Food Processing Industries
• Definition– If any raw product from agriculture, animal husbandry, dairy or fisheries is sent through a process that adds commercial value to it, it is called food processing.
• Introduction– CII report- $33 billion investment possible in next 10 years.
• Conclusion– Vision 2015 report aims at trebling share and increasing value addition to 35%
• Food Processing Chain– raw material production, procurement and storage, food processing, packaging and branding, à Retailing and marketing.
• Backward Linkages- helps get better deals for poor and marginal farmers. Facilitates easy procurement. Local bodies, SHG can be used for better connectivity.
• It can be seen from fact that food processing has a share of 13% in GDP.
Scope of food processing-
• Food forms a major part of budget of India. Being a billion big market, the demand for processed food is always large. A dismal 10% of all perishables undergo processing. Leading states like Maharashtra have only 1.2% food processed.
• Urban tastes have been changing to processed foods like dairy products, bakery products, processed meat, etc.
• India has diverse agro-climatic regions and a large raw material base
• The cheap labour available can be employed in food processing industry.
• It offers better farm gate prices, promotes crop diversification, value addition to food and better choice to customers
• In times when agriculture has shown negative growth, it has potential of increasing farmer revenues.
• It also makes available nutritious food to the customers. From Farm to Plate.
• In GST rate, food products are untaxed. This will give fillip to food processing industry.
Drawbacks of food processing industry-
• The food processing industry is fragmented and highly unorganized due to the fact that processing takes place at local level for local consumption.
• Lack of end-to-end supply chain due to lack of transportation, spoilage, no cold storages, etc.
• Lack of domestic market penetration, especially for processed fruits, vegetables and milk products.
• Lack of technology
• Lack of branding and marketing. Eg- Tetrapack milk is preferred due to branding. Best quality marketing is being done for Patanjali products.
• Lack of innovation that does not create brand loyalties.
• Competition from international market- eg- Nashik grows grapes, sends to Europe and then imports wine.
Steps by government for Food Processing –
• Food processing have been exempted from licensing under Industries
(development and regulation) act 1951
• Food processing industry comes under priority sector lending.
• FY17 budget allows 100% FDI in marketing of food products made in India. Walmart and Tesco have shown interest
• Farmers will be able to leverage the e-commerce and IT network to market their products.
• Coupled with mega food parks, NAM, cold storage chains and make in India, it will end up adding value to the farm produce.
• The Government has established agri-export zones (AEZs), apart from mega food parks, to boost agricultural and food processing exports.
National Commission on Agriculture recommended making agriculture a central subject.
SAMPADA is an umbrella scheme incorporating ongoing schemes of the Ministry like Mega Food Parks, Integrated Cold Chain and Value Addition Infrastructure, Food Safety and Quality Assurance Infrastructure, etc. and also new schemes like Infrastructure for Agro-processing Clusters, Creation of Backward and Forward Linkages, Creation / Expansion of Food Processing & Preservation Capacities. The objective of SAMPADA is to supplement agriculture, modernize processing and decrease agri-waste
• It means the buying and selling of agricultural commodities at various levels through a series of exchanges from farm level to final consumers.
The characteristics of an efficient marketing system are:
• To enable the primary producers to get the best possible returns
• Efficient cold storage and cheap mode of transport
• Being informed about the prevailing market conditions.
• To provide facilities for fast travel of commodities till final consumer. Farm Gate to Plate.
• To reduce the price difference between the primary producer and ultimate consumer by reduced number of intermediaries.
• To make available all products of farm origin to consumers at reasonable price without impairing on the quality of the produce.
Drawbacks in marketing system –
• Improper warehouses
• Lack of grading and standardization
• Inadequate transport facilities
• Presence of a large number of middlemen
• Malpractices in unregulated markets
• Inadequate market information
• Inadequate credit facilities
• Forced and distress sales
• Poor handling, packing, packaging, and processing facilities
• Stockholdimg restrictions and export restrictions
• Acts like APMZC and ECA alongwith MSP
Ways of improving marketing system –
• Better transport and cold storages through CWC, SWC, Rural Godown Scheme, etc
• FPO for better marketing
• Repealing APMC and promoting NAM.
• Standardization and grading. Eg- Agmark
• Marketing information facilities to let farmers know market conditions
Technology in Agriculture-
• The National Policy for Farmers emphasizes the use of Information and Communication Technology (ICT) at village level for better weather and market news, product information and proper marketing of agricultural products.
• Need- 60% dependent on agriculture, primarily rainfed, but with meager incomes. Agri growth was in negative. Thus, for improvement in agriculture, ICT needed.
Use of ICT for agriculture-
• Availability of Soil Health Cards electronically, DBT for fertilizer.
• E-commerce for direct selling to the consumers through e-commerce sites
• Recently govt launched E-Krishi Samvad for farmers to directly interact with ICAR for solutions
• Better marketing. Eg- E-Choupal for end-to-end solutions till final consumer.
• Services for market information. Eg- Agrimarket mobile app – price in mandi in 50km radius of GPS position, Gyandoot project of Madhya Pradesh.
• Question-and-answer services where experts respond to queries like Kisan Call Center and Kisan TV.
• Provision of early warning systems about disease/ pest problems, weather, etc.
• Facilitation of land records and online registration services. Eg- EMojani software of Maharashtra.
• Finally, the National E-Governance Plan for Agriculture has aimed at integration of all e-services into one for farmers to take a proper decision.
Sub-Mission for Agricultural Mechanization- for sowing and post-harvest machinery and for bank credit. Insurance already covered.
• FAO states that food security emerges when all people at all times have physical and economic access to sufficient, safe and nutritious food to meet their dietary needs.
• It has 3 aspects- availability, access and affordability of food.
• Importance- basic need, social welfare, distributive justice, healthy people = more workforce for economy.
• Current status- UNICEF report says in 2015, 22% of total child mortality in world in India, chiefly due to malnutrition.
Issues in Food Security –
• Corruption and leakage in PDS. Bihar 50% leakage.
• High food inflation especially pulses.
• Food availability skewed in favor of urban areas than remote areas
• Wastage and rotting due to lack of storage and proper transportation of food
• Govt’s MSP policy has skewed production only for cereals and not pulses, horticulture, etc that has reduced their availability.
• Improper classification of BPL families that led to ghost beneficiaries.
• Hidden hunger
Government measures for food security –
• Targeted PDS with GPS tracking to reduce leakages. Chhattisgarh model.
• For women- Janani Suraksha Yojana, etc
• National Food Security Act– 75% rural and 50% urban population. Solution- use DBT through JAM trinity or Food Coupons, food fortification to prevent malnutrition, eliminate hidden hunger by increasing intake of protein, usage of GM crops to increase productivity.
• “Technology missions” are Govt. policies targeting specific sectors for achieving the set objectives by leveraging technology available
• These missions are funded jointly by Centre and State Govt. and other allied institutions. These missions aim at –
a. Improving production, productivity and quality of goods through various interventions during input, growth, harvest and post-harvest stages.
b. Developing infrastructure for processing and value addition to agricultural produce.
c. Creating employment in the rural economy
d. Reducing wastage of cereals, vegetable & fruits, etc. and ensuring food security.
• The GoI has launched various technology missions in Agriculture sector targeting various crops and methods like-
• Technology Mission on Cotton, launched in 2000 for improving yield and quality of cotton crop by supplying seeds, fertilizers and pest management technology
• Technology Mission on oil seeds, pulses and maize- for reducing import dependence and for diversifying crops in India from the usually grown rice and wheat.
• Jute Technology Mission and Sugar Technology Mission, etc
• Mission for integrated development of horticulture for holistic development in horticulture especially in northeastern India.
• Thus, technology missions form a important part in increasing the growth in agriculture and ensuring doubling of farmer incomes by 2022.
Farmer Producer Organization
• It is a company established under the Companies Act, 2013.
• Works on the principle of Collectivization
• To overcome a host of challenges confronting small and marginal cultivators – from fragmentation of holdings to inadequate access to credit, technology, extension services and markets.
• It is modelled on the role played by the National Dairy Development Board during the Operation Flood programme that involved support to dairy cooperatives from the village to the apex level.
• Supply of inputs such as seed, fertilizer and machinery, market linkages, training & networking and financial and technical advice are also among the major activities of FPO.
• Govt exempted profits of FPO from taxation for next 5 years
• Need- collective procurement, help in selling, Role in retail food chain in making food reach from farms to plates
• Concerns- lack of long term capital, lack of entrepreunership, admin constraints, constraints from government
• Pulse problem is both – high prices and low prices
• India is the largest producer of pulses and largest importer from Canada. Canada is keen to establish food processing industries in India. India-s consumption is 22-23 mt and domestic production is around 17-18 mt.
• Pulses production low due to low rainfall. But this can’t be blamed fully. If there are large tracts of irrigated agricultural lands, who stopped the government from encouraging pulse farming? Connect to green revolution.
• Through the decades, the per capita availability of pulses has reduced while that of cereals has increased.
• However substantial change can happen only when the domestic production increases by a sharp rise in MSPs and a freezing of MSP of other crops like wheat so that farmers take to pulses. The increase in MSP increased the cropping area to some extent. Govt hikes MSP for pulses by 250rs/quintal.
• No policy for buffer stocks for oilseeds and pulses. Decision to increase buffer stock of pulses to 20 lakh tonnes from 8 lakh tonnes by signing government-to-government supply contracts with countries. Long term MoU with Mozambique for supply of pulses. It will increase to 2 lakh tones till 2021 and help augment domestic supplies.
• Govt must also procure pulses from farmers. Procurement by FCI, NAFED and Small Farmers Agribusiness Consortium
• Restrictions have been imposed on importers, retailers on hoarding of pulses. Over 1.20 lakh tones of pulses were seized. The dal prices still didn’t stabilize because the government took a long time to release the seized pulses.
• Price Stabilization Fund of 500 cr announced. It is also used to control volatility of onion, potato, etc. It is given to states as interest free loans.
• Government suspends future and forward market trading in pulses to stop further rise.
• There exists an Accelerated Pulses Production Program which aims at greater production of pulses.
• Possible alternative of khesari dal that was banned in India due to a notion that it causes lathyrism. Indian Council of Medical Research has lifted ban in Jan 2016. Khesari dal costa upto 40-50 rs per kg and can go a long way in reducing the arhar crunch.
• CEA committee suggests a PPP institution with 49% govt stake to look after pulse procurement alongside FCI, NAFED, etc. Also change MSP, delist pulses from APMC, cold storages, ceiling price, review ECA, GM crop to increase yields.
• Now due to bumper crop and import, pulse price is falling leading to losses for farmers. The need is to remove stockholding restrictions and export bans
• Does govt have infra to store such high amount of pulses? Price stabilization fund is not enough for procuring?
• IARI has launched a new Arhar variety Pusa Arhar 16. It requires less water, matures early and can be mechanically harvested.
• 20 lakh tons produced in 2017 leading to price fall leading to extra procurement by Maharashtra government. Lack of coordination between state and central govt, no proper procurement policy