Increasing Employment

 Food processing industry provides plenty of direct and indirect employment opportunities, because it acts
as bridge between Agriculture and Manufacturing

Curbing Migration
When food processing plants are setup near agro/rural regions, they reduce:

1. Poverty among villagers,

2. disguised unemployment
3. exploitation of farmers
4. rural-urban migration
1. unplanned urbanization,
2. slums/hygiene/social problems in cities

Curbing Food Inflation

 In the last few years Food inflation has been a major problem. Food inflation is eventually passed
through into manufactured goods through higher money wages.

well-developed food industry + compact supply chain=reduces food inflation via:

1. Disintermediation (meaning no middlemen/commission agents)

2. less wastage/spoilage of perishable products

Crop-diversification

 Coming to the original point: we need crop diversification, all farmers shouldn’t be growing just rice and
wheat. But if want to seduce the farmers into growing other crops, then following must be done

1. Promote food industry with backward linkages to farmers growing fruits, vegetables, milk, fish, meat,
poultry, grain, etc.
2. Aggressively market the processed food in India + Abroad

crop diversification => the excessive “rotting-wheat” surplus problem is solved

Abundant Raw Material

Geographical advantages

1. 46 out of 60 soil types are present in India.

2. More than 26 types of climatic conditions= can cultivate large variety of fruits, crops, vegetables.
3. Large coastline, villagers in 13 states engaged in fishing as their secondary activity.
4. Variety domestic animals such as cows, buffaloes, goats, chicken, lamb, sheep.
5. Large irrigated area under cultivation. Ample supply of fresh water for human, plant and animals.

Problems with government schemes

1. Agriculture is a State subject. No scheme can be successful without coherence between the Centre and
States in policies and strategies. But we have plethora of bodies and departments @center and state
level=empires within empires. Even Left hand doesn’t know what right hand is doing. Problem is
compounded when ruling parties are different at state and center level.
2. Most schemes have Low ceiling (they just give a few lakh rupees) + as plant size increases, the MSME
tax benefits decrease. So, food-entrepreneur setups two small plants using money two schemes, rather
than one big plant. Smaller the plant=>poor economies of scale=>high production cost, can’t invest in
marketing-research, innovation, export quality products.
3. These Subsidies/grants are “back-ended” (meaning ca$H is not given before you start the project, but
only after the project is completed or in final stage)
4. But Parameters of project approval/ file-Processing= non-transparent (just like our UPSC). Timely
clearance of project files=nope. Sometimes they don’t even give reasons for rejecting project. Food-
Entrepreneur is unsure whether bureaucrats will approve his file or not (+bribe demand)
5. Significant time lags from the date of application for financial assistance, to release of funds= affects the
project schedule= cost overruns for the investor.
6. Most schemes seek to get investors to pump money in certain infrastructure without providing the
necessary support for the utilization of the infrastructure. (e.g. asking pvt player to setup cold storage,
without guaranteeing continuous electricity supply).
7. Overenthusiasm =Excess capacity. Example: many tax-benefits given to groundnut oil refining
industry=new units keep popping up even when groundnut cultivation is not sufficient to provide raw
material to all refineries. Result: No unit runs on full capacity, industrial sickness, loan defaults, NPA.
8. Inputs of Panchayati raj institution, cottage industries, local entrepreneurs are considered irrelevant in
scheme design.
9. Lack of focus/financing for freezer cabinets in retail outlets/kirana stores, vending machines for
tea/coffee/beverages.
10.Working capital requirements are high for food processing industry (thanks so many intermediaries,
electricity, high duties on imported chemicals etc.) But these schemes only give money for initial
project/machines. Don’t provide support for working capital (i.e. cost of day to day operations, buying
raw material, electricity-utility bills etc.)

Solution: Integrate all schemes offered by various Ministries and allied agencies.

Ministries and Departments of the Government

Ministry of Food Processing Industries (MoFPI)

Functions of MoFPI

1. Launch National Mission on Food Processing

2. R&D in food processing, Specialized packaging for food processing industries, Technical assistance and
advice to food processing industry
3. Enhance Processing level and reduction in wastages
4. Food Safety & Quality assurance
5. Financial assistance, grant-in-aids, tariff issues related to
o Fruits and vegetable, Food grain milling industry,
o Dairy products, poultry, eggs, meat, Fish processing
o Bread, oilseeds, meals (edible), breakfast foods, biscuits, confectionery, other ready to eat food
products
o Alcoholic drinks, beer, Aerated waters / soft drinks and other processed foods
6. strengthen institutions such as
o National Institute for Food Technology and Entrepreneurship Management (NIFTEM)
o Indian Institute of Crop Processing Technology (IICPT)
o Indian Grape Processing Board (IGPB)
o National Meat & Poultry Processing Board (NMPPB)

2 fancy mission 3 schemes

1. Vision 2015 for food processing 1. mega food parks
2. National Mision on food processing 2. modernization of abattoirs (slaughterhouses)
3. cold chain infrastructure

+ some chillar schemes for HRD, R&D.

 National Mision on food processing

Will do following:

1. increase agricultural productivity

2. increase farmers income
3. Help state governments to create synergy between their agricultural plans vs. food processing sector.
4. Help state governments in institutional and infrastructural gaps
5. Create efficient Supply Chains for agricultural produces.
6. Skill development, training and entrepreneurship for both post-harvest management and food processing
industry.
7. Give capital/technology/skill to MSMEs so they can setup/modernize food processing units
8. Help food processing industry to meet quality /food safety standards for both desi and foreign markets.

This national food processing mission has following schemes:

1. Technology Up-gradation / Setting up / Modernization / Expansion of Food Processing Industries

2. cold chain facilities for Non-Horticultural produces and Reefer Vehicles
3. Primary Processing Centres/Collection Centres in rural areas
4. Modernization of Abattoirs
5. Modernization of Meat Shops
6. Human Resource Development (HRD)
7. Promotional Activities
8. Up-gradation of Quality of Street Food

National Food Processing Development Council (NFPDC) provide guidance to all schemes of
Ministry of Food Processing including above national mission on food processing.

Hub and Spoke model in mega food park

FIRST MEGA FOOD PARK IN 2012

 In 2008, new scheme was made “Private Entrepreneurs Godowns (PEG-2008).
 To increase grain storage capacity with help of Private sector.

 National Horticulture Mission (NHM)
 Terminal market complexes (TMC)
 National Horticulture Board (NHB)
 National Centre for Cold Chain Development (NCCD)

National Horticulture Mission (NHM)

 By Whom? = Department of Agriculture and Cooperation

 To increase production of all horticultural products (Fruits, Vegetables, Flowers, Plantation crops, Spices,
Medicinal Aromatic plants) in the states.
 Provides funding for various activities (R&D, nurseries etc) including funds for post-harvest management,
supply chain infrastructure, cold storages.

Terminal market complexes (TMC)

 scheme is being implemented under National Horticulture Mission

 These Terminal market complexes will establish forward linkages with wholesalers, distribution centres,
retail cash and carry stores, processing units and exporters.

National Centre for Cold Chain Development (NCCD)

Setup during 11th FYP, under Societies Registration Act, to do following

1. Create an enabling environment for the cold chain sector

2. help private sector involvement in cold chain sector
3. Financial assistance upto 90% to State Governments to setup/modernize/expand cold storages and ice
plants via cooperatives.
4. establish standards and protocols related to cold chain testing, verification, certification and accreditation
as per international standards
5. Provide technical assistance to Financial Institutions, Government Departments/ agencies, and industry
for selecting cold chain component e.g. refrigeration units, refrigerated transport equipment, display
cabinets, milk tanker etc.
6. HRD and technical advisory.

Agmarknet

 Agricultural marketing information network

 it is an online portal that provides information on following

Prices MOVEMENT WEATHER ,FARMERS ADVISORY,

Dairy Schemes
By Department of Animal Husbandry, Dairying & Fisheries

They run following schemes:

1. install Bulk Milk Coolers at village level close to the area of milk production
2. for installation of bulk milk cooler
3. Intensive Dairy Development Scheme (IDDS
4. Dairy Entrepreneurship Development Scheme (DEDS)

National Dairy plan will do following:

1. Breed improvement + animal nutrition=> increase milk production, reduce methane emission.
2. Strengthen of village based milk procurement system= Rural milk producers to get greater access to the
organized dairy sector.
3. HRD, management, knowledge sharing, R&D and other fancy stuff
4. Scheme will run in 14 states – Uttar Pradesh, Punjab, Haryana, Gujarat, Rajasthan, Madhya Pradesh,
Bihar, West Bengal, Maharashtra, Karnataka, Tamil Nadu, Andhra Pradesh, Orissa and Kerala.
5. ^These states collectively account for over 90% of country’s milk production.
 Agri Export zones (AEZ)

 In 2001, By Commerce Ministry.

 Total 60 AEZs in 20 states.
 To converge the efforts of central and state governments to increase agro-exports
 AEZ concentrates on a particular produce/ product located in a geographically contiguous area (e.g.
Mango in Chittur District of Andhra) and coordinates the ongoing Central-State schemes to cover the
entire value chain from farm to the foreign consumer, including sorting, grading, packaging, processing,
exporting.

Problems

1. Government Agencies don’t take ownership or responsibility.

2. Villagers and field officers are unaware about the scheme and its conceptual framework
3. The Design of AEZ itself doesn’t have project orientation.
4. Lack of coordination/ monitoring system in AEZs
5. The investment made by central and state government have not materialized into real-useful assets on
the ground.
6. Indiscreet proliferation of AEZs in certain states. WB, Maharashtra have multiple Agro export zones while
Odisha barely got one AEZ and that too in 2013= More than a decade after the scheme was launched in
2001!

duty credit?

Without going into all technical correctness:

 You exported xyz worth Rs.100 then Director General of Foreign trade will give you a scrip (piece of
paper) worth Rs. 2 to 5 (or whatever % credit is decided in the scheme)
 When you import capital goods, you’ve to pay custom duty. But you can use these credit scrip to pay for
that custom duty.

Another doubt: Why does or why should government give duty credit?

Ans. Because other (stupid) schemes have failed to improve the rural infrastructure, hence it is difficult to
transport/market these products from India to abroad. Therefore duty credit is given to offset infrastructure
inefficiencies and other associated costs involved in marketing of these products.

 Agricultural Produce Market Committee (APMC) acts since 50s.

APMC acts run on two principles:

1. Ensure that intermediaries (and money lenders) do not compel farmers to sell their produce at the farm
gate @throwaway prices=farmer is not exploited
2. All food produce should first be brought to the market yard=> sell through auction=farmers gets good
money.

Under APMC Acts:

 A State is geographically divided and Market (Mandis) are established at different places within the
states.
 Farmers have to sell their produce through the auction @mandi.
 To operate in Mandi, a trader has to get license.
 Wholesale, retail traders (e.g. shopping mall owner) or food processing company etc cannot buy farm
output directly from farmer. They’ve to get it through the Mandi.

MODEL APMC ACT2003

Farmers Processors, exporters, graders, packers, etc. can buy agricultural produce directly from farmers.

Permits Private market yards, Direct Purchase Centers, farmers’ market for doing trade in agriculture
produce. (monopoly of Mandis=destroyed)

Public Private Partnership in the management and development of agricultural markets in the country for
post-harvest handling, cold storage, pre-cooling facilities, pack houses etc.

Increased the responsibilities of APMC committee. They have to:

1. ensure complete transparency in pricing system and transactions taking place in market area;
2. ensure payment for agricultural produce sold by farmers on the same day;
3. promote agricultural processing + value addition
4. Publish data on arrivals and rates of agricultural produce brought into the market area for sale.
5. Setup and promote public private partnership in Management
 Direct Sale / Cooperative markets.

 virtual markets= Future exchange, Spot Exchange, Warehouse Receipt System and Web Marketing.
 In India, the Multi Commodity Exchange (MCX) and the National Commodity Derivatives Exchange
(NCDEX) are the two biggest players in the agro-futures market.

NCDEX  Setup an e-mandi (online wholesale market).

 Farmer will first deposit his produce to a NCDEX nominated warehouse, gets receipt.
 This receipt can be traded by the participant on the e-mandi across the country

MCX  Working on similar project like above, with help of Yes bank.
 MCX online portal for commodity trading also available in regional languages to help non-
English speaking farmers.

ITC e-Choupal
In 2001, ITC (India Tobacco Company Limited) started small internet kiosks at the village level. Provides
following:

1. direct procurement framework

2. Real time market information related to prices
3. Availability of inputs: seeds / fertilizers, their prices
4. scientific farm practices
5. weather, monsoon data
6. Dispute resolution between the company and the farmers.

overlapping and outdated laws> LACK OF COORDINATION ambiguity, confusion for consumers, traders
and manufacturers.> > Food Safety and Standards Authority of India (FSSAI) Act to provide for a single
food law regulator 2006,

CODEX standards

 In the 60s, FAO+WHO setup Codex Alimentarius Commission.

 To develop harmonised international food standards, guidelines and codes.
 In WTO system => Sanitary and Phytosanitary measures (SPS Agreement) – a country can impose ban
on imported food products, if they do not meet the Codex standards. (=meaning this type of non-tariff
barrier is permitted in WTO).
 India also banned import of American Chicken to ‘prevent Avian influenza’ among Indian poultry.
(Although USA has dragged India to WTO saying India has not provided any scientific evidence in line
with international standards to justify this ban.)
 WTO system=> Agreement on Subsidies and Countervailing Measures (SCM)=if a country finds
evidence of dumping, it can extra impose duty (known as countervailing duty, CVD) on such
dumped products. (=meaning this type of tariff barrier is permitted in WTO)
  USA has imposed a countervailing duty (~6%) on Indian frozen shrimps, because Indian shrimp gets
plenty of subsidies from Indian government for shrimp farming and export and hence Indians are able
to dump shrimps to USA and hurt USA’s local shrimp businessmen. (or atleast that’s what America
claims).
 Anyways, Indian shrimps are not the only items subjected to anti-dumping duty in USA.

HACCP

 HACCP (Hazard Analysis Critical Control Point)

 This certification system is adopted by the Codex Alimentarius Commission.
 For preventing microbiological, chemical and physical contamination along the food supply chain.
 So, if you want to safely export food products to US/EU, then first you need to get certificate that your
plant meets the HACCP standards. (certificate system similar to ISO standards)

Why is Multibrand-FDI relevant/important from food processing/agro point of view?

 desi food players are mostly small scale = poor economies of scale = they don’t have the mon
 invest in backend infrastructure.
less  Government made FDI condition that Retail giant needs to invest part of his FDI investment in
Wastage  backend infrastructure (=processing, manufacturing, distribution, design improvement, qualit
 control, packaging, logistics
 , storage, ware-house, agriculture market produce infrastructure etc.)

 These retail giants have deep pockets = large economies of scale = they use direct purchase /
Better
 contract farming to get the fruits-veggies. Thus middleman eliminated=farmer gets more pric
Income

 Government made FDI condition that Retail giants need to buy part of their goods from small
Small
 industries.
Scale

 Increases direct/indirect employment opportunities in the supply chain, logistics, retail and wh
employm
ent
.

 The Foreign giants bring their own IT technology, best management practices for running the
 business at extreme efficiency.
Tech-
 Foreign giants will tie up with a local player (e.g. Bharti, Tata etc)=Indian managers/workers
knowled
 desi companies also learn new things
ge
 Later some of thm might setup their own firms utilizing the work-experience=Thus foreign bus
upgrades
 knowledge, technology trickles down and benefits Indian economy.


 2016

Government has allowed 100% FDI for trading including through e-commerce, in respect of food products manufactured or
produced in India. 100% FDI is already permitted in manufacturing of food products through automatic route. This will provide
impetus to the foreign investment in food processing sector, benefit farmers immensely and will create vast employment
opportunities.

Scheme for Agro-Marine produce Processing and Development of Agro-clusters (SAMPADA) for overall development of food
processing sector, for providing enabling infrastructure, expanding processing and preservation capacities, controlled temperature
logistics and backward and forward linkages, with an allocation of Rs.6000 Crore for a period co-terminus with 14th Finance
Commission.

AMPADA with an allocation of Rs. 6,000 crore is expected to leverage investment of Rs. 31,400 crore, handling of
334 lakh MT agro-produce valuing Rs. 1,04,125 crore, benefit 20 lakh farmers and generate 5,30,500 direct/ indirect
employment in the country by the year 2019-20.

The objective of SAMPADA is to supplement agriculture, modernize processing and decrease agri-waste.

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 SAMPADA is a comprehensive package to give a renewed thrust to the food processing sector in the country. It
includes new schemes of Infrastructure for Agro-processing Clusters, Creation of Backward and Forward Linkages and
Creation / Expansion of Food Processing & Preservation Capacities aim at development of modern infrastructure to
encourage entrepreneurs to set up food processing units based on cluster approach, provide effective and seamless backward
and forward integration for processed food industry by plugging gaps in supply chain and creation of processing and
preservation capacities and modernization/ expansion of existing food processing units.

The implementation of SAMPADA will result in creation of modern infrastructure with efficient supply chain
management from farm gate to retail outlet. It will not only provide a big boost to the growth of food processing sector in the
country but also help in providing better prices to farmers and is a big step towards doubling of farmers’ income. It will create
huge employment opportunities especially in the rural areas. It will also help in reducing wastage of agricultural produce,
increasing the processing level, availability of safe and convenient processed foods at affordable price to consumers and
enhancing the export of the processed foods.

Background:

Food Processing Sector has emerged as an important segment of the Indian economy in terms of its contribution to
GDP, employment and investment. During 2015-16, the sector constituted as much as 9.1 and 8.6 per cent of GVA in
Manufacturing and Agriculture sector respectively.

The manifesto of NDA Government stresses upon incentivizing the setting up of food processing industry for
providing better income for the farmers and creating jobs.
 Various measures have been taken by the government to give a boost to the food processing sector. With these
measures food processing sector has grown at 7 per cent. In order to arrest post-harvest losses of horticulture & non-
horticulture produce, the Ministry has accorded approval to 42 Mega Food Parks and 236 Integrated Cold Chains for creation
of modern infrastructure for the food processing along the value chain from the farm to the market. Out of 42 Mega Food
Parks, 8 are operational. Of this, 6 Mega Food Parks have been made operational during the last 3 years. Another 4 Mega
Food Parks are targeted for operationalization in next three months. Similarly, out of 236 Cold Chains, 101 Cold Chains have
been sanctioned recently in March, 2017. 100 Cold Chains have become operational. Of which, 63 Cold Chains have been
made operational during last 3 years.

Government has taken various other measures to boost food processing sector as follows:

(a) To provide impetus to investment in food processing and retail sector, govt. has allowed 100% FDI in trading
including through e-commerce, in respect of food products manufactured and / or produced in India. This will
benefit farmers immensely and will create back – end infrastructure and significant employment opportunities.
(b) The govt. has also set up a Special Fund of Rs. 2000 crore in NABARD to make available affordable credit at
concessional rate of interest to designated food parks and agro processing units in the designated food parks.
(c) Food and agro–based processing units and cold chain infrastructure have been brought under the ambit of Priority
Sector Lending (PSL) to provide additional credit for food processing activities and infrastructure thereby,
boosting food processing, reducing wastage, create employment and increasing farmers’ income.

Union Budget 2016-17 proposed 100 per cent FDI through FIPB (Foreign Investment Promotion Board) route in marketing of food products
produced and manufactured in India

The Government of India has relaxed foreign direct investment (FDI) norms for the sector, allowing up to 100 per cent FDI in food product e-
commerce through automatic route

 The Indian Council for Fertilizer and Nutrient Research (ICFNR) will adopt international best practices for research in fertiliser sector, which will enable farmers to
get good quality fertilisers at affordable rates and thereby achieve food security for the common man.

The Ministry of Food Processing Industries announced a scheme for Human Resource Development (HRD) in the food processing sector. The HRD
scheme is being implemented through State Governments under the National Mission on Food Processing. The scheme has the following four
components:

 Creation of infrastructure facilities for degree/diploma courses in food processing sector

 Entrepreneurship Development Programme (EDP)
 Food Processing Training Centres (FPTC)
 Training at recognised institutions at State/National level