By Kunal Bose
India is forever fighting to protect a fair amount of its production of fruits and vegetables from perishing. Containing wastage, from production centres to final consumers, has concentrated on handling logistics better. Now, in an attempt to further cut the loss, the Centre has inducted a technology tool developed by e-commerce major Amazon, which, aided by wi-fi-enabled IoT (internet of things) cameras, identifies inherent defects in fresh produce.
India being a big producer of fruits and vegetables, with production not in close proximity to major markets, containing damage to the minimum, calls for a robust food processing industry. In its mission to raise production and diversify agriculture, while at the same time raising incomes of growers, the Centre has been adding value to farm produce by rapidly expanding food processing units across the country.
Thankfully, all the states rich in fruits, vegetables and dairy products are on the same page with the Centre. Other measures linked to the mission include popularisation of the cultivation of millets and making them part of global food security. These steps have helped in raising farmer incomes along with the proven health benefits.
Over the years, India’s production of cereals – such as rice, wheat and pulses – has risen along with that of horticulture and dairy products, poultry items and fish and meat, making India the largest or the second largest producer of many of these items. And with government patronage, millets’ output particularly has risen considerably; their acceptability as a principal diet is also increasing.
The importance of building food processing capacity in tandem with rise in production is principally underlined by the following reasons: First, as processed food products continue witnessing growing demand both in the domestic and foreign markets, it triggers crop diversification and incomes of farmers rise in consequence.
Second, post-harvest food wastage, particularly of seasonal and perishable items such as fruits and vegetables, is a national concern as also income destroyer for farmers. It is, therefore, essential to create sustainable supply chains, seamlessly connecting farmers with processing and marketing outfits.
Third, by building robust backward and forward linkages from farm gates through food processing units to local retail outlets and exports, this fast rising sector has huge job creation potential in a country such as India with its different skill sets. In fact, the sector helps discourage migration from rural crop growing centres to urban areas in search of jobs.
Fourth, processed foods lead to commercialization of agriculture, freeing farmers from price manipulation and exploitation by ‘adathiyars’ (brokers).
With all these, not only is the freshness of farm produce preserved through cold chain to processing factories, the value-added to food products also increases the shelf-life with food quality not compromised. All in all, a boon for consumers of all income groups.
The growth of the food processing industry, helped by liberal policies and periodic policy fine-tuning, stands on two pedestals – domestic market and exports. The latter to, primarily, Europe, the Middle-East, and South-East and Far-Eastern countries. According to the Agricultural and Processed Products Development Authority (APEDA), India’s exports of processed food was an impressive Rs 59,580.72 crore ($7.409 billion).
In processed food exports, major contributions included processed vegetables, prepared and preserved cucumber and gherkins, processed fruits, juices and nuts, jaggery and confectionery items, cereal preparations, guargum, alcoholic beverages and prepared animal feeder.
At the same time, the Ministry of Food Processing Industries says in its 2022-23 annual report: “During the five years ended 2020-21, the food processing sector had been growing at an annual average rate of 8.38 percent as compared to around 4.87 percent in agriculture and allied sectors (at 2011-12 prices). The Food Processing sector has emerged as an important segment of the Indian economy in terms of its contributions to the GDP, employment and investment. The sector constituted as much as 10.54 percent and 11.57 percent of GVA and manufacturing and agriculture sector, respectively in 2020-21 (at 2020-21 prices.)”
APEDA says a “big retail revolution” is awaiting India and this holds great promise for processed food products in the local market. It opines that food and grocery retail, which figures among the largest sectors in the global economy, is also going through a transition phase in India. Compared to around 75 percent of food sales in developed countries occurring through superstores, India, according to APEDA “is the least saturated… with small organized retail” still the dominant phenomenon. It further said food and grocery retail was expected to grow at a CAGR (compound annual growth rate) of 3 percent from 2022 to 2030.
APEDA’s prescription for rapid growth of the sector and more domestic and foreign investment flowing into it is to rapidly improve cost competitiveness and efficiency of marketing channels. Being fully aware of the sector’s potential, particularly for the farming community, the government continues to initiate measures for strengthening the sector and encouraging both domestic and foreign investment.
In fact, New Delhi has allowed 100 percent foreign direct investment in food processing industries and also in trading, including ecommerce in respect of food products produced locally. The country received FDI of Rs 7,194.13crore ($895.34 million) in 2022-23, according to APEDA. In a boost to the industry, the last few years has seen the country’s big retailers owning superstores and smaller sized other outlets have an increasingly big presence in the food processing industry mostly using factories owned by third parties (or merchant producers) but providing them with technologies and subjecting their products to strict quality checking.
Fully exempting food processing from GST or putting raw and processed food products in the 5 percent bracket, numbering well over 70 per of all items of the sector, have given a boost to the sector. In order to incentivize investment, the government has classified loans to food and agro-based processing units and also cold chain as priority sector lending. Further growth will require strengthening infrastructure, particularly extending the cold chain across the country, widening of R&D base and creating adequate numbers of food testing laboratories. In the building of infrastructure, investment has to come mostly from the government.
A welcome development was the introduction of production linked incentive (PLI) scheme for the food processing industry in March 2021, with an outlay of Rs 10,900 crore, to be implemented between 2021-22 and 2026-27. The scheme has three components: incentivising manufacturing in four food product segments (ready to cook/ready to eat foods; processed fruits & vegetables; marine products; and mozzarella cheese), promoting innovative/organic products of SMEs, and incentivising branding and marketing abroad of foods of Indian brands. Additionally, the PLI scheme for promoting millet-based products was launched in 2022-23 with an outlay of Rs800 crore. PLI beneficiaries have made investments of Rs 7,126 crore with sales of Rs 49,825 crore till September 2023, according to official sources. (IPA Service)
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