FNB News - Food industry in North India – Synergies and challenges

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Food industry in North India – Synergies and challenges

Monday, 03 January, 2022, 08 : 00 AM [IST]

Venkatesh Ganapathy

Introduction
India ranks second only to China in terms of food production. India is the leading producer of milk and also leads in the production of varieties of fruits such as mangoes, papayas, bananas and guavas. The food and grocery market is contributing 70% of retail sales. This explains the primary reason for the growth of India’s food processing industry in the last few years. A Confederation of Indian Industry (CII) estimate claims that the sector may generate employment of nine million people-days and may attract US$33 billion investment in the next 10 years.

The linkages between industry and agriculture in India are characterised by synergy leading to the growth of food industry in North India.
The food processing sector includes the processing of fruits and vegetables, dairy, meat and poultry, food grains, fisheries and consumer foods (beverages, packaged food and water). The sector is fragmented into unorganised and organised sectors. The organised sector is small and consists of flour mills and processing units of fruits and vegetables, fish, meat, poultry and dairy. The unorganised sector comprises flour mills, rice mills, pulse mills, oilseed mills, traditional food units, bakeries and processing units of spices, fruits and vegetables.

Increase in disposable incomes in North India has led to growing preference for processed foods. The change in food habits of working class is another development. Availability of raw-materials like fruits and vegetables in abundance in North India incentivises the growth of food industry. Markets for products related to meat, poultry, fisheries, milk products, beverages and grain processing are still underpenetrated and thus these markets offer immense scope for growth.

Commodity based food processing activities include primary processing of commodities like wheat, rice, sugar and spices. Value added food processing includes secondary and tertiary processing like that which is done for bakery items, milk products, honey and ready-to-eat/ready-to-cook products. The share of commodity based processing is 66% of the overall food processing market while value-added processing is growing at a CAGR of 10%. Dairy sector, health foods, immunity boosting foods, organic foods, beverages and fruit juices, ready to eat products, convenience foods are the food products that are occupying top of the consumer’s mind share in the North Indian market.

Challenges faced by the food industry in North India
    • Linkages between food processing industry and market are weak
    • Supply Chain is fragmented
    • Distribution costs have increased
    • Quality focus has dwindled
    • High wastage of produce at the farm level
    • Inadequate storage and cold chain facilities

Smaller firms seldom have direct access to the markets. This makes them more vulnerable and financially deprived. Rather than focusing on needs of the market, food processing in North India is still production driven. This can lead to gaps in supply.

Sr No.	State	Remarks
1	Jammu and Kashmir	Cultivation of horticultural crops,involving sub-tropical and temperate fruits such as guava, berry, litchi, mangoand pear, peach, apricot, cherry, plum, apple, almond, and walnut respectively. 3 food parks, 10 industrial estate/complex and 2 agro-export zones in the state, 6 cold chain units, 1.1 million tons installed cold storage capacity.
2	Uttar Pradesh	Highest production of sugarcane (35% of total) – production of sugar; development of agri-business and agro-processing sector in country. Cold storage capacity of 13.8 million tons; 29 cold chain units; Production of food grains, sugarcane, potato, livestock, milk, wheat, lentil and vegetables.
3	Uttarakhand	510 food processing units, annual investment of Rs 1000 crore, leading fruit producer of India (pear, peach, plum); apple, walnut; Availability of infrastructure & labour pool: 2 mega food parks; 4 industrial clusters, 4 agri-export zones and 512 registered food processing units.
4	Himachal Pradesh	Off season vegetables like capsicum, tomato, peas, cabbage, cucumber and fruits like Kiwi. Apples, almonds, Rice, Maize, Ginger, Cardamom, Clove, Garlic, Ajwain. 12 cold chain units; industrial areas and food parks.
5	Punjab	Major producer of wheat and rice; litchi, guava, mandarin orange, potato and tomato. Well-developed infrastructure for food processing sector, development of warehouse storage capacity, Processing of milk (80% unorganised, 20% organised): Multi product mega food park; 16 cold chain units
6	Haryana	Egg production, highest fish productivity per hectare per year; Rice, wheat, vegetables and fruits, exotic vegetables, herbal and medicinal plants; Green peas and mushrooms; 2600 registered food processing units involved in processing of cereal grains,vegetables and fruits.240-250 cold storages with a total capacity of approximately 4 Lakh MT, 100 registered rice producing mills and three labs recognized by APEDA for food processing.

The way forward

Food processing sector of the country has the ability to attract an investment of around US$33 billion in the next decade. The Government of India’s efforts to boost growth in the food processing sector (reforms like100% FDI in marketing of food products) and incentives at central and state government level will benefit the food industry.

There is immense potential for growth in the food processing sector in the North Indian states like Jammu and Kashmir, Haryana, Punjab, Himachal Pradesh, Uttar Pradesh,and Uttarakhand. Mega food parks and cold chain facilities are being established in North India. FMCG manufacturers have established processing facilities and these co-exist along with many small and medium sized food processing units.Newer methods of food processing used advanced technology need to be employed. Food industry in North India must leverage available technologies to boost productivity and increase operational efficiency.

There is increased clamor among consumers for food products with higher nutritional value. Consumers are becoming health conscious spurring the need for innovation. There is shift in consumer preferences for instant or ready to eat foods and frozen foods that are easy to cook in a shorter time frame.Consciousness of need to maintain good health has increased the demand for food that is qualitative and nutritious. Growth in food processing industry can lead to favourable terms of trade and thus the North Indian market holds immense promise and potential. Changes in consumer behaviour have led to demand for better infrastructure, setting up of cold storage units and sharpened focus on quality control.