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ASSIGNMENT ON FOOD PROCESSING INDUSTRIES OF INDIA
SUBMITTED BY: Tengkam G. Momin Muniram Prasad Sharma
FOOD PROCESSING INDUSTRIES
Food Processing Industries or Sectors are the indispensible elements for the overall development of an economy. It provides a vital linkage and synergy between the agriculture and industry. It helps in commercialising, diversifying and sustaining the agricultural sector by enhancing the income of the farmers, by providing the market opportunities for the agricultural products intended for exports and by absorbing the employment problem by generating employment opportunities. The Agricultural produce can be sold or exported to far off places for earning revenues and as such these industries play a serious role. The Food Processing Industry sector in India is one of the largest in terms of production, consumption, export and growth prospects.
Meaning of Food Processing:
The term 'food processing' is mainly defined as a process of value addition to the agricultural or horticultural produce by various methods like grading, sorting and packaging. In other words, it is a technique of manufacturing and preserving food substances in an effective manner with a view to enhance their shelf life; improve quality as well as make them functionally more useful. It covers spectrum of products from sub-sectors comprising agriculture, horticulture, plantation, animal husbandry and fisheries.
The changing pattern of living and lifestyle of the Indian people has generated new avenues for the growth and prosperity of these Industries. Urbanisation has supported a lot and the consumers¶ demand for quality food products at a convenient and better way have compelled these industries to adapt changes arising due to the demand scenario by adopting newer technologies. The Indian food processing industry is one of the largest in the world in terms of production, consumption, export and growth prospects. Earlier, food processing was largely confined to the food preservation, packaging and transportation, which mainly involved salting, curdling, drying, pickling, etc. However, over the years, with emerging new markets and technologies, the sector has widened its scope. It has started producing many new items like ready-to-eat food, beverages, processed and frozen fruit and
vegetable products, marine and meat products, etc. It also include establishment of post-harvest infrastructure for processing of various food items like cold storage facilities, food parks, packaging centres, value added centres, irradiation facilities and modernised abattoir. India has a strong agricultural production base with diverse agro-climatic conditions and arable land of 184 million hectares. It is one of the major food producers in the world and has abundant availability of wide variety of crops, fruits, vegetables, flowers, live-stock and seafood. As per the available information, it produces annually 90 million tonnes of milk (highest in the world); 150 million tonnes of fruits and vegetables (second largest); 485 million livestock (largest); 204 million tonnes of food grains (third largest); 6.3 million tonnes of fish (third largest); 489 million poultry and 45,200 million eggs. As a result, Indian food processing industry has become an attractive destination for investors the world over.
The total inflow of foreign direct investment (FDI), year-wise, in food processing sector during the period 2000-01 to 2007-08 (up to November2007) is as follows:
Year 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 (up to November 2007) Grand Total Foreign Direct Investment (Rs. in Crores) 0198.13 1036.12 0176.53 0510.85 0174.08 0182.94 0441.00 0061.63 2781.28
(Source: Annual Report 2007-08, Ministry of Food Processing Industries)
Key Growth Drivers of Food Processing Sector in India:
Increasing spending on health and nutritional foods. Increasing number of nuclear families and working women Changing lifestyle Functional foods, fresh or processed foods Organised retail and private label penetration Changing demographics and rising disposable incomes Indian food processing industry is widely recognized as a 'sunrise industry' having huge potential for uplifting agricultural economy, creation of large scale processed food manufacturing and food chain facilities, and the resultant generation of employment and export earnings. The industry is estimated to be
worth around US$ 67 billion and employing about 13 millio n people directly and about 35 million people indirectly. The food processing sector in India is geared to meet the international standards. Food Safety and Standards Authority of India has the mandate to develop standards and also to harmonise the same with International Standards consistent with food hygiene and food safety requirement and to the conditions of India's food industry. Increased urbanization, improved standards of living, and the convenience needs of dual income families point to major market potentialities in the food processing and marketing sectors. This is also evident from the presence of several global foods giants and leading Indian industrial enterprises in the country's food processing sector, such as: Nestle India Ltd, Cadbury's India Ltd, Kelloggs India, Hindustan Lever Ltd, ITC-Agro, Godrej Foods and MTR Foods Ltd Besides, in the current globalized milieu, our surplus food production, as well as the increasing preference for Indian foods (in several
regions of the world) need to be leveraged to achieve economic, and strategic objectives through exports.
Opportunities in Food processing Sector:
Processable varieties of crop Contract farming Investments in infrastructure through Public Private Partnership (PPP) Mega Food parks Integrated cold chain Food safety Management Systems
Important segments in Food Processing Industries ( Exports and Turnover figures ):
Fruits and Vegetables Processing (In 2008-09, India's export of fresh fruit and vegetable was estimated at US$ 0.79 billion and in case of processed fruits and vegetables it stood at US$ 0.68 billion.) Meat Processing (In 2008-09, India's export of meat products (including buffalo meat, sheep/goat meat, poultry products, animal casings and processed meat) stood at U$ 1.25 billion.) Diary Processing (In 2008-09, export of dairy products was estimated at US$ 0.21 billion.) Fisheries Sectors (The export of marine products has steadily grown over the years - from a mere US$ 0.84 million in 1961-62 to US$ 1,849.08 million in
2008-09. Marine products account for approximately 1.1 % of the total exports from India.) Grain Processing Sectors (Export of oil meals, oilseeds, minor oils (fats) and castor oil during the financial year 2007-08 is reported at 62.6 lakh tonnes valued at US$ 2.32 billion against the exports of 58.9 lakh tonnes valued at US$ 1.39 billion in the previous year.) Consumer Food Industries (India's biscuits industry is the largest among all the food industries and has a turnover of around US$ 0.64 billion)
Major Players in Indian Food processing:
ITC Limited Parle Products Pvt. Ltd. Agro Tech Foods Amul
Perfetti India Ltd. Cadbury India Ltd. PepsiCo India Holdings Nestle India Pvt. Ltd. Britannia Industries Ltd. Hindustan Lever Limited Milkfood MTR Foods Limited Godrej Industries Limited Gits Food Products Pvt. Ltd. Dabur India Ltd.
Unilever Conagra Foods Nissin FoodsWalmart Venky's
While the food-processing sector offers several opportunities, it faces constraints as well, such as: Low income and the high share of basic food in the household consumption expenditure which acts as a deterrent in the growth of processed food sector.
Socio cultural factors such as preference in India for freshly plucked/cooked food, variation in food habits across the country, easy availability of raw materials for cooking, preference for consumption of food at home etc. Low productivity, high wastage. Inadequate infrastructure for sorting, grading, packing etc. in addition to the high cost of raw material (at processor¶s level). APMC Act which restricts sourcing materials from farmers. Lack of a common policy on Contract farming. Lack of trained man power for various stages of processing, storage, marketing and branding. Lack of access to modern technology.
Low share of sale of food products through organized retail, which are the usual drivers of quality, scale and integration. Globally 72 %, or more of food sales, is through organized retail. Share in India is just one percent. The high proportion of unorganized sale leads to low product quality, low hygiene levels and safety. Access to Credit for farmers as well as small and medium food processors is a key issue. Over 75% rely on informal credit at very high interest rates leading to increase in cost of production affecting competitiveness. Inability to attract investment by large corporate houses who complain of unreliable sources of supply of raw material. Inability to induce investor confidence.
Low inflow of Foreign Direct Investment, in spite of the permission for 100% FDI in the food processing sector (except in food retailing, alcoholic beverages and plantations). Inability of Government Schemes to have the desired impact on productivity, technology and market arrivals. Advantages of low price at farm gate for raw materials not available to processors, affecting international competition .
Conclusion: To conclude, Food Processing Industries or Sectors form an integral part of our economy. It is one of the main components of export-oriented industries who have changed the overall development scenario of the Indian economy by exporting the produce from the processed agricultural products and earning foreign exchange and also absorbing employment problem to a certain extent possible. In the present context, its contribution cannot go unseen and many foreign companies and investors have vested their interest in venturing in these sectors in India by investing in these sectors and industries.