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FOODPROCESSINGINDUSTRIESASUNRISESECTOR
P.SBhatnagar*

oodhasaverywideconnotationbutitcanbesummedupasanyplantoranimalmaterial,whichis
consumedfornutritionandsustenance.Thecollection,preparationanddistributionoffoodconstitutethe
verybasisofcivilization,cultureandhome.Humanityhasalwaysrecognizedthatpreservationoffoodto
ensureavailabilityaccordingtoneediscentraltoitsconcerns.Pickling,salting,dryingandother
methodsoffoodprocessingarealmostasoldasmankinditself.Foodprocessingisamultifaceted
endeavoranditsfurthercomplexityliesintermsoftheenablingenvironment,thestatusofthe
productionofthebasicplantandanimalmaterial,theindustryandthenconsumerorthemarket.
Significance
FoodprocessingindustryisofenormoussignificanceforIndia'sdevelopmentbecauseofthevital
linkagesandsynergiesthatitpromotesbetweenthetwopillarsofoureconomy,industryandagriculture.
Fastgrowthinthefoodprocessingsectorandprogressiveimprovementinthevalueadditionchainare
alsoofgreatimportanceforachievingfavourabletermsoftradeforIndianagriculturebothinthe
domesticandinternationalmarkets.Evenmoreimportantisthecrucialcontributionthatanefficientfood
processingindustrycouldmakeinthenation'sfoodsecurity.Thesimplefactthatthepostharvestlosses
areabout25to30percentinourcountryshouldserveasaneyeopenerforallofus.Evenmarginal
reductionsintheselossesareboundtogiveusgreatreliefonthefoodsecurityfrontaswellasimprove
theincomelevelsofthefarmers.
ItisinthiscontextthattheGovernmentofIndiahasgivenutmostprioritytodevelopingthefood
processingsector.TheGovernmenthastakenanumberofinitiatives.Theentiresectorhasbeen
deregulatedandnolicenceisrequiredexceptinthecaseofalcoholicbeverages.Automaticapprovalfor
foreigninvestmentupto51percentisallowed.Evenwhereinvestmentismorethan51percent,
approvalisgivenonacasetocasebasisbytheForeignInvestmentPromotionBoard(FIPB).Centper
centexportorientedunitsarepermittedtoimportrawmaterialsandcapitalgoodsfreeofduty.Zeroduty
importisalsopermitted,forcapitalgoods.Exportearningsareexemptedfromcorporatetax.Anumber
ofStateGovernmentshavealsoannouncedliberalfiscalbenefitsforthefoodprocessingindustries.
InlinewiththispolicytheDepartmentofFoodProcessingIndustrieshaslaunchedconcessional
financeschemes.Theschemescovertheentirespectrumofactivitiesinvolvedwithfoodprocessingsuch
aspostharvestinfrastructureincludingcoldchain,foodqualityandsafety,packaging,researchand
developmentandpromotionofprocessedfood.Duringthe8thPlan(199297),theDepartmentprovided
anassistanceofRs.177croreforvariousfoodprocessingprojects.Duringthefirsttwoyearsofthe9th
Plan(19972002)theamountofassistanceprovidedisRs.48crore.Thesefiguresmayseemsmall.But
whatisimportantisthatthisseedmoneyhasgeneratedprojectsofthevalueofanestimatedRs.1100
crore.
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Investments
Thevariousinitiativestakenbythegovernmenthaveattractedlargeinvestmentsinthefood
processingsector.FromJuly1991whentheliberalisationprocessstarted,untilSeptember1999,1,111
approvals(whichinclude100percentjointventures,foreigncollaborationsandindustrialapprovals)
involvingatotalinvestmentofRs.19086crore.ThisisaninvestmentofRs.9125crorewhichhadalready
beenapproved.Asmanyas5,718industrialentrepreneurs,memorandainvolvinganinvestmentof
Rs.53,697crorewerefiledduringthisperiod.
Theenvironmentforthisindustryhassubstantiallychangedsince1991.Asaresultofthesesteps,the
cumulativeinvestmentbythefinancialinstitutionsinthefoodindustrysectorincreasedfromabout
Rs.6500crorein9293toRs.18500croreattheendof9798,anincreaseofalmost200percent.Further,
foreigninvestmentsofRs.8886crorehavebeenapprovedofwhichRs.2032crorehasbeenimplemented.
However,theshareofthefoodindustryinthetotalsanctionsbythefinancialinstitutionshasdecreased
fromabout4percenttoabout2.5percent.
Inlinewiththemarketorientationofthefinancialmarket,therehasbeenasignificantrelaxationinthe
regulatoryregime.TheColdStorageRegulatoryOrderandtheRiceMillingRegulationshavebeen
abolished.TheGovernmentiscommittedtotheremovalofquantitativerestrictionsonimports.

ExportPotential
TheIndianprocessedfoodindustryhasshownatremendouspotentialforexports.During199899the
totalexportfromthecountrywaswithRs.1,41,603crorewhichincludedRs.25224croreofagricultural,
plantationandprocessedfoodproducts.Thiswas18percentofthetotalexports.Theexportof
processedfoods,viz.,processedfruitsandvegetables,animalproducts,rice,marineproductsandother
processedfoodswasvaluedatRs.12915croreduring199899whichwas9.2percentofthetotal
exports.Globalizationhasledtoanincreaseintradeacrossthebordersofdifferentcountriesand
annuallyabout460milliontonsoffoodvaluedatUS$3billionistraded.Indiahas,thus,agreat
potentialforglobaltradeinagriculturalandprocessedfoodproducts.
Foodprocessinghasthelargestemploymentgenerationpotential.Itgenerates54,000personsper
Rs.1000croreinvestmentwhereasintextilesandinpaperindustriesitis45,000and25,000persons
respectively.Altogether12.73lakhjobopportunitiesarelikelytoariseinthefoodprocessingsectorwith
theimplementationoftheapprovalsgivenandindustrialentrepreneurialmemorandafiledsofar.
Despitetheseinitiativesandadvantages,theprocessingofrawmaterialforvalueadditionisstillata
verylowlevellessthan2percentascomparedto2560percentinthedevelopedcountries.Toboost
thegrowth,theGovernmentandtheindustryhavetoworkincloseunison.
Theindustryneedstoadoptthelatesttechnologiestoinjectgreaterefficiencywhichcouldprovide
economiesofscaleandcosteffectiveness.Weneedtointroducetechnologiesthatcanaddvalueata
reasonablecostasthepremiumofprocessedfoodsoverfreshfruitsandvegetablescannotbeveryhighif
alargedemandistobegenerated.Someofthenewtechnologiesincoldstoragesystemincludechanging
thecoolingsystem,useofprefabsandwichinsulatedpanels,sprayingpotatoeswithsproutsuppressants
andthenstoringthemtosavepowerandusevaporabsorptionrefrigeration,basedonsolarandbiogas
energywhichhasbeenadoptedintheadvancedcountries.Similarinovationshavealreadybeenapplied
inseveralotherareas.
Theotherissueistheabsenceoflinkagesbetweentheindustryandthefarmersfortherawmaterials.
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Currently,mostagroindustriesdependonthenormaltradechannelfortheirrawmaterialwhichoften
resultsintheindustrygettingonlytheleftoversofthemarket.Thisisveryacuteinthehorticulture
basedindustry.Inordertoensurethattheindustrygetstherightqualityandquantityofrawmaterialat
theappropriatetime,themostsuitablemethodintheIndiancontextappearsistoprocurerawmaterial
directlyfromthefarmersthroughcontractproduct.Experimentsmadebysomeleadingcompaniesinthis
regardhavebeeneminentlysuccessful.
Indiahaslargeprospectsforexportsofagroproducts.ThekeytoIndia'ssuccess,however,shallbe
quality.Inourendeavortoboostexports,Indiamaybeenconfrontedwithtwoissues,viz.,genuine
qualityissuesandpseudoqualityissues.Weneedtogearuptomeetboththechallenges.Theconceptof
qualityassurancehasbeenalludedtotheIndianexporterssofar.Totalqualitymanagementbeginsnot
onlyfromthefirststageofmanufacturingoftheendproductbutfromstageoneofproductionoftheraw
material.Mostoftheprocessedfoodmanufacturedinthecountryisnotofaverygoodquality,largely
becauseoftheuseofpoorrawmaterial.Therefore,theprocessorsneedtoenterintocontracted
arrangementswiththefarmersforprovidingprocessablevarietiesofrawmaterialsandalsohelpthemto
improveproductivitybyusingthelatestagriculturaltechnologies.
ThegrowthpotentialofIndia'sfoodindustryisenormous.Withfoodbeinganationalpriorityandfood
habitschangingrapidlytowardsvalueaddedfoods,theIndianfoodprocessingindustryisonthebrinkof
arevolutionthatwillmodernizetheentirefoodchain.
*Secretary,DepartmentofFoodProcessingIndustries,GovernmentofIndia.

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