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Food Processing in India PDF
Food Processing in India PDF
IN INDIA
India is the worlds second largest producer 'Food products' generated the highest
of food next to China, and has the potential of employment (12.2%), followed by 'Textiles'
being the biggest in the food and agricultural (11.5%), 'Basic metals' (8%), 'Other non-metallic
sector. The food processing industry is one of the products' (7.3%) and 'Wearing apparel' (6.9%).
largest industries in India-it is ranked fifth in In terms of capital requirement, capital to output
terms of production, consumption, export and co-efficient Food Products is 0.19 implying food
expected growth. products requires less capital for producing one
unit of output, in value term, as compared to
Performance of this sector has improved
other labour intensive industries.
significantly in the recent years. Manufacturing
sector was generally growing at a higher rate In terms of emoluments or compensation to
than FPI till 2009-10. Performance of FPI employees, 'Basic Metal' has the highest share
improved substantially in 2010-11; almost at par (11.2%) followed by 'Machinery and equipments'
with manufacturing sector. In 2011-12, as per (8.3%), 'Motor vehicles, trailers and semi-trailers'
the Index of Industrial Production (IIP), FPI has (8%). However, among labour intensive
out-performed manufacturing; while FPI grew industries, 'Food products' (7.7%) has the highest
at 15.1 per cent, manufacturing growth was share of employment followed by 'Textiles'
close to 3.0 per cent. (7.6%). Similarly, fixed capital per employee is
This sector has a total of 35,838 registered very favourable at Rs. 6.54 lakh per employee in
units with an invested capital of nearly Rs. 2.5 Food Product industry as compared to Rs. 7.45
lakh crore producing an output of around Rs. 5.8 lakh in Textiles and overall industry average
lakh crore in value terms. Major industries of Rs. 12.64 lakh.
contributing to this sector are grain mills, sugar, In an emerging country like India, where
edible oils, beverages and dairy products. As can growth with equity is a primary policy thrust,
be seen from the table, total number of factories the optimum development of the food processing
in FP Sector [constituting both Food Products: sector will contribute significantly in tackling
Division-10 & Beverages: Division-11] in 2010-11 several developmental concerns such as
is 35,838. This is 30.4 per cent higher as compared disguised unemployment in agriculture, rural
to 2009-10. The sector has generated employment poverty, food security, food inflation, improved
to the tune of 16.75 lakh persons which is higher
nutrition, prevention of wastage of food, etc. By
by 4.3 per cent as compared to the previous year.
serving as a bridge between agriculture and
Similarly, Capital invested in FP sector has also
manufacturing and by dealing with the basic
increased significantly by 28.6 per cent.
needs of all Indian citizens the assured supply
Further Food processing sector is highly of healthy and affordable food at all locations in
labour absorptive and less capital intensive in the country, this sector has the potential to be a
nature. As per ASI:2010-11, among all industries major driver in India's growth in the coming years.
Food processing is a large sector that covers a) Fruits & Vegetable Processing:
activities such as agriculture, horticulture, India produces the widest range of fruits
plantation, animal husbandry and fisheries. It and vegetables in the world.
also includes other industries that use agricultural
It is the second largest vegetable (100
inputs for manufacturing of edible products. million tonnes) and fruit (50 million tonnes)
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The total area under fruit cultivation is
The market for dairy products is expected
estimated at 4.18 million hectares and 7.59
to grow at 15-20 per cent.
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million hectares under vegetable
cultivation. c) Fish Processing:
However less than 2 per cent of the total
India has large marine product and
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vegetables produced in the country are
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commercially processed, as compared to
resources along the 8,041 km coastline,
nearly 70 per cent in Brazil and 65 per
cent in USA. 28,000 km of rivers and millions of hectares
of reservoirs and brackish water.
Indias installed capacity for fruits and
vegetable processing increased from 1.1 India is the third largest fish producer in
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million tonnes in 1993 to 2.77 million the world and second in in-land fish
tonnes in 2007. production.
About 20 per cent of processed fruits and The Fisheries sector in India has been
classified into marine, inland and
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resources.
b) Milk Processing:
Fish processing is mostly targeted for export
Indian stands first in the world in terms of markets. Processed fish product exports
milk production. include conventional block frozen products,
The current size of the Indian dairy sector individual quick frozen products and
is Rs.3133.5 billion and has been growing minced fish products like fish sausage,
at 5 per cent a year. cakes, cutlets, pastes, etc.
The dairy sector ranks first in terms of
d) Meat and Poultry Processing:
processed foods with 37 per cent of the
produce being processed. India has the largest number of livestock
The organized sector processes an estimated population in the world accounting for 50
20 percent of the total milk output in India. per cent of buffaloes and 16 per cent of the
goat population.
There are 676 dairy plants registered with
Government of India, which come under Meat production is Rs.625 million and Meat
the organized sector. export is Rs.5.2 million.
The various competitive advantages in the food capabilities of Indian firms. India has a
processing sector that India enjoys over other large number of research institutions
nations are: like Central Food Technological
Research Institute, Central Institute of
1. Indias comparatively cheaper workforce
Fisheries Technology, National Dairy
can be effectively utilized to setup large
Research Institute, National Research
low cost production bases for domestic
and Development Centre etc. to support
and export markets. Cost of production
the technology and development in the
in India is lower by about 40 per cent
food processing sector in India.
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over a comparable location in EU and
10-15 per cent over a location in UK. 7. India's large market size, relatively
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young population, growing middle class
2. Due to its diverse agro-climatic
and changing life styles also creates
conditions, it has a wide-ranging and
incredible market opportunities for food
large raw material base suitable for food
producers, food processors, machinery
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processing industries.
makers, food technology and service
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3. India ranks No. 1 in the world in
production of Milk (Fresh & whole of
Buffalo and Goat), Cashew Nuts
providers in this sector.
8. Urbanization, growth of nuclear
families, increasing proportion of
Shelled, Ginger, Chick Peas, Bananas, working women, changing taste for
Guavas, Papayas, Mangoes and global and non-traditional cuisine,
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Indigenous Buffalo Meat. Further, India increasing preference for health foods,
ranks No. 2 in the world in production growth and penetration of retail chains
of Rice, Wheat, Potatoes, Garlic, Cashew etc. also act as drivers to give this
Nuts, Groundnuts, Dry Onion, Green industry a boost.For instance, According
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along the 8,041 km coastline, 28,000 km is driven by the processed food market,
of rivers and millions of hectares of which accounts for 32 per cent of the
reservoirs and brackish water. India also total food market. It accounts for US$
possesses the largest livestock population 29.4 billion, in a total estimated market
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in the world with 50 per cent of worlds of US$ 91.66 billion. The food
buffaloes and 20 per cent of cattle. processing industry is one of the largest
5. Investments in food industry are industries in India -- it is ranked fifth in
increasing, not only by domestic firms terms of production, consumption,
and Indian government, but also foreign export and expected growth. According
direct investment. to the Confederation of Indian Industry
(CII) the food-processing sector has the
6. The Indian food processing industry has potential of attracting US$ 33 billion of
significant support from the well investment in 10 years and generate
developed R&D and technical employment of 9 million person-days.
As the food processing sector is growing, the state. It ranks second in the production of
several states in India are focusing on developing value-added products and beverages with a 10
the sector and attracting investments in it. Some per cent contribution to the exports of the
States are at an advantageous position with country.
respect to others due to favourable raw material
The state is also well endowed with human
presence, market demand and other institutional
resources with the right skill sets. It is estimated
factors. Some locations of food processing
industries are discussed below: that the agro-based industry in the state employs
65 per cent of its total population.
Andhra Pradesh The government of the State is also providing
Andhra Pradesh is a key state that better incentives to the companies such as:
contributes significantly to the food and food 1. Additional 10 per cent of the subsidy
processing sector in India. The state ranks first assistance to the agro food processing units.
in the country in area and production of
2. Government extending electricity tariff
mango,oil palm, chillies and turmeric, second in
at a concessional rate.
citrus and coriander,third in cashew, fourth in
flowers and fifth in grapes, banana,ginger and 3. A refund of 50 per cent of Stamp Duty
guava based on area and production. It accounts Land Registration and Documentation
for a sizable share of countrys aggregate Duty paid by the unit.
production of rice. It also contributes 25-30 per 4. A subsidy of 50 per cent for buying
cent to the total sea food exports of the country. equipment per beneficiary on primary
The food processing industry contributes processing activities, like grading, sorting,
19.36 per cent to total industrial production in packaging, washing at the farm gate.
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linkage.
India get its first mega food park, Srini mega
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food park at Chittoor in Andhra Pradesh, Madhya Pradesh
aimed to facilitate end-to-end food processing
Madhya Pradesh is the fourth largest
with beneficial forward and backward
producer of agri-produce in India with lowest
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linkages.
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From seed to shelf, Srini Food Park will ranks first in the production of soyabean, gram,
facilitate end-to-end food processing with oilseeds, pulses, and linseeds, maize. It ranks
beneficial forward and backward linkages. On second in the production of lentils and niger.
par with software parks, this new-age facility
is equipped with Central Processing Centre Agriculture contributes almost one-third of
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and Primary Processing Centres. It aims at the Gross State Domestic Product (GSDP) and is
becoming a pioneering infrastructure enabler the main source of employment for over 70 per
and facilitator for the Food Processing Industry. cent population. It constitutes about 60 to 75 per
cent rural income. The performance of the
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Food Processing Industry is divided as: The upstream stage of the production
Upstream, Midstream and Downstream. process involves searching for and extracting
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produced by the farmers. and fertilizers are petro-chemically derived.
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Bees & Biodiversity: Industrial agriculture
The downstream stage in the production is the largest single threat to biodiversity,
process involves processing the materials and 7 in 10 biologists believe that today's
collected during the upstream stage into a biodiversity collapse poses an even greater
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finished product. The downstream stage further threat to humanity than climate change.
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includes the actual sale of that product to other
businesses, governments or private individuals.
The type of end user will vary depending on the
Bees, bats, amphibians and other beneficial
species are dying off, and their declines are
linked to pesticide exposure.
finished product. The downstream process has
Human Health: While farmworkers and
direct contact with customers through the
their families, rural communities and
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finished product.
children are on the "frontlines" of industrial
Upstream Stage: Brief description agriculture, they all carry pesticides in our
bodies. Pesticide exposure undermines
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Upstream stage of the production process public health by increasing risks of cancer,
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involves growing raw materials for the food autoimmune disease (e.g. diabetes, lupus,
processing industry. asthma), non-Hodgkin's lymphoma,
Parkinson's disease and more.
As the food processing industry is growing
at high speed in India, the demand for raw Further in the case of agricultural marketing
materials are increasing tremendously. Thus in India, also known as distributive handling
farmers are switching to new and advanced of agricultural produce - there are number of
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practices for farming raw materials at high scale. intermediaries who are involved in marketing
Industrial agriculture treats the farm as a factory, the agricultural produce. Intermediaries often
with "inputs" (pesticides, fertilizers) and flout market norms and their pricing lacks
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yields and equipping them with grading, initiatives of marketing distribution in the
cleaning and packaging facilities, along PPP format. Besides, commodity exchanges
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with market information systems. and futures markets have come up in the
form of National Commodity and
Efforts are to be made to develop packaging Derivative Exchange Ltd (NCDEX) and
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technologies for individual products to Multi-Commodity Exchange Limited (MCX).
increase their shelf life and improve
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consumer acceptance, both in the domestic To encourage the private sector to make
and international markets. investments in marketing infrastructure on
the required scale, a favourable regulatory
Efforts are to be made to harmonise food environment needs to be created so as to
laws to encourage production of high attract large corporates. This would include:
quality products with minimum
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a) liberalised credit norms to entrepreneurs
intervention from regulatory authorities. for agricultural marketing activities; b)
The complexity of multiple administering changes in the market regulatory
authorities for food processing enterprises framework to allow private entrepreneurs
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IN FOOD INDUSTRY
Modern consumers nowadays demand a livestock food industry. Each segment needs
variety of both local staple foods and exotic foods; different supply chain strategies such as
and they expect products from either category procurement and sourcing, inventory
to always be of the highest quality, affordability management, warehouse management,
and safety. In response to this ever-growing packaging and labeling system, and distribution
demand, the farm to fork food supply chain management.
concept has grown and now involves many
types of organizations, some directly involved Thus Food supply chain performance
in producing food (eg farms) and others less management is key to meeting the growing
directly (eg food processing equipment consumer demand for products that are safe, of
manufacturers). And as the food industry sector high quality, sustainably produced, and of
is vast and diversified, categorized by different assured provenance. A well-managed supply
segments such as fresh food industry, organic chain has social, environmental and economic
food industry, processed food industry and benefits.
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but then it is still transported home by the levels are important for controlling insects and
mould growth for example in grain storage.
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customer. A product may be a key ingredient
for another product and thus is transported to a
Food Production
manufacturing site elsewhere by road, rail, sea
or air. This procedure can be repeated before it
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Ingredients are combined or transformed in
is finally sold as a finished product, which again
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requires transport to get it to the point of sale. produce the final food product. Commercial
Transportation of foods results in what is termed food products can have multiple ingredients or
"food miles" . components, which themselves may have
Commodity products, such as grains, can be undergone transformations, making them quite
complex final products. Production can take
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bulk or container shipped around the world in
huge transporter ships. In bulk shipping the grain many forms it can be batch or continuous, on
goes straight into the hold of the ship instead of a mass-scale, or more limited in output - and can
being transported in containers on board the ship. use many specialized techniques and equipment.
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Foods can be stored and packed in modified Marketing involves providing sales platform
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the adoption of Good Agricultural Practices norm of 600-800 km/day. Also most of the roads
(GAP) which establish basic principles for in India can support only 16.2 tons as against
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farming, including soil and water management, an International norm of 36 tons.
crop and animal production, storage, processing
Many of the Indian cities have brought in
and waste disposal. The aim of the food chain
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Truck Curfews by blocking the trucks during day
approach, which incorporates these improved
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farming practices, is to ensure that the food chain
becomes more transparent so national and
global food crises can be prevented rather than
time. If the curfew is missed, the trucks have to be
parked outside the city and there is a long delay.
This type of delay becomes a problem in case of
treated. Perishable goods. For instance, it is said that 20%
of the Tomatoes get rotten during Transit.
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Contemporary issues in supply chain Railway network is not very suitable for
management in food industry in India: transit of Food items as it does not provide end
The global business environment including to end delivery in many cases. Port Infrastructure
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agribusiness is in a state of transition, being is very important for importing Food Items and
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influenced by globalization, strategic alliances, the delay caused in the ports can have adverse
merger and acquisition, business process and re- effect. High dependence on manual labour and
engineering. These strategic approaches are low technological presence impacts the supply
chain lead time. The cost of an Import Container
altering the focus of overall management of
box in India is USD 500 as against USD 300-350
businesses and influencing the ultimate goal
in foreign ports.
reaching the end-users by shifting from mass-
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Adani Agri Logistics has a tie up with Food Under Rural Godown Scheme, subsidy is
Corporation of India (FCI) and has set up State available for construction of Rural Godowns @
of the Art Warehouses at seven places in the 25% for all categories of farmers, Agriculture
country. It has currently capacity of 0.6 mn Tons graduates, cooperatives. All other categories of
and is planning to increase the capacity to 2 mn individuals companies and corporations are
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Hilly States.
potentially displaced by the market efficiencies
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5. Scheme for Development and strengthening introduced by FDI (projected to be a segment of
of Agricultural Marketing Infrastructure, small farmers). FDI would also bring investment
in post-harvest infrastructure that would
Grading and Standardization
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increase the shelf-life of produce and minimize
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Under the Scheme for Development and
strengthening of Agricultural Marketing
Infrastructure, Grading and Standardization,
subsidy @ 25% of the capital cost of the project
food wastage (now as high as 20-30%).
Moreover, new investment would result in other
positive externalities such as better seeds and
stricter standards that would increase quality and
with a ceiling of Rs. 50.00 lakh per project is productivity while lowering costs. FDI in retail
available. In respect of North-Eastern States and should also be cross-cutting and modernize not
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Hilly and Tribal areas and entrepreneurs only retail and agriculture, but also
belonging to SC/ST and their cooperatives manufacturing.
subsidy of 33.33% is provided with a ceiling of
Further the entry of players in the organized
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estimate that the retail market in India, currently Overall, farmers are bound to gain from the
worth $500 billion, will grow to $1.3 trillion by advent of the organized food retailers under a
2020. Organized retail is expected to reach 20- proper regulatory environment promoting direct
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25% of total retail by 2020 (from a current 5-6%). procurement on one hand and machinery to
The prospect of higher growth in the food and prevent the exploitation of farmers on the
grocery category is particularly attractive because other hand.
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tremendous emphasis on food hygiene, GMP,
HACCP and nutritional labeling in the entire need to address the skill gaps.
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food chain. However, most of the unorganized
k) High cost of transportation
players in food processing industry do not
adhere to quality standards resulting in minimal The non-availability of climate controlled or
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share in world trade because of the tightening reefer containers coupled with the high costs (in
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of restrictions and the introduction of the
Sanitary and Phytosanitary Agreement by global
industry bodies.
most of the cases both side fares are computed
due to non-availability of return cargo),
temperature abuse in transit capacity issues in
terms of handling and distribution of produce,
j) Lack of Skilled Manpower high costs of packaging (the protocol of usage of
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At the current levels of operations itself, there plastic bins for distribution with cost efficacy is
is shortage of skilled manpower at various levels. yet to be developed), etc. negate the advantage
A survey by FICCI on estimating the skill of low production cost.
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STEPS TAKEN BY THE GOVERNMENT
TO IMPROVE FOOD PROCESSING INDUSTRY
and creation of an integrated cold chain Final approval has been accorded to 8 Mega
mechanism for handling perishable produce. Food Parks in the States of Andhra Pradesh,
Punjab, Jharkhand, Assam, West Bengal,
a) Mega Food Parks Scheme: Uttarakhand, Tamil Nadu and Karnataka. The
cumulative project cost of these 8 Parks is Rs.
The scheme aims to accelerate the growth
930 crore which includes total grant assistance
of food processing industry in the country
of Rs.500 crore under the Scheme. In-principle
through facilitating establishment of strong food
approval has been accorded to remaining 7
processing infrastructure backed by an efficient
projects. In addition to these, 15 new Mega Food
supplychain.
Parks are in the process of Government
The Mega Food Parks Scheme provides for approval.
a capital grant of 50 percent of the project cost
During the 12th Plan following changes have
in difficult and ITDP notified areas(with a ceiling
been proposed:
of Rs 50 crores). The grant shall be utilized
towards creation of common infrastructure in Considering the size of investments required
CPC and PPCs in the park. Such facilities are in a Mega Food Park project, it is considered
Developed plot in the Mega Food Park on Sell produce to collection centres
lease with Power, Water, and ETP facilities
Cutting edge processing facilities in CPC Benefit from higher pricing
Reap benefits of power cost, common Avail of information regarding seed and other
facilities, testing, government support best practices
Avail of backward and forward Improve product quality
linkage benefits
Increase profitability Reduce losses through best practices in
handling and packing
Avail of primary processing facilities, Cold
Storages, Ripening Chambers, and Ware
houses
Retail Chains MNC Exporters
Avail of good quality produce Avail good quality product from producers
Avail standardized products Be sure of product quality through food chain
Benefit from quality assurance Quality assurance provided
from testing labs
Benefit from good transportation facilities
viz reefer trucks and vans
Avail of labeling, packing facilities at mega
park
Satisfy your customer through good
product
essential that promoters of such projects preference to those proposals which already
have not only sufficient experience but also possess the required land along with
requisite financial resources. This is also necessary permission to use it for a MFP at
critical due to nature of investments, as like the time of submission of Expression of
in any infrastructure project, these projects Interest itself.
have a long gestation period with slow Further to interact with the principle of
returns. Further many projects under Decentralisation proposed during the 12th
implementation have suffered due to lack Plan of the Ministry , it is being proposed to
of trust and coordination among various provide for greater role of the state governments
equity holders. In some cases, such conflicts in both selection and implementation of the
have even endangered the projects, as Mega Food Park projects.
various entities seek to have control over
the Board of Directors of SPVs. Thus it has b) Scheme for Cold Chain, Value Addition and
been proposed that a business entity may Preservation Infrastructure
be eligible to promote a SPV for setting up
a Mega Food Park project. The Task Force on Cold Chain set up by the
Acquisition of suitable land for the project Ministry of Agriculture has identified a huge gap
along with change in land use has been of 9 to 10 million tonnes of cold storage capacity
found another major reason for delay thus in the country. Ministry of Food Processing
working group recommended to give larger Industries through its Scheme for Cold Chain,
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region and difficult areas subject to a maximum launched a comprehensive Scheme for
of Rs 10 crore. Modernization of Abattoirs across the country.
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During the 12th Plan following changes have The Scheme is mainly aimed at promoting
been proposed: scientific and hygienic slaughtering of animals,
by-product utilization and value addition,
The level of assistance would be reviewed
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provision of chilling facility to prevent microbial
to bring parity with the schemes of
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Department of Agriculture & Cooperation, forward linkage facilities for finished meat and
to the extent feasible. In case required, meat products.
competitive bidding with standardized
projects would be taken up to bring about The Scheme is to be implemented with the
greater objectivity in the selection process. involvement of local bodies (Panchayats and
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In addition, the Scheme may make requisite Municipal Corporations) and also has the
linkages to value addition/processing, as flexibility for facilitating involvement of private
the mandatory requirement under the investors through competitive bidding.
Scheme, so as to clearly differentiate such Professional agencies are also being involved by
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projects from those assisted by NHB/NHM. the Ministry for project appraisals,
implementation and monitoring of projects.
The state-wise selection and financial bidding
process would also necessitate preparation 2. Schemes for Quality Assurance, Codex,
of Model Projects for various States, along R&D & promotional activities
with requisite technical parameters. There
would also be involvement of state a) Scheme for Setting up/Upgradation of
governments along with agencies such as
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Institutions. Apart from Degree/Diploma transfer of technology for processing of food
courses, certain short duration Certificate courses products by utilising locally grown raw material
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may also be considered under the Scheme. These and providing hands-on experience at such
courses may be of duration of 36 months and productioncum-training centres. Thus, these
initiated preferably through Industrial Training Centres would be helpful in promoting
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Institutes/Polytechnics. The level of assistance entrepreneurship/skill development as well as
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available for creation of requisite infrastructure
is proposed to be enhanced from existing Rs. 75
lakh to Rs. 1 crore for each proposal.
transfer of technology. The entire outlay for HRD
activities during the 12th Plan would now be
implemented under NFPM though the Ministry
would be directly releasing remaining assistance
b) Entrepreneurship Development Programme
for projects sanctioned during 11th Plan, for
(EDP)
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which Rs. 6 crore each for next two years has
This is to promote entrepreneurship in food been provided.
c. To assist the state governments in At the apex level, there would be a Mission
addressing both institutional and Directorate in the Ministry of Food Processing
infrastructural gaps along the Value Industries with a Governing Council and an
Chains and thus create efficient Supply Executive Committee.
Chains for agricultural produces.
A Governing Council would be constituted
d. To promote initiatives for skill under the Chairmanship of the Minister of Food
development, training and Processing Industries and may comprise of
entrepreneurship which would meet Ministers and senior officials from relevant
needs of both post-harvest management Ministries/Institutions, Industry associations and
and food processing industry. representatives of select state governments. The
e. To assist MSMEs in setting up/ Council would be responsible for laying down