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By 2025, food processing to be worth over half a trillion dollars
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Friday, 24 December, 2021, 08 : 00 AM [IST]
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Ashwani Maindola, New Delhi
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As India has recorded close to 15% rise in export of agricultural and processed food products, according to Invest-India, by 2025, India’s food processing industry is expected to be worth over half a trillion dollars while, by 2030, Indian annual household consumption will treble, making India 5th largest consumer.
In recent times, there were various policy initiatives taken under the Budget, or initiatives like one district, one product or Production Linked Incentive (PLI) scheme and even the three farm law reforms. Each of them was different and can have different impacts that can be seen and analysed only after 3-4 years of its implementation.
However, there are lost opportunities as well.
While the demand for processed food is rising and the Indian government is trying to get investment in food processing through schemes like PLI; there is limited investment by manufacturers and supply chain agents like retailers in the processed food business.
Experts feel this is primarily because of three reasons: First, single brands retailers face difficulties in opening retail chains/cafes. Second, there are issues with respect to sourcing from farmers and third, there are inverted duties in sourcing raw materials and intermediate products from outside India.
The Indian food processing sector also needs further attention in many areas like awareness about value addition, packaging solutions and there are product specific challenges, as well.
Arpita Mukherjee, professor, ICRIER, says, “There are product specific challenges and general challenges. High import duties on raw materials and intermediate products is a general challenge. Similarly, sourcing consistent quality products from the domestic market for large-scale production is also a challenge. Setting up the supply chain is a challenge with high logistics costs. Policy inconsistency is another challenge as has happened with the recent farm laws, where policy was announced and then withdrawn. Some processed food, irrespective of their nutrition content, like carbonated soft drinks, is considered as a “sin good” and is facing higher taxes. There is no concept of nutrition based taxes. Majority of the players in this sector are informal and small-scale, and lack technology. Also the R&D is low while the cost of capital is high”.
She added, “Focussing on product-specific challenges, let us take the case of alcoholic beverages. Since the sector is not covered under the GST, manufacturing units have to be registered with each state government and this prevents economies of scale. There is no concept of “Single country, single pricing” for this sector.”
She suggests that the government should focus on a holistic thought and approach rather than a piecemeal approach.
“Processed food is highly taxed in India. There should be “nutrition based taxes” and other measures like consumer awareness programmes should be strengthened to guide consumers towards responsible consumption. Most food should be at the lowest GST slab. Second, supply chain issues are often state-specific and barriers to private players sourcing from farmers need to be addressed. Focus should be on implementing modern technology, R&D and scale upgradation. Government policies should be targeted towards scale expansion for SMEs. Inverted duties should be removed. There is a need to work with farmers and their associations for consistent quality products,” she opined.
Food Regulations -
Ashwin Bhadri, CEO, Equinox Lab, and an expert in food regulations, says that food processing industries are the ones that need to work with lots of patience. Firstly, the whole process is hectic, and adhering to the norms framed by FSSAI makes it hard. The manufacturing companies have no other option as adhering to the norms is promising and those are framed concerning the health of the customer.
“When food processing and preparation activities take place, they are divided into three categories such as modern method, traditional method, and development method. Every step is to be taken care of as even a small careless step can lead to contamination. Analysis of the regulatory framework can be done by conducting audits or inspections. Those analyses are helpful for the unit to know where they lack and what improvement can help to fill the gaps,” said Bhadri.
Also, experts say that food wastage has become a central problem in the industry. Innovative packaging can reduce it and help to resolve the problem of declaring the food unsafe or unsuitable for consumption purposes. During the beginning of the pandemic, the safety of food processing and manufacturing centres was questioned. Maintaining end-to-end transparency is the only way that allows the customers to rely on products.
Further, optimising agricultural yield is another focus area the processing industry should look into along with contract farming. Introducing smart framing techniques is the way forward.
Experts feel that the food processing sector and the norms framed by FSSAI should be aligned with each other for a better outcome related to food safety.
Bhadri says, “The Government currently should focus on preventing contamination and storage. There are food processing units that are working full-fledged and maintaining the unit has proven difficult for them. It is a primary focus and hence, the schemes that help to avoid food contamination should be taken into consideration. When food contamination is a focus point, the storage and temperature across the value chain also are essentials that cannot be ignored."
"Also, the major problem experienced is during transportation. Maintaining the temperature and storage capacity becomes an issue when the consumables are transported from one place to another,” he added.
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