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Smart processing hubs using advanced tech key
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Tuesday, 31 December, 2024, 08 : 00 AM [IST]
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Venkatesh Ganapathy
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The food processing sector has become a key contributor to India's economy over the past few years. The sector has performed exceptionally well with an impressive average annual growth rate of 7.3% from 2015 to 2022. It has significantly contributed to Gross Domestic Product (GDP), employment, and investment, accounting for 10.54% of gross value added (GVA) in manufacturing and 11.57% in the agriculture sector in 2020-21. GVA in the food processing sector has increased from Rs 1.61 lakh crore (US$24.60 billion) in 2015-16 to Rs 1.92 lakh crore (US$24.43 billion) in 2022-23.
The market size of the food processing sector in India is estimated to reach US$1,274 billion in 2027 from US$866 billion in 2022, backed by the rise in population, changing lifestyle and food habits due to rising disposable income and urbanisation. The FDI equity inflow in the food processing sector for April 2021-March 2022 was US$709.72. The total FDI received in the food processing sector from April 2000 to March 2022 was US$11.08 billion.
India witnesses 4.58%- 15.88% wastage in fruits and vegetables thus, the opportunity lies in investing in initiatives that help reduce wastage levels including infrastructure (cold chain, processing infrastructure). The food processing industry faces several challenges, including a lack of cold chain and storage, which leads to significant post-harvest losses of perishable goods, affecting both food quality and farmers' income. The supply chain is highly fragmented, causing inefficiencies and increased costs, with poor infrastructure leading to transportation delays.
Poor supply chain linkages, characterised by a lack of mechanisation, high seasonality, perishability, and inadequate intermediation, resulting in raw material shortages and over 30% loss of produce at the farm level due to insufficient infrastructure are other challenges. Infrastructure bottlenecks further hinder the industry, requiring better logistics and support from railways and airways to reduce wastage. Complex regulations make it difficult for businesses to navigate, and inconsistent enforcement results in unfair competition and quality issues. Food safety is a critical concern, with the potential for contaminated products to harm public health and the sector’s reputation. Furthermore, limited investment in research and development (R&D) hinders innovation, with India’s R&D expenditure significantly lower than other major economies.There is a lack of innovation and product development in the sector, and there are deficiencies in the regulatory environment, with multiple laws under various ministries governing food safety and packaging, leading to inefficiencies and compliance challenges.
Changes that can be expected by 2030
Sr
No
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Description
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Changes
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Challenges
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1
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Technological
advancements and automation
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Advancements
in artificial intelligence (AI), the Internet of Things (IoT), and
robotics will become more embedded in food processing operations.
These technologies can help improve the precision of food
production, enhance quality control, and optimise supply chain
logistics.
AI
can be used for predictive analytics, helping food processors
forecast demand, reduce waste, and manage inventory more
effectively. Robotics, on the other hand, can automate repetitive
tasks such as sorting, packing, and labelling, which will help
reduce labour costs and increase operational efficiency.
Additionally, AI-driven systems could improve food safety by
detecting contaminants and ensuring adherence to quality
standards.
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High
costs of technology, reduction of human labour, need for
investments in training and reskilling.
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2
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Changes
in consumer preferences
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Consumer
demand for healthier, sustainable, and ethically sourced products.
More demand for plant-based options, organic foods, and locally
sourced products.
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Invest
in R&D, scalability of operations; Changes in production
processes and sourcing strategies.
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3
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Global
Supply Chain Vulnerabilities
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Interconnected
food supply chains are increasingly vulnerable to disruptions
caused by geopolitical events, natural disasters, and pandemics.
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Need
for diversifying supply sources, investing in supply chain
resilience, and adopting technologies such as blockchain for
better traceability and efficiency.
Companies
will need to invest in more localised sourcing strategies,
resilience planning, and alternative supply sources to mitigate
these risks.
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4
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Legal
and Regulatory Challenges
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Strong
action by governments and international bodies on food safety,
packaging, labelling and sustainability.
By
2030, trade barriers may become more pronounced, especially in
response to concerns over food security, public health, and
environmental sustainability. Protectionist policies and tariffs
may disrupt established supply chains, forcing food processors to
adapt to a more fragmented global market.
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Compliance
with stricter food safety standards, including regulations on
additives, preservatives, and allergens. Traceability and
transparency in the food supply chain will also be critical, with
regulations requiring more detailed information on food origin,
production methods, and environmental impact.
Companies
will need to invest in automation and technology to compensate for
the lack of skilled labour.
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5
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Sustainability
and Environmental Concerns
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Increasing
pressure on companies to adopt more sustainable practices. This
includes reducing carbon footprints, minimising food waste, and
transitioning to renewable energy sources.
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Consumers
and governments alike will demand that food processors adopt
practices that reduce water usage, minimise energy consumption,
and employ environment-friendly packaging.
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By 2030, food waste will be a particularly urgent issue. According to the Food and Agriculture Organization (FAO), roughly one-third of food produced for human consumption is wasted annually. This waste occurs at various stages of the food supply chain, including processing, retail and consumer levels. For food processors, tackling waste involves improving efficiency in production, better-managing supply chain logistics, and finding ways to reuse by-products. Innovations such as edible packaging, compostable materials, and waste-to-energy technologies could offer solutions, but these require significant investment and technological development. In the Interim Budget 2024-25, the Ministry of Food Processing Industries was allocated a total Budget of Rs 3,290 crore (~US$396 million), an increase of ~13% over revised estimates for fiscal year 2024. There are substantial investment prospects totalling US$2.36 billion across 31 projects under Common Infrastructure for Industrial Parks which includes facilities such as specialised processing units, effluent treatment plants, testing laboratories, common warehouses, and logistics support. Foreign investment opportunities in India's food processing sector are also promising due to favourable policies, a vast consumer market, and government initiatives focused on improving the sector's competitiveness and sustainability. Creating smart food processing hubs using advanced technologies like IoT, AI, and blockchain for better monitoring and efficiency will become necessary. There is also potential in nutraceutical innovation, developing functional foods that cater to health needs, and zero-waste processing, which maximises the use of raw materials. Community-based processing centres in rural areas can help reduce post-harvest losses and provide employment opportunities. (The author is faculty member, IBS-Bangalore)
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