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By 2030, food processing industry seeks to leverage advantages India has
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Wednesday, 11 January, 2023, 08 : 00 AM [IST]
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Ashwani Maindola, New Delhi
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As India has entered into the third decade of 21st century, the food processing industry, which is one of the identified pillars of the Indian economy, stares at the future focusing on three key areas of improving processing & reducing wastages, improving global market share, and generating employment with supporting rural livelihood.
Industry body CII says that the packaged food segment has been reporting double-digit growth since 2018 with bakery products and dairy products accounting for a major share. The growth in the segment is also supported by a shift in consumer preference for branded packaged products, amid rising awareness of healthy living. The growth is further fuelled by increasing competition in the segment with new product launches and new entrants leading to increased choices for consumers and the strong growth is expected to continue.
By 2030, the processing industry seeks to leverage the advantages India has, backed by strong production numbers, steady growth and investments.
According to Confederation of Indian Industries (CII), the food processing sector has been growing and is expected to reach US$535 billion by 2025-26 and this could be achieved and taken forward with a focus on high value processing of horticulture, meat, poultry, dairy, and so on and thereby reducing levels of post-harvest wastages with a focus on processing higher value.
Secondly, CII’s vision paper for food processing says that there is a need to create ‘Brand India’ for value-added agro products with global recognition in terms of food safety, quality and sustainability parameters; and increase share of processed products in India’s export basket from the existing 24%.
However, Arpita Mukherjee, professor, ICRIER, says that the food processing sector faces multiple challenges starting from difficulties in maintaining uniform quality standards while sourcing from multiple small- and mid-sized farmers, to fragmented supply chain, huge wastages, low productivity, high logistics and input costs and high taxation.
“There is limited use of technology (like those related to product traceability) and support for access to domestic and international markets. Food processors need information on standards and requirements in export markets. The cost of laboratory testing and certification is high. Challenges also include access to finance, brand building and marketing and availability of skilled manpower. In some states, food processors face regulatory issues in directly sourcing from farmers,” said Prof. Mukherjee.
She added that apart from conducive policies, there is need for investment in infrastructure and technology.
She said, “Food processors, especially the MSME sector, need access to technology and access to finance at cheaper rates. The initiatives taken by the government in creating logistics infrastructure are likely to reduce the logistics costs, but more partnership is needed with the private sector to develop integrated supply chains and cold chain networks. The MSME sector needs training in use of technology, supply chain traceability and there is need for R&D and innovation to reduce wastages. There is a need for skill development in this sector and in this area there is scope for private-public partnership.”
Another area of concern was taxation.
Prof. Mukherjee says that the taxes have to be lower for processed food and to align it with UN Sustainable Development Goals there can be “nutrition-based taxes”. India has one of the highest GST rates on processed food products, which need a thorough review. There is a need for partnership and collaboration across stakeholders to develop sustainable food supply chains, as well.
Regarding interventions on the policy front, she said that there is a need for targeted schemes and policies to support MSME producers to scale up and adapt technology. There can be support for R&D and innovation focusing on nutritious products.
“Global multinationals, while establishing presence, focus on markets with ease of doing business and WTO compliant subsidies and incentives. There is a need for more partnership between Indian and foreign MSMEs and trade agreements can have a chapter to facilitate such collaborations. MSMEs need help in marketing and brand building and interventions can be in that direction. MSMEs also need knowledge about their export markets, which includes food safety standards, labelling and packing requirements and so on. Incentives may focus on such training,” said Prof. Mukherjee.
Meanwhile, CII has identified enablers towards achieving the vision for a strong processing industry sector domestically.
CII says that establishing efficient backward linkages is key to contribute to nation’s food security as well as proving healthy processed foods, secondly the processing industries should have access to credit facilities and there should be separate allocation of 10% to food processing within the 40% quota for priority sector lending and removal of the cap of Rs 100 crore per borrower for being classified as priority sector. Thirdly, CII suggested that ensuring cost-competitiveness will be another enabler for the processing sector as India’s cost of logistics is currently around 14% of GDP – higher than developed country exporters like the US (9.5%). To address the concern around the disproportionate cost of logistics vis-à-vis the cost of production, it was suggested that in the short-term - the Government of India should restore the Transport and Marketing Assistance (TMA).
For global market penetration, CII suggested that the Government should help in negotiating for tariff equalisation and non-tariff barriers in target export countries towards making Indian products price-competitive and thus help gain market share, help industry in creating ‘Brand India’ and undertake ‘Dedicated Marketing Initiatives’ such as tying up with global retail majors and popularise flavours such as Mango, Citrus towards adoption into food and non-food segments towards generating demand.
Besides, the need for human capital is strongly felt in the sector and along the lines of the PLI scheme, a specific scheme targeted towards boosting MSMEs should be implemented to provide the necessary catalyst for domestic market growth.
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