, Government launched an integrated umbrella scheme- Pradhan Mantri Kisan SampadaYojana in 2017.
- The scheme is providing financial support to create and develop infrastructure for mega food parks, integrated cold chain and value addition, food processing and preservation capacities and agro-processing clusters.
- The Ministry of Food Processing Industries has sanctioned 39 mega food parks and 298 cold chain projects throughout the country for seamless transfer of perishables from production to consumption areas.
- The scheme has created effective backward and forward linkages for perishable agri-horti produce by setting up primary processing centers/collection centers at farm gate, while distribution hub and retail outlets at the front end.
- In the general budget (2019-20), the Finance Minister announced, "Indian Railways will set up 'Kisan Rail’ through PPP arrangements. There shall be refrigerated coaches in express and freight trains to build a seamless national cold supply chain for perishables, inclusive of milk and meat".
- To help improve value realisation especially in North-East and tribal districts 'KrishiUdaan' will be launched by the Ministry of Civil Aviation.
- Government of India created a specific 'Dairy Processing and Infrastructure Development Fund' under NABARD with the objective to modernise and expand milk processing facilities across India.
Entrepreneurship and Engagements
- Food processing sector, due to its close linkage with farms and farmers, provides a huge opportunity for entrepreneurship in rural areas.
- Prime Minister Employment Generation Programme, ASPIRE (Scheme for promoting innovation, rural industry and entrepreneurship) and SFURTI (Scheme for regeneration of traditional industries) are some of the specific schemes to address capital needs of agri-entrepreneurs.
- Food processing sector has been identified as one of the key and priority sector of the Government's ambitious 'Make in India' campaign.
- Programs such as Start-up India, Stand-up India and Skill India are other major initiatives that are backing development of food processing sector, in their own domain.
- Green shoots are emerging fast in food processing sector due to promotional activities and initiatives by Government of India. However, we need to accelerate implementation of supportive schemes at ground level.
- Food processing has the potential to act as an engine of growth for rural economy and to bring prosperity in rural areas.