Oct. 10, 2024
The Hindu Business line
Revolutionizing India's Food Processing Landscape
Context: Despite the government's efforts to prioritize agricultural development, including a substantial budget allocation of ₹1.52 lakh crore in 2024-25, the country's agri-exports have been underperforming with only 25% of agricultural exports being processed.
About Food Processing
Food processing involves the methods and techniques used to transform raw plant and animal materials into edible products from simple preservation to complex industrial methods.
Key Objectives: Preservation, Safety, Quality enhancement, Convenience & Value addition
Key Factors Driving the Growth of the Food Processing Sector in India
• Demographic Dividend Drives Demand: India's large and growing population, coupled with rising incomes and urbanization, is fueling demand for processed foods.
• Digital Revolution- From Farm to Phone to Plate: E-commerce platforms, food delivery apps and Digital India initiative have expanded market access for processed food products.
• Government Policies-Catalyzing Growth: The Production Linked Incentive Scheme for Food Processing Industry (PLISFPI) and 100% FDI allowance in food processing.
Major Issues Related to the Food Processing Sector in India
• Fragmented Supply Chain-The Broken Link: Lack of direct farmer-processor linkages not only affects the quality of raw materials but also impacts the final product's cost competitiveness in both domestic and international markets.
• Infrastructure Deficit-The Cold Reality: Despite recent investments, India's cold chain infrastructure remains inadequate leading to post-harvest losses estimated at ₹92,651 crore annually.
• Regulatory Labyrinth: Tangled in Red Tape: Food processors must navigate regulations from multiple bodies including FSSAI, Agricultural and Processed Food Products Export Development Authority, Bureau of Indian standards (BIS), and state-level agencies.
• Skills Gap-The Missing Ingredient: Despite the sector's potential to generate employment, the lack of specialized training programs and industry-academia collaboration leads to a significant skills mismatch.Only 3% of India's workforce in food processing has formal training. This skills gap not only affects product quality and innovation but also hampers the adoption of new technologies.
• Capital Crunch-Starved for Funds: The high risk perception associated with the sector due to seasonality, perishability of raw materials, and market volatility leads to stringent lending norms and higher interest rates.
• Packaging Paradox-Wrapped in Challenges: The food packaging industry, growing at 13-15% annually, faces issues of sustainability and cost.The government's push for sustainable packaging (e.g., the ban on single-use plastics) is forcing rapid changes, but the industry struggles to find cost-effective alternatives.
• Market Volatility-The Price Rollercoaster: India's agricultural market, characterized by seasonal production and climate vulnerabilities, experiences frequent price shocks.
Measures Can Be Adopted to Enhance the Food Processing Sector in India
• Food-Cluster Development: create integrated food processing zones, Incorporate shared infrastructure like cold storage, quality testing labs, and effluent treatment plants to reduce individual setup costs.
• Tech-Driven Supply Chain- From Soil to Shelf: Integrate IoT sensors for real-time monitoring of storage conditions and transportation, Develop AI-powered demand forecasting models to reduce wastage and optimize inventory, Encourage the use of drones (leveraging Drone-Didi Scheme) and satellite imaging for crop monitoring, enabling processors to predict yields and plan accordingly.
• Financial Re-engineering of the Food Processing Sector:Introduce sector-specific credit schemes with flexible repayment terms aligned with crop cycles,Implement a credit guarantee fund to encourage banks to lend to small and medium processors.
• Quality Standardization: Harmonize Indian standards with global norms like Codex Alimentarius to boost export potential, Introduce a tiered certification system for processors, incentivizing higher standards with easier market access and financial benefits.
• Regulatory Streamlining-Cutting the Red Tape: Establish a single-window clearance system for all food processing related approvals, reducing the current average setup time from 6-8 months to 2-3 months.
• Sustainable Processing-Green from Farm to Fork:Introduce a tiered green certification system for processors based on their environmental impact, water usage, and waste management practices. Promote the development and adoption of biodegradable packaging materials through R&D grants and tax incentives.
• Export Ecosystem-Global Flavors, Local Roots: Establish dedicated export zones with plug-and-play infrastructure and single-window clearance for export documentation, Develop country-specific strategies focusing on product customization, packaging, and marketing to suit different international markets.
• R&D Acceleration- Innovate to Elevate: Establish a network of Food Innovation Labs in partnership with leading academic institutions and industry players, Introduce a weighted tax deduction on R&D expenses for food processing companies to encourage private sector investment in innovation.