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Goal of Make in India to increase food processing level to 25% by 2025
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Tuesday, 16 December, 2014, 08 : 00 AM [IST]
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Ashwani Maindola, New Delhi
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fiogf49gjkf0d The objective of the Make in India campaign is to increase the level of food processing (which was 10 per cent in 2010) to 25 per cent by 2025. And with its 127 geographic agro-climatic conditions, the country provides ample opportunities to the entrepreneurs to revive, the sector, which mostly comprises micro-, small- and medium-sized enterprises (MSME), which largely act in isolation and need corporatisation.
There is a need to incorporate good manufacturing practices (GMP), good hygiene practices (GHP), safety, quality and certifications such as Hazard Analysis and Critical Control Points (HACCP) and International Organisation for Standardisation (ISO), which would facilitate the export of the goods, and enable them to withstand competitors from all over the globe.
Food processing is no longer limited to bread and ketchup. Companies in the sector are undertaking research and development (R&D) and constantly innovating. As a result of these efforts, a new range of products has emerged, and it must adhere to standards. The government’s vision is to make India a food processing hub, and not just an exporter of raw produce.
Dr S K Malhotra, horticulture commissioner, Ministry of Agriculture, said, “With geographical indications (GI) and the academia-industry link, India has a chance to carve a distinctive place in the food processing sector. Ginger, basmati rice, fennel, Alphonso mangoes, saffron and black pepper are unique to India, and could take the Indian processing sector forward in a big way.”
In its knowledge paper on the food processing sector, the Confederation of Indian Industry (CII) said, “The Make in India campaign is designed to facilitate investments, foster innovation, enhance skill development and build best-in-class manufacturing infrastructure. The food processing sector is a key sector for this campaign. The government has introduced a plethora of policies to encourage investments in it.”
“The programme provides entrepreneurs, including foreign investors, opportunities to enter the Indian food processing sector, which covers such areas as fruit and vegetables, beverages, dairy, food additives, nutraceuticals, confectionery and meat and poultry. They can also invest in supply chain infrastructure and food parks,” it added.
The Chamber termed the agro and food processing sector the link between the agriculture and manufacturing sectors. The changing preferences of upwardly-mobile middle-class families haven’t just given prominence to the food processing sector, but also fuelled its growth in the last few years. It is now the fifth-largest sector in India in terms of both production and export growth. In 2012-13, its share in the country’s gross domestic product (GDP) was 9.8 per cent. Its value was estimated to be between $121 billion and $130 billion, and it accounted for 30-35 per cent of the total food market.
However, when compared globally, India currently only processes around two per cent of fruit and vegetables. And here lies the potential.
The CII paper stated that since the Indian economy was liberalised in August 1991, proposals for projects have been initiated in various segments of the food and agro-processing sector. Besides this, the government has approved proposals for joint ventures, foreign collaborations, industrial licences and 100 per cent export-oriented units envisaging an investment.
Out of this, foreign investment amounts to over Rs 10,000 crore. India’s exports of processed food were Rs 31,552 crore in 2013-14. This included the shares of such products as mango pulp (Rs 773 crore), dried and preserved vegetables (Rs 743 crore) and other processed fruit and vegetables (Rs 2,267 crore).
The Indian food processing industry is primarily export-oriented. The country’s geographical situation gives it the unique advantage of connectivity to Europe, the Middle-East, Japan, Singapore, Thailand, Malaysia and Korea.
In this context, the Chamber suggested the following interventions for the transformation of the food processing sector:
- Scalable farmer-industry partnerships: In order to encourage various emerging models of successful interactions, such as farmer producer organisations (FPO) and farmer producer companies (FPC), and to organise agri-input retail to deliver suitable technologies and inputs to farmers, public-private partnership (PPP) models must be encouraged and corporate farming must be permitted for high-value agriculture for exports;
- Food processing growth through an emphasis on branding: To deliver to customers a value proposition; a brand promise to deliver food that adheres to a set of norms, and an assurance of freshness, healthiness, quality and traceability;
- A National Agriculture and Food Export Mission in select categories to actively promote the export of select crops: Currently, India loses out on exports with other producers due to the failure to be cost-competitive; the lack of a powerful Indian food brand; weak adherence to quality and safety standards, and poor infrastructural linkages. In high-value agriculture categories, particularly fruit and vegetables, India could aspire to be a top-five global exporter, and
- Mega demand servicing and export hubs: These hubs would allow companies to procure, store, process and export from a single location. Such hubs would help put in place the necessary forward and backward linkages with consumption markets and agriculture production zones, along with the storage infrastructure, and provide for comprehensive facilities across the value chain
Meanwhile, the Indian food processing industry is witnessing a new trend, with such companies as Mahindra ShubhLabh Services Ltd (MSSL) selling branded fruit in India and overseas. It, in fact, became the first company in India to do so when it launched the Saboro brand.
MSSL also entered a 60:40 joint venture with Belgium-based Univeg group, the world’s second-largest fresh produce company, to consolidate its presence. Between them, the companies would invest Rs 30 crore in the new entity, Mahindra Univeg Pvt Ltd.
Univeg, which is present in 26 countries, would provide technical knowhow and best practices in quality control; post-harvest handling of fresh produce; the ripening process, and farm agronomy practices to meet international quality standards.
Mahindra Univeg would also focus on developing a fresh food supply chain. It plans to produce 1,00,000 tonnes of fresh fruit over the next three to five years.
Agri-chemical company Rallis India, a unit of salt-maker Tata Chemicals, is also expanding its range of branded fruit and vegetable business as a part of its focus on growing its non-pesticides business.
It has already launched branded grapes to be sold exclusively through select outlets of Tata Group’s retail venture, Star Bazaar, in Mumbai and Pune. The company is now planning to offer other fruits and vegetables.
Countries like Canada, Germany and the Netherlands have expressed their desire to cooperate with India in the field of agri processing knowhow.
Wouter Verhey, Dutch agriculture counsellor for India and Sri Lanka, said that his country was willing to share agricultural knowhow and provide technology to the Indian industry, so that the food could be processed better.
Meanwhile, the Federation of Indian Chambers of Commerce and Industry (FICCI) stated that the Make in India campaign could become the trigger in transforming Indian manufacturing, whose share in the country’s GDP has been 15-16 per cent for several years.
Given the need to create a million non-farm jobs every month, manufacturing would have to grow at 12-14 per cent annually.
The FICCI document stated, “India is unarguably an attractive investment destination, given its rich demographics that feed into the intrinsic demand and supply elements of businesses.”
“The potential however has remained mostly untapped for want of a truly enabling environment required for businesses to flourish,” it added.
It emphasised that the focus must now be on:
- Improving the business environment through ease of doing business and an encouraging fiscal framework;
- Enabling the manufacturing set-up by providing a conducive ecosystem that supports factor advantage, nurtures innovation and strengthens inter-linkages with other industries and institutions, and
- Attracting greater capital through further liberalisation of foreign direct investment (FDI) in key sectors
In a document it submitted to the government, PHD Chamber stated, “The animated tax regime and soft regulations would propel the Make in India campaign.”
“Bolstering manufacturing would require India to dilute its strangulated regulations with the animated tax regime and put in place sound infrastructure to arrest investors’ sentiments and investments into it, besides drastically curtailing its age-old cumbersome procedures and fistful practices, so that the ease of doing business in India transforms completely,” it added.
Sharad Jaipuria, the Chamber’s president, said, “Delays in land acquisition, clearances for project approvals (mainly due to the multiple Central and state procedures and environmental issues) hinder the enthusiasm of investors and dissuade them from parking their surpluses in India.”
“On account of these reasons, India has been placed 134th (out of 185 economies) in World Bank’s 2014 Ease of Doing Business index, while it stands 179th (of 189) as far as the ease of starting a business in concerned. These must improve to rebuild an altogether different perception about India on the basis of its manufacturing capacities,” he added.
“Single-window clearances with effective coordination between the Centre and the states and digitalisation of all departments of the government with electronic filing and fulfillment of procedures are the ways to improve them,” Jaipuria pointed out, adding that MSME should be treated with preference in terms of credit extension and empowered with technology through state-owned R&D centres.
The reforms and labour laws suggested by domestic and global players should be implemented, so that the production and productivity are consistently maintained to meet the demands of a modern economy with improvement and modifications in governance.
“India’s position in the Ease of Doing Business index is lower than those of its BRICS counterparts (namely Brazil, Russia, China and South Africa),” said Richard Rekhy, co-chairman, CII Invest North 2014, and chief operating officer, KPMG India, at a panel discussion on ‘Addressing the Challenges of Doing Business in India with Focus on Reviving Manufacturing’. It was a part of the third edition of the CII Invest North Conclave.
To grow at 8-9 per cent in the coming years, India’s manufacturing sector would have to grow at over 12 per cent.
Meanwhile, industry-level cooperation has already begun. A 15-member FICCI business delegation, comprising representatives of MSME, visited Tel Aviv, Israel, recently to discuss agriculture, water and solar energy.
It discussed the technologies that Indian companies could adopt, and explored emerging investment opportunities, and joint ventures with Israeli firms to manufacture and market products in India.
The programme was designed to present an overview of Israel’s agriculture industry, which is characterised by a high level of technology, high-pressure irrigation systems, automatic and controlled mechanisation and quality seeds and plants.
FICCI stated that the objective of the mission was to strengthen the existing Indo-Israeli ties and forge new relationships with Israeli business leaders looking to expand their operations to India.
“It helped Indian industry strategise their businesses to deal with the opportunities and challenges facing the agriculture, water and clean tech sectors,” it added.
The Indian embassy in Tel Aviv, the Israeli embassy in India and the Israel Export and International Cooperation Institute (IEICI) partnered with FICCI to arrange business-to-business (B2B) meetings and field visits locally.
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