Hyderabad: Food processing has become an integral part of the food supply chain in the global economy, and India has also seen growth in this sector in the last few years.
The sector contributes around 11% of agricultural value-added and 9% of manufacturing value-added products.
According to the ministry of food processing industries annual report 2018-19, the sector employs 12.8% of the workforce in the organised sector and 13.7% of the workforce in the unorganised sector.
Despite being one of the largest producers of agricultural and food products in the world, India ranks fairly low in the global food processing value chains. In fact, as with the rest of India (most other sectors), this sector is also largely unorganised and informal.
Classification of Food Processing
Food Processing can be further delineated into primary and secondary processing. Rice, sugar, edible oil and flour mills are examples of primary processing. Secondary processing includes the processing of fruits and vegetables, dairy, bakery, chocolates and other items.
Mostly, processing in India is confined to primary processing, which has lower value-addition compared to secondary processing. There is a need to move up the value chain in processed food products to boost farmer incomes. For instance, horticulture products, such as fruits and vegetables, carry the potential for higher value-addition when compared to cereal crops.
Importance of Food Processing
Food processing provides an opportunity to utilise excess production efficiently. Not just from a growth perspective, food processing is also important from the point of reducing food waste.
In fact, the United Nations estimates that 40% of production is wasted. Similarly, the NITI Aayog cited a study that estimated annual post-harvest losses of close to Rs 90,000 crore.
With greater thrust on proper sorting and grading close to the farm gate, this wastage could also be reduced, leading to better price realisation for farmers.
Concept of 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, especially in rural areas.
The Mega Food Park Scheme is based on “Cluster” approach and envisages the creation of a state-of-the-art infrastructure in a well-defined agri/horticultural zone for setting up of modern food processing units in the industrial plots provided in the park with well-established supply chain.
A Mega food park typically consists of supply chain infrastructure including collection centers, primary processing centers, central processing centers, cold chain and around 25-30 fully developed plots for entrepreneurs to set up food processing units.
Implementation of the Mega Food Park Scheme
Implementation of the Mega Food Park Scheme is being done through the special purpose vehicle (SPV) mechanism in which government agencies, financial institutions/banks, organised retailers, food processors, service providers, producers, farmer organisations are the equity holders.
The Scheme is under the purview of the Ministry of Food Processing Industries. Each food park is expected to have around 30-35 food processing units, an aggregate investment of Rs 250 crore, expected annual turnover of about Rs 450-500 crore and generation of direct and indirect employment for around 30,000 persons.
The scheme envisages one-time capital grant of 50 per cent of the project cost excluding land cost subject to a maximum of Rs 50 crore in general areas, and 75 per cent of the project cost, excluding land cost too, subject to a ceiling of Rs 50 crore in difficult and hilly areas, including the North -East and J&K.
Though the scheme was launched in 2008, till 2014 only two mega food parks were made operational. As per the official data, the Union Government has funded 42 mega food parks and made 17 mega food parks operational.
The Ministry of Food Processing is also implementing a Central Sector Scheme of Cold Chain, Value Addition and Preservation Infrastructure under which assistance is provided to set up integrated cold chain infrastructure for arresting post-harvest losses of horticulture & non-horticulture produce subject to a maximum grant-in- aid of Rs 10 crore per project. The government has decided to set up 500 cold chains across the country to boost food processing sector, which grew by more than 7 per cent last year. A total of 299 integrated cold chain (ICC) projects were sanctioned by the government till last year. Out of this, 91 are operational.
Measures to Boost Food Processing Sector
Although building infrastructure is a requisite for enhancing the processing capacity, what is also of immense importance is to have enough skills to be able to use that capacity.
Backward linkages to farmers need to be made more robust. Contract farming is an attractive avenue in this regard.
According to the Model Contract Farming Act, 2018, the contract will specify the quantity, quality and price of produce being supplied. This would shield farmers from price volatility, subject to quality commitments. The National Skill Development Corporation (NSDC) estimated the need to skill 17.8 million persons in the food processing industry by 2022.
To give a boost to the food processing sector and Mega Food Parks, government of India has allowed 100 per cent FDI under the automatic route in Food processing industries.
Also 100 per cent FDI is allowed through government approval route for trading, including through e-commerce in respect of food products manufactured or produced in India.
By 2024, it is expected that Food Processing industry will potentially attract USD 33 billion investments and generate employment for 9 million people.
Export Potential of Processed Food
At present, India’s agricultural exports predominantly consist of raw materials, which are then processed in other countries, again indicating the space to move up the value chain. Despite India being one of the largest producers of agricultural commodities in the world, share of agricultural exports in the GDP is fairly low in the country. The same proportion is around 4% for Brazil, 7% for Argentina, 9% for Thailand, while for India it is just 2%. India exported processed food worth Rs. 31,111.90 crore in 2018-19.
| Products | Share of Products |
| Mango Pulp | Rs. 657.67 Crores/ 93.97 USD Millions |
| Processed Vegetables | Rs. 2473.99 Crores/ 354.75 USD Millions |
| Cucumber and Gherkins | Rs. 1436.08 Crores/ 205.84 USD Millions |
| Processed Fruits, Juices & Nuts | Rs. 2804.97 Crores/ 402.52 USD Millions |
| Pulses | Rs. 1680.18 Crores/ 242.66 USD Millions |
| Groundnuts | Rs. 3298.33 Crores/ 473.81 USD Millions |
| Guar gum | Rs. 4707.05 Crores/ 676.47 USD Millions |
| Jaggery & Confectionary | Rs. 1606.32 Crores/ 230.14 USD Millions |
| Cocoa Products | Rs. 1350.86 Crores/ 193.26 USD Millions |
| Cereal Preparations | Rs. 3859.37 Crores/ 553.17 USD Millions |
| Alcoholic Beverages | Rs. 2103.97 Crores/ 301.71 USD Millions |
| Miscellaneous Preparations | Rs. 4072.98 Crores/ 583.33 USD Millions |
| Milled Products | Rs. 1060.13 Crores/ 151.85 USD Millions |
Way Forward
Every year we come across the stories in newspapers that farmers are throwing their produce on road in frustration as they are not getting even the cartage charges for their agri produce like tomatoes. Department of Agriculture of every state should take the initiatives in guiding the farmers to produce various items instead of same item by everyone.
When the same item is flooding the market, prices are falling and farmers are being exploited by the agents. In many situations, we don’t have the capacity to preserve and process the fresh farm produce to be able to meet the demand. Develop contract farming linkages between processors and farmers.
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