A REPORT ON FOOD GRAIN SECTOR

SUBMITTED TO:

PROF. SATYA ACHARYA

SUBMITTED BY:

APOORV AGARWAL PRINCE LUKKAD RONAK AGARWAL SHIV MISHRA VARUN SINGHAL

TABLE OF CONTENT

INTRODUCTION ....................................................................................................................................... 3 GROSS CAPITAL FORMATION IN AGRICULTURE AND ALLIED SECTORS .................................................. 4 FOOD PROCESSING INDUSTRY IN INDIA ............................................................................................... 6 SIGNIFICANT CONTRIBUTION TO GDP AND EMPLOYMENT ................................................................... 7 INDIA'S STRENGTHS IN FOOD PROCESSING ................................................. Error! Bookmark not defined. HURDLES IN THE GROWTH PATH ............................................................................................................. 9 SIGNIFICANT OPPORTUNITIES-DOMESTIC MARKET AND EXPORTS ......................................................... 10 FOOD PROCESSING SEGMENTS .............................................................................................................. 10 FOOD GRAIN SECTOR ............................................................................................................................. 14 PRICE POLICY FOR AGRICULTURAL PRODUCE ......................................................................................... 21 INDIA S IMPORT AND EXPORT OF VARIOUS COMMODITIES ................................................................... 24 INDIA FACES CHALLENGES ON THIS FRONT ............................................................................................ 28 EXPORT PROMOTIONAL STRATEGY ........................................................................................................ 28 PESTAL ANALYSIS ON FOOD PROCESSING INDUSTRIES ........................................................................... 28 FIVE FORCES ANALYSIS .......................................................................................................................... 30 SWOT ANALYSIS OF FOOD PROCESSING INDUSTRY ............................................................................... 34 OPPORTUNITIES IN FOOD PROCESSING CHAIN- ..................................................................................... 35 KEY GROWTH DRIVERS OF FOOD PROCESSING SECTOR IN INDIA............................................................ 38 CONSTRAINTS ........................................................................................................................................ 38 GOVERNMENT INITIATIVES .................................................................................................................... 39 CONCLUSION ......................................................................................................................................... 43 REFERENCE- ........................................................................................................................................... 44

INTRODUCTION

Agriculture, as the largest private enterprise in India, is the lifeline of the economy. Agriculture provides the underpinning for our food and livelihood security and support for the economic growth and social transformation of the country. During 2008-09 the agricultural sector contributed to approximately 15.7 per cent of India's GDP (at 2004-05 prices) and 10.23 percent (provisional) of total exports besides providing employment to around 58.2 per cent of the work force. This has compromised the lives, livelihood and food security of the people. Therefore, there is a compelling case for increased investment in the sector. The continued high growth of agriculture is essential to meet the food and nutritional security requirements of the people and provide livelihood and income in rural areas. The overall target of GDP growth in the country for the Eleventh Plan is 9 per cent per annum with an annual average growth rate of 4 per cent in agriculture, 10-11 per cent in industry and 9-11 per cent in the services sector. The strategy for accelerating agricultural growth to 4 per cent per annum in the Eleventh Plan requires action in terms of bringing technology to the farmers, improving the efficiency of investments, increasing systems support and rationalizing subsidies, diversifying, while also protecting food security concerns, and fostering inclusiveness through a group approach, by which the poor will get better access to land, credit and skills. The total growth of GDP vis-à-vis growth rate in agriculture and allied sector from 2005-06 to 2009-10 is given in the table below:

Table:
Growth in agriculture and allied sector GDP vis-à-vis total GDP from 2005-06 to 2009-10 (at 2004-05 prices)

Year 2005-06 2006-07 2007-08 2008-09 2009-10

Total GDP 9.5 9.7 9.2 6.7 7.2

Agriculture and allied sector (%) 5.2 3.7 4.7 1.6 (-)1.2

The agriculture and allied sector GDP is likely to show a decline of 0.2 per cent during2009-10 as against the previous year's growth rate of 1.6 per cent. This is due to the impact ofoverall deficit of 23 per cent in rainfall during the south west monsoon which adversely affectedKharifproduction.The production of food grains,oilseeds and sugarcane is accordingly expectedto decline by 8 per cent, 5 per cent and 11.8 percent respectively as compared to the previousyear. Production of cotton, horticulture crops and vegetables is however expected to increase by0.2 per cent, 2.5 per cent and 4.8 per centrespectively.

GROSS CAPITAL FORMATION IN AGRICULTURE AND ALLIED SECTORS
Public investment in agriculture, in realterms, had witnessed a steady decline from theSixth Five Year Plan onwards. Analysis of trendsin public investment in agriculture and allied sectors reveal that it declined in real terms (at1999-2000 prices) from Rs.64,012 crore during the Sixth Plan (1980-85) to Rs.52,107 crore duringthe Seventh Plan (1985-90) to Rs.45,565 croreduring the Eighth Plan (1992-97), and Rs.42,226crore during Ninth Plan (1997-2002). However,this trend was reversed in the Tenth Plan (2002-07), with public investment in agriculture ofRs.67,260 crore. The share of agriculture and allied sectors in total gross capital formation has also progressively declined for nearly two decades. However, this trend has since been arrested and the share of capital formation of the agriculture and allied sectors in GDP has increased from 14.1 per cent in 2004-05 to 21.3 per cent in 2008-09 (at 2004-05 prices). The share of public investment to GDP of the agriculture and allied sectors has also increased from 2.9 per cent in 2004-05 to 3.8per cent in 2008-09 (at 2004-05 prices). The share of private investment to GDP of agriculture and allied sectors has also increased from 11.2 per cent in 2004-05 to 17.5 per cent (at 2004-05 prices) in 2008-09. Gross capital formation public and

although much slower. together with declining food prices. . The rural areas are still home to some 72 percent of the India s 1. With the exception of sugarcane. agricultural growth in the 1990s reduced rural poverty to 26. and political fabric goes well beyond this indicator. its importance in the country s economic.3 percent by 1999-2000. to build a solid foundation for a highly productive.private in agriculture and allied sectors and its percentage share to GDP of agriculture and allied sectors is given in Table below: Gross Capital Formation (GCF) Public and Private in Agriculture and Allied Sectors and its percentage share to GDP of Agriculture and Allied Sectors (at 2004-05 prices) (inRs. The Government of India places high priority on reducing poverty by raising agricultural productivity. Most of the rural poor depend on rain-fed agriculture and fragile forests for their livelihoods. The sharp rise in foodgrain production during India s Green Revolution of the 1970s enabled the country to achieve self-sufficiency in foodgrains and stave off the threat of famine. India s rice yields are one-third of China s and about half of those in Vietnam and Indonesia. internationally competitive. social. potato and tea. and diversified agricultural sector.1 billion people. however. Agricultural intensification in the 1970s to 1980s saw an increased demand for rural labor that raised rural wages and. the slowdown in agricultural growth has become a major cause for concern. However. bold action from policymakers will be required to shift away from the existing subsidy-based regime that is no longer sustainable. Sustained. a large number of whom are poor. the same is true for most other agricultural commodities. reduced rural poverty. Since then. crore) Although agriculture contributes only 21% of India s GDP.

food processing was largely confined to the food preservation. export and growth prospects. generating employment and export growth.3 % to India s GDP in 2006 and share of industrial production. fruits. India's supply strengths and rising consumption-led demand. Indian food processing industry has become an attractive destination for investors the world over. packaged/convenience food. to encourage commercialization and value addition to agricultural produce. Adeveloped Food Processing sector will help overcome the biggest challenges in front ofIndia y Low farmer income and high subsidies y High wastage along the value chain . It also include establishment of postharvest infrastructure for processing of various food items like cold storage facilities. flowers. consumption. It has started producing many new items like ready-to-eat food. packaging centres. The Food Processing Industry sector in India is one of the largest in terms of production. India produces annually 90 million tonnes of milk (highest in the world). However.3 million tonnes of fish (third largest). export and growth prospects. milk processing. irradiation facilities and modernized abattoir. export and growth prospects. India has a diverse agro-climatic regions and soil types with optimum amount of sunshine hours and day length suited for cultivating both food and commercial crops round the year. for minimizing pre/post-harvest wastage. 150 million tonnes of fruits and vegetables (second largest). alcohol beverages. the sector has widened its scope. soft drinks and grain processing. beverages.200 million eggs. 204 million tonnes of food grains (third largest). Food Processing to GDP. marine and meat products. Government's high priority to the sector coupled with agrowing consumption-led demand is leading to a fast pace growth in the sector. meat and poultry processing. drying. with a number of fiscal reliefs and incentives. hurdles in terms of wastage and highlights the opportunities in the sector for players and the government. The food processing industry provides vital linkages and synergies between industry and agriculture. fish processing. Naturally. With agriculture at the core of Indian economy and more than two-thirds of the populationdependent on farming. Annual food production in India is 602 million tonnes in which 220 million tons of cereals. pickling. packaging and transportation. consumption. value added centres. curdling. 6. vegetables. etc. food parks. a developed Food Processing sector can be a strong link betweenagriculture and the consumers. cereals. The government has accorded it a high priority. pulses etc. which mainly involved salting.FOOD PROCESSING INDUSTRY IN INDIA Food processing industry is one of the largest industry in India and ranked fifth in terms of production. The food processing industry contributed 6. consumption. processed and frozen fruit and vegetable products. Earlier. As a result. 485 million livestock (largest). etc. India is a leading producer of many agricultural products like fruits and vegetables. live-stock and seafood. 489 million poultry and 45. It is one of the major food producers in the world and has abundant availability of wide variety of crops. The Indian food processing industry is one of the largest in the world in terms of production. with emerging new markets and technologies. India has a strong agricultural production base with diverse agro-climatic conditions and arable land of 184 million hectares. over the years. India offers a huge potential in terms of rising consumption and as a sourcing hub for the world due to its supply strength. Important subsectors in food processing industries are : fruits and vegetable processing.

Also.y Poor hygiene and safety standards Food processing is the set of methods and techniques used to transform raw ingredients into food or to transform food into other forms for consumption by humans or animals either at home or by the food processing industry. pulse mills and oil-seed mills. It has been observed that employmentpotential of the food-processing sector is muchhigher than other sectors. secondary and tertiary foodprocessors.The food industry expected to grow to USD2.000 people in the paper . SIGNIFICANT CONTRIBUTION TO GDP AND EMPLOYMENT Indian food processing industry is estimated tobe around USD 67 billion. horticulture. The food processing industry is made up of primary. jobs for 48. For instance. plantation. there are several thousands of bakeries. 280 billion by 2015 and generate an additionalemployment for approximately 8.2 millionpeople.000 people in textiles and employment of 25. It also includes other industries that use agriculture inputs for manufacturing of edibleproducts. flourmills.000 people in the food processingsector. animal husbandry and fisheries. billion food industry. an investment of INR 10 billion generates employment for 54. traditionalfood units and fruit & vegetable/spice processing units in unorganized sector. Food processing is a large sector that covers activities such as agriculture. In India. Primary Food Processing is a major industry with lakhs of rice-mills/hullers. of the USD 180. making it the fifth biggest . 1.

There is also fourfold generation of indirect employment in auxiliary and other downstream activities on account of investment in the food sector. These numerous advantages and factor conditions like low cost of labour put India in anEnviable position to produce a wide variety of food crops and commercial crops fordomestic consumption as well as export. 60 percent of the employment generation takes place in 3 small towns and rural areas. . Also.industry.

The lack of processing andstorage of fruits and vegetables results in huge wastages. Processed food has a longer shelf life and reduces wastage. The country's highly favorabledemographic patterns. HURDLES IN THE GROWTH PATH In spite of the huge supply advantages.7 billion in dollar terms by4 2013 from 168. estimated at about 35 percent.India.5 percent. with a population of more than 1.1 billion. the value of which is approximately INR 33. as shown in the figure. Food consumption in India is expected to grow to 229. with more than 50 percent of the population below 30 years of age. is one of the largest consumer markets inthe world. So. Huge losses across the value chain resulting in poor processing levels arelimiting the growth the India's share in the global processed food trade.6 billion in 2007. India's share in the global food trade is still around1.000 crore 6 annually (Recent reports put the number at a much higher level). as young populationsare one of the key drivers in the demand for processed and health foods.increasing disposable income. it is imperative for the government and private players to invest in infrastructure to make India not only have sustainable food production for its growing population but also export more to the world. Food and Beverages is largest category in Indian5 consumer spending and is expected to remain in the future. urbanization and lifestyle change are likely to bring aboutchanges that will enforce shifts in the Indian food and drinks industry. .

Also.37 million Tons/Hectare for Fruits and Vegetables in 2002-03 to 10. So. These are the various segments in food processing industries in India. especially among the young and rich urban population.SIGNIFICANT OPPORTUNITIES-DOMESTIC MARKET AND EXPORTS The low share of processed food and global trade is an opportunity waiting to be tapped. with anenviable share in few categories like Mango. but also generate direct and indirect employment helping alleviaterural poverty. as fruits and vegetables form an indispensable part of healthy diet. FOOD PROCESSING SEGMENTS India's low level of processing is expected to change significantly in the future fuelled bysustained economic growth and steady urbanization. India accounts for 13 percent of vegetables and 12percent of fruits production globally.is also a key factor helping value growth over the forecast period.6 billion USD in 2005 to 95.14 million Tons/Hectare for Fruits and Vegetablesrespectively. Cashew. Processed food output is expected togrow at a strong 7 percent CAGR in terms of value from 55.94 and 16. This is an opportune time for companies to invest in quality facilities anddevelop products with features that appeal to the growing Indian consumer base and theexport markets. Premiumisation. FRUITS AND VEGETABLE PROCESSING INDUSTRIES Fruits and vegetables is one of the most important and fast growing sub-sectors of the foodprocessing sector.Increasing urbanization and rise in disposable incomes will further push demand forProcessed food. Green Peas and Onion. from a government's point of view. . Banana. Agricultural produce thatis processed for domestic consumption can not only fetch higher prices and hence higherincome for the farmers.25 and 14. the government should continue to support the industry with an enablingand growth oriented policy. The productivity has also improved from 10. Food Processing sector can help reduce theburden of subsidies and raise the farmers' income simultaneously.61 billion USD in 2013.

most animals are not bredfor meat. . India accounts for morethan half of the global buffalo population indicating a significantly high export opportunity. pigs and poultry.MEAT AND POULTRY SUPPLY India's has the largest livestock population in the world. buffaloes.India ranks among the top six egg producing and among the top five chicken producingcountries. sheep. however. Animals generally usedfor production of meat are cattle. as a vast majority of the Indian population is vegetarian.

The milk surplus states in India are Uttar Pradesh. barley and12 millets like jowar (great millet). DAIRY PROCESSING India is the largest producer of milk in the world Milk. sharing 96 percent of the totalvalue. IndianOilseed sector is one of the largest in the world.8 million tons in 2009 growing at a CAGR of 2. with a share of 40 percent. India's unique pattern of production. Karnataka and Tamil Nadu with majority of the manufacturing of milk products also concentrated in these states.32million tons in 2005-06.000 crore ofwhich INR 16. The majorsegments within Grain Processing are Oil Milling and Pulse Milling & Flour Milling.9 million tons equivalent in 2006 to 108. bajra (pearl millet) and ragi (finger millet) .0 lakh tons in the previous year. most of the broiler meat produced is used for domesticconsumption. Andhra Pradesh. Milk products production is expected toincrease from 99. while beef and veal meat is also exported.But the sector is predominantly into primary processing. maize. Maharashtra. India is next only to European Union and Chinain terms of vegetable oil imports.Grain processing is the biggest component of the food sector. Haryana. with a total turnover of INR 86. India produces all major grains . oilcakes and rice bran during 2006-07 is13 reported at 115. Rajasthan.209. Gujarat.1 million village Dairy Cooperative Societies (DCS). GRAIN PROCESSING India produces more than 200 million tons of different food grains every year . while the secondary and the tertiary sectors add 4 percent. .rice.4 lakh tons compared to 122. Punjab. processing and marketing of dairy products consist of over 11 million farmers organized into about 0.89 percent. wheat.000 crore are import/exports. consumption.As is evident from the figure. Processing The solvent extraction processing of oilseed.

pastries. changing life style. Agriculture and agro products remain the most important sector of the Indianeconomy. ready to eat and ready to cook products. The central government is working with all the states to reform policy and facilitate investment in food processing sector.Consumer food processing Consumer foods consist of packaged foods. . Bread and biscuitsconstitute the largest segment of consumer foods. breads. the government has formulated the National food processing policy and approved complete de-licensing for the sector excluding alcohol beverages. cakes. buns.4 billion USD by 2013. In short. noodles. The packaged food sales topped 13billion USD in 2007 and are expected to reach 23. South East and West Asia) In terms of policy support. rusks. rice flakes. non-alcoholic and alcoholic beverages. biscuits etc. rising per capita income. They contribute nearly one third of the GDP and account for 64% ofthe workforce. India has the following advantages in the Food Processing Sector: · India is one of the largest food producers in the world · India has diverse agro-climatic conditions and has a large and diverse raw material base suitable for food processing companies · India has huge scientific and research talent pool · A largely untapped domestic market of 1000 million consumers · 300 million upper and middle class consume processed food · 200 million more consumers expected to shift to processed food by 2010 · Well developed infrastructure and distribution network · Rapid urbanization.Packaged foods includes pasta. The sector was also declared a priority sector for lending in 1999. increased literacy. rolls.leading to rapid growth and new opportunities in food and beverages sector · Strategic geographic location (proximity of India to markets in Europe and Far East. cornflakes. increased number of women in workforce.

the monsoon remained weak and erratic during the major part of the season.03 M.27 M.T. Despite the timely onset of the south-west monsoon during 2009.T. More than 30 food parks are proposed in the country to attract foreign direct investment in this sector.18 M.T. vegetable.09. y Food parks and special agriculture zones. y Government assistance and favorable government policies.76 lakh bales during 2008. In addition to this.T.18 lakh bales during 2009-10(2nd AdvanceEstimates) against 222.T.T.57 lakh bales (2nd Advance Estimates) as against 103.09. lower compared to 99. food technology and service providers. FOOD GRAIN SECTOR The total geographical area of the country is 328.28 M. The gross and net irrigated area is 85. there was an overall deficit of 23 per cent in rainfall.56 M.Why India for Food processing? y Vast source of raw material and low production cost-India ranks first in availability of milk. achieved during 2008-09.T. during theprevious year. Production of sugarcane during 2009-10is estimated at 251.47 M.(2nd Advance Estimates) which is0. in 2008.03 M.85 Million Tonnes (MT) asper 2nd Advance Estimates compared to 234. but skilled work force could be utilized to setup production facilities. pulses and tea and second in fruits. Milk product offers significant opportunity in India as it is world s largest producer.4 MT less as compared to 80. 2009). Cotton production is estimated at 223.T. with a cropping intensity of 138 per cent. which is 11. (2nd Advance Estimates) against 285.Deficit rainfall during the south-west monsoon season affected Kharif agricultural operations during the current year. . Crop Production 1. Production of coarse cereals during 200910 is estimated at 34.T.65 lakhbales during 2008-09. during 2008-09. while 193.62 M. Production of wheat is estimated at 80. achieved during2008-09. machine makers.The national policy on food processing aims at increasing the level of food processing from 2 percent to 10 percent by end of 2010.T. The production of jute &mesta during theyear 2009-10 is estimated at 103. grams and pulses has declined while the expenditure on milk and milk products has increased.27 M. Also proportionate expenditures on staples such as cereals.7 million hectares.8 million hectares and 60.3 million hectares is the net sown area.68 M. of which 140. At the end of the south-west monsoon (1 June. with paddy suffering the most adverse impact.9 million hectares respectively. (2nd Advance Estimates) compared to the previous year'sproduction of 40.7 million hectares is the gross cropped area.The government is promoting agriculture zones and mega food parks to develop the food processing sector. y Large consumer market and changing consumer pattern-India s homogeneous market size endowed with growing income and changing life style has created market opportunities for food producers. rice and wheat.9 Production of food grains during 2009-10 is estimated at 216. 2009 to 30 September. Production of rice is estimated at 87.

78 million tonnes in 2007-08 (Table 8. cotton. from 2005-06 to 2008-09 (fourth advance estimates).4). However.88 million tonnes as against 230.Source: Department of Agriculture and Corporation CROP PRODUCTION 2008-09 8. sugarcane. jute and mesta) declined in 2008-09 compared to 2007-08 levels. the production of major commercial crops(oilseeds. Total foodgrains production in 2008-09 was estimated at 233.5 For three consecutive years. foodgrains production recorded an average annual increase of over 8 million tonnes. .

CROP PRODUCTION 2009-10 Deficiency in rainfall in the south-westmonsoon season during 2009. which is lower than the production of 273. which is 8 percent lower than the production during 2008-09 and 32 per cent lower than the targeted production for 2009-10. As per the first advance estimates (kharif only) for 2009-10. Sugarcane Sugarcane production in 2009-10 is estimated at 249. Cereals The overall production of kharif cereals in 2009-10 is expected to decline by 18.56 lakh bales in 2008-09 by 2. .83 million tonnes which is lower than the target of 125. theproduction of kharif rice is at 71. Cotton Cotton production in 2009-10 is estimated at 236.2 per cent. This is lower than the targeted production of 112. Jute and Mesta The production of jute and mesta is estimated at 102.76 milliontonnes against 28.07 lakh bales produced in 2008-09.48 million tonnes. This represents a decline of 9 per cent over the previous year and 27 per cent vis-à-vis the targeted production for 2009-10. especiallypaddy. production of food grains is estimated at 98.15 million tonnes setfor the year as also lower than the fourth advance estimates (kharif only) of 117.70 million tonnes for2008-09. Coarse Cereals Total kharif production of coarse cereals in2009-10 is expected to decline to 22. Rice As per the first advance estimates. severely affected kharif crops.65 million tonnes for kharif 2009-10. a decrease of about 15 per cent over 2008-09 levels and 17 per cent over the target for 2009-10.33 lakh tonnes in 2009-10. The recovery of monsoon in September andpostmonsoon (October-December) cumulativerainfall of 8 per cent above normal protected the kharif crops to some extent and improved the prospects ofrabi crops in 2009-10. particularly in Julyand August. which is higher than the fourth advance estimates of 231.42 million tonnes in 2009-10.34 million tonnes in 2008-09 anda target of 32. Oilseeds Total kharif production of the nine oilseeds is estimated at 152.93 million tonnes during 2008-09.57 lakh bales (of 170 kg each). Pulses Total production of kharif pulses is estimated at 4.00 lakh bales and also lower than the 104.65 million tonnes in2009-10.43 lakh bales (of 180 kg each) in 2009-10. which is about 15 per cent lower than the kharif production in 2008-09.51 million tonnes over 2008-09.

However.9 per cent per annum during 2001-08 compared to the 1990s leading to an increase in growth in production. the index of area under rice shows negative growth during the above period. Wheat The area under wheat that was around 25 million ha in 2002-03 increased to 26.41 per cent duringthe1990s to 13. However. there has been improvement in thegrowth indices of area and yield in tur and index ofarea in gram resulting in increase in the growth ofproduction. Limitations of expansion in agricultural land suggest multiple cropping as a means to increase the gross cropped area. During 2000-01 to 2008-09. Trends in indices of area.However. production and yield of different crops till 2008-09 (Base triennium ending 1981-82=100) are given in Table. Rice The compound growth index of rice yield has shown a growth of 1.64 per cent during 2001 to 2008. the growth index of yield moderated butremained positive. The compound growth indices of area. PRODUCTION AND YIELD Growth in production of agricultural crops depends upon acreage and yield.0. Trends in area and production are given in Figure. It is clear that the main source of long-term output growth can only be improvement in yields.29 per cent during the 1990s to 15. Oilseeds The growth in indices of yield and area underoilseeds has shown perceptible improvement during .48 per cent during2001-08.GROWTH RATES OF AREA.4 million ha in2005-06 and further to 28 million ha in 2008-09. The combined effect on the indexof production was an increase in growth from 2. the growth in index of area moderated butremained positive. Cotton The yield of cotton went up from 307 kg/ha in2003-04 to 419 kg/ha in 2008-09 (fourth advanceestimates). Pulses Gram and tur are the major contributors to total pulses production in the country. production andyield during 1991-2000 and 2001-08 have shown perceptible decline. The compound growth rate index of yield increased significantly from . Sugarcane The compound growth rate index of area undersugarcane increased significantly during 200108.

18 lakh ha than that in the previous year. which is 44. whichis lower by 9.47 lakh ha duringkharif 2008-09. The area coverage under sugarcane during the current year is 41. The area coverage under oilseeds during kharif 2009-10 is 175.84 lakh ha under total food grains during kharif 2009-10 compared to714.23 The area coverage of 667.85 lakh ha less than the 406.78 lakh ha.49 lakh ha than kharif 2008-09. AREA COVERAGE 2009-108.19 lakh hectares.02 lakh ha during kharif 2008-09 shows a decline of 46.2001-08 compared to the 1990s. . which is also lower by about 2.18 lakh ha. The area coverage under kharif rice during 2009-10 is around 361.62 lakh ha.

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The MSP of wheat has been raised to Rs 1.PRICE POLICY FOR AGRICULTURAL PRODUCE The Government s price policy for agricultural commodities seeks to ensure remunerative prices to the growers for their produce with a view to encouraging higher investment and production. the Governmentannounces minimum support prices (MSPs) eachseason for major agricultural commodities andorganizes purchase operations through public andcooperative agencies. The MSPs of other kharif crops have been retained at their 2008-09 levels. An incentive bonus of Rs 50per quintal is also payable over and above the MSPof paddy. The MSP of arhar (tur) has been raisedover the 2008-09 level by Rs 300 per quintal andfixed at Rs 2. and to safeguard the interests of consumers by making supplies available at reasonable prices. raising it by Rs 100 per quintal. . TheGovernment has fixed the MSPs of 2009-10 kharifand rabi crops. The MSP of sesamum has been fixed at Rs 2. The Government decides the support pricesfor various agricultural commodities after taking intoaccount the recommendations of the Commissionfor Agricultural Costs and Prices (CACP).870 per quintal and Rs1. The price policy also seeks to evolve a balanced and integrated price structure in the perspective of the overall needs of theeconomy.300 per quintal while that of moong has been raised by Rs 240 per quintal and fixed at Rs 2.760 per quintal. The MSPs of gram and safflower have been raised by Rs 30 per quintal each. The MSPs of masur and rapeseed mustard have been retained at their previous year s levels of Rs 1.850 per quintal.080 per quintal and of barley to Rs 750 per quintal from Rs 680 per quintal.830 per quintal respectively. Towards this end. The MSPs for paddy (common) andpaddy (Grade A) have been raised by Rs 100 perquintal and fixed at Rs 950 per quintal and Rs 980per quintal respectively. The designated Central nodalagencies intervene in the market to undertakeprocurement operations with the objective of ensuringthat market prices do not fall below the MSPs fixed by the Government. the viewsof State Governments and Central Ministries as wellas such other relevant factors as consideredimportant for fixation of support prices.100 per quintal from Rs 1.

47 per cent in 2008-09 (Table).1 per cent of procurement of wheat for the Central Pool in 2007-08.6 million tonnes in 2007-08.8 million tonnes in 2006-07. The nodal agency which undertakes procurement.Procurement of Food grains-The main objectives of food management are procurement of foodgrains from farmers at remunerative prices. Punjab and Haryana which accounted for 91.10 (April December). 69.53 per cent in 2009-10.7 million tonnes in 2004-05 to 34.7 per cent of the rice procured for the Central Pool in 2006-07. distribution and storage of foodgrainsis the Food Corporation of India (FCI).38 million tonnes in 2009-10 (April to December).69 million tonnes in 2008-09 and 25. As in earlier years.8 million tonnes and 22. at affordable prices and maintenance of food buffers for food security and price stability. Procurementat MSP is open-ended. 2008-09 and 2009-10 (April December) has resulted in comfortable food stock availability to meet the TPDS needs and buffer stocks norms. Uttar Pradesh and Andhra Pradesh. while distribution is governedby the scale of allocation and its offtake by the beneficiaries.46 per cent in 2007-08 and 67. particularly the vulnerable sections of society.8 milliontonnes in 2008-09. .9 million tonnes in 2009. These four States accounted for nearly 69. procurement of food grains by the FCI continues to be higher in the States ofPunjab. Offtake of foodgrains under the TPDS has beenincreasing in the last five years and has gone upfrom 29.As regards rice. Haryana. The offtake of foodgrains is primarilyunder the targeted public distribution system(TPDS)and for other welfare schemes of the Government ofIndia. indicating an increased share in procurement by other states (Table). Howeverincreased MSP along with various other steps taken by the Government has resulted in record wheat procurement of 22. accounted for 66. The overall procurement of coarse grains in the kharif marketing season (KMS) 2008-09 hasincreased to 13.88 per cent in 2008-09 and 69. The instruments used are the MSP and central issue price (CIP). increased marginally to 37. the procurement in 2008-09 was 32. Overall procurement of rice and wheat which was 35. The record procurement of rice and wheat during 2007-08. distribution of foodgrains to consumers.75 lakh tonnes due to a substantial increase in MSPs of coarse grains in KMS 2008-09.

Provision of minimum nutritional support to the poor through subsidized foodgrains and ensuring price stability in different States are the twin objectives of the food security system. the issue price has been kept unchanged since July 1. . therefore. continues to provide large amount of subsidy on foodgrains for distribution under the TPDS. other nutrition-based welfare schemes and open market operations. In fulfilling its obligation towards distributive justice. While the economic cost of wheat and rice has gone up continuously. The Government. the Government incurs food subsidy. 2002.

The report attributes the status to India's immense landmass and availability of a largenumber of commodities. However. expects India to be a net food exporter to 2013. .8 percent over 2008 to USD 24. BMIIndia Food and Drink Report for Q1 2009. India is a net exporter of agricultural products. At an overall Food and Beverage level.INDIA S IMPORT AND EXPORT OF VARIOUS COMMODITIESSupported by a committed government in improving the food trade and providing aconducive atmosphere for agriculture.import growth of food products in India is also expected to be strong over the forecastperiod. the export1 of processed segments is growing much faster as shown in the figure . to reach USD 12. exports are expected to increaseby 72. Over the forecast period to 2013. in spite of vast natural resources.3 billion by 2013.25 billion.

were formed for promoting exports from India.4percent. The table below shows the key segments and theproduction and Export/Import over the last two years. the US is the world's leading food exporterfollowed by Netherlands. Grain Processing The grain processing sector. France and Brazil in the top five. India is a major exporter in the Food Industry and imports less. y Foreign equity participation of 51 percent is permitted for cold chain projects. Basmati Rice is gaining traction in the Indian market and commands apremium in the export market as well. has a limited exportsfocus.Two nodal agencies. with a 1. The exports aregrowing at over 15 percent y-o-y with 2007 growth a high 29 percent. India stands a distant 21st for the year 2007. India's share in the global exports have increased from 1. y There is no restriction on import of cold storage equipment or establishing cold storages in India. the majority of the increase happening in this decade. Germany. y National Horticulture Board (NHB) operates a capital investment subsidy scheme (CISS) that subsidies the promoter. In spite of the supplyadvantages. MPEDA is responsible for overseeing all fish and fishery product exports. .1 percent to just 1. However. During the period1980-2007. The Government of India (GOI) hasaccorded high priority to the establishment of cold chains and encourages major initiativesin this sector. with 96 percent Primary Processing. other processedfood product exports are the responsibility of APEDA.4 percent share in theglobal trade. According to the WTO statistical database. APEDA and MPEDA.

Achieving the target for exports is dependent on the raw materialsupply. pastes. India needs to promote value addition.200 per ton and alsoimposed an export tax of USD 200 per ton to discourage exports and conserve domesticsupplies but has since revoked the export tax. surimi.2 percent of the total export ascompared to that of ribbon fish (which is the raw material for surimi) which is priced at INR4 25/kg and enjoying an export share of 18.textured products and dry fish. value addition and adherence to quality control regulations. The export has been strong with frozen shrimp continuing the largest item interms of volume. are the major exportdestinations. South East Asia. thereis considerable scope for boost of marine exports through value addition. Also. 70 percent of Indian sea food exports constitute fish and shrimp in various forms and shrimp alone accounts for 71. etc. and it now recognizes even thoserice varieties as 'evolved basmati' which have at least one traditional basmati grandparent. Though production is expected to remainstagnant during the year as compared to last year. European Union. product diversification. optimum capacity utilization of processing industries. theshare of fish surimi which is priced at INR 68/kg.1003 per ton . cakes. the exports of cereals and rice isexpected to slightly increase. USA. However value added products comprise of a smaller share and the major share of the present export in volumetric terms is in bulk form. Japan. Middle East etc. The share of export of shrimp in blockfrozen form is around 22 percent as against 2. . minced fish products like fish sausage.3 percent . and lowered the export floor to USD 1. be more export-driven by promoting products like fresh surimi. by extending the classification.In view of the supply and growth potential of the sector.2 percent in IQF form. is only 3.The major exports segments are cereals and rice. India has expanded the basket for Basmati rice.5 percent of the value of exports4. The Indiangovernment last year expanded the definition of basmati. instant quickfrozen products. This is expected to further boost exports.Processed fish products for export include: conventional block frozen products. Government of India has set atarget to increase fisheries export from INR 6000 crore to INR 14000 crore during the XIFive Year Plan Period. Similarly. China. cutlets. and raise the share of IQF products that claim a higher price to boost trade. The unit value of IQFproducts being INR 475 per kg as against INR 194 per kg for the block frozen shrimp. India had last year set the export floor for basmati at USD 1.

Belgium and Germany. These markets aredominated by OECD countries. an export-oriented growth strategy will need to support the private players at the expense of the Dairy Cooperative Societies. Private sector targets very narrow segment of exports and emerging urban areas. 45 percent of USA imports are from Canada and Mexico. some of whom provide a very high level of support to theirdomestic producers which are unlikely to be scaled down in the near future. Singapore. This would seriously affect the dairy farmers unless government comes up with innovative measures to produce surplus milk at low cost at global quality standards. SPS and TBTclauses are stringent and make the export markets protective. Italy. . For example. where the sector is strongly controlled by cooperatives. In the current scenario. Globally. storage facilitiesinfrastructure bottleneck prevent the segment from growing in exports. Japan. Also. France. most of the countries import from countries that are geographically closer. India exports mostly to the proximate countries. Another 50 percent is accounted by select Cairns group countries. Netherlands. Thailand. India's geographical situation gives it the unique advantage of connectivity to Europe. the Middle East. EU imports 50 percent from Spain. Malaysia and Korea. INDIA'S FOOD PROCESSING TRADE BY GEOGRAPHY The Indian food processing industry is primarily export oriented. while another 25 percent is accounted by select Cairns group countries.MILK PROCESSING- Milk and milk products are produced for domestic consumption. India's share inexports of dairy products in international market is insignificant.

the ministry of food processing has taken the following initiatives: y y y y y Formulation of the National Food Processing Policy Complete de-licensing. the apples produced in Himachal Pradesh are of table variety and not of the processing grade. known as the fruit bowl of the country. For example. but also low level of processing and value addition.000 hectares of land under horticulture cultivation yielding about half a million tons of different kinds of fruit. farmers in HimachalPradesh are increasingly moving towards commercial cultivation amongst which one of the most preferred crops. peaches. y y y y Presence of too many intermediaries implying a high cost of raw material High costs of packaging Low technology equipment and knowledge High costs and poor quality of distribution EXPORT PROMOTIONAL STRATEGYIndia needs to map demand with production capabilities. has approximately 200. almonds and plums are the major commercial crops of Himachal Pradesh. While apple is the main fruit crop. cherries. PESTAL ANALYSIS ON FOOD PROCESSING INDUSTRIESPOLITICAL In terms of policy support. Himachal Pradesh. Improved knowledge on processing grade will improve supply of such products and fetch remunerative prices for the farmers. There are not enough grading facilities in India that can separate class A products from the rest.INDIA FACES CHALLENGES ON THIS FRONT: Poor quality and grading mechanisms for raw material leading to loss of consistency in variety of raw material. This not only leads to wastage and higher costs for processors. Recently the production of apple has been severely affected by adverse climatic changes. other fruits like pears. High level of wastage across the value chain India is still a production-supply driven market and not a market demand driven. excluding for alcoholic beverages Declared as priority sector for lending in 1999 100% FDI on automatic route Excise duty waived on fruits and vegetables processing from 2000 01 . The state earns more than INR 25 billion from cultivation of fruits and vegetables. As an alternate. leading to lower realization for farmers. apricots.

as the market is still to explore. The domestic market for processed food is huge and fast growing.y y y y y y Income tax holiday for fruits and vegetables processing from 2004 05 Customs duty reduced on freezer van from 20% to 10% from 2005 06 Implementation of Fruit Products Order Implementation of Meat Food Products Order Enactment of FSS Bill 2005 Food Safety and Standards Bill. 2005 Apart from these initiatives. The retail boom will create a huge demand for the foodprocessing sector in the coming years. LEGAL y y y Legal aspect has important role in grain sector act such as MRTP has been relaxed n made more flexible There is continuous improvement in TPM and TQM Legal document such as standardization sheet are required to meet the customer need ENVIRONMENT y y y y y y Opportunity to trade globally Conducive working environment Subsidy provided by the government encourage development in this sector Increased infrastructure Vast domestic market Various initiative and assistance in project make this sector more investor friendly .000 crore. the Centre has requested state Governments to undertake the following reforms: y y y y Amendment to the APMC Act Lowering of VAT rates Declaring the industry as seasonal Integrate the promotional structure ECONOMIC The size of the Indian urban food market is estimated at Rs 350. Though. it has now started discovering the money there is to be made in the urban food retailing market. The private sector is yet to realize its full potential in the food-retailing sector. Little wonder that 2007 has been designated the Year of Food Technology.

Entry barriers into the industry are quite low. y y y y Reducing the Threat of New Entrants Enhancing the marketing/brand image. utilizing patents. except intrinsic physical or legal obstacles. investment into technology for oil processing because the grant is given for rice milling and flour milling only. new entrants have to introduce something new or something innovative to enter into the market. Without strong brand loyalty.e. The production of food grains is increasing but the capacity of processing is not increasing. Distribution channels: for example. Switching costs are low as there are many suppliers in the industry. Development and regulation. The most common forms of entry barriers for food grain processing. 1951. Customers have little brand loyalty. and large amounts of capital to launch massive advertising campaigns. and creating alliances with associated products can minimize the threat of new entrants. a potential competitor has to spend little to overcome the advertising and service programs of existing firms and is more likely to enter the industry. There is one more reason for low entry barrier i. access to distribution channels. Cost advantages not related to the size of the company: for example. . There is also high potential for incentives if these small industries are able to succeed. so there is also a gate open for new entrants. are as follows: y y y y Cost of entry: for example. Start-up costs are low for new firms entering the industry as ministry is giving grant for rice and flour milling. because most of the processed food items have been exempted from the purview of licensing under the Industries. A few opportunities associated with potential entrants is that established firms can take advantage of economies of scale in production. for the focused growth of the 'pulse milling and flour milling' sector. the Ministry is providing financial assistance to the grain processing industries for its setting up/ expansion/ modernization in the form of grant. Differentiation: for example. ease of access for competitors. Both of these facts can be considered threats to large established industries. contacts and expertise. Act.FIVE FORCES ANALYSIS THREAT OF NEW ENTRANTS The threat of new entrants is an issue that large industry cannot ignore. India s comparatively cheaper workforce can be effectively utilized to setup large low cost production bases for domestic and export markets.. Factors Affecting the Threat of New Entrants The threat of new entrants is greatest when: Processes are not protected by regulations or patents. certain brand that cannot be copied i. Competitors may enter the industry if there are excess profits.e.

POWER OF BUYERS Buyers have the most power when they are large and purchase much of your output. Factors Influencing the Bargaining Power of Buyers Buyers have more power in this industry because: The industry has many small companies supplying the product and buyers are few and large. and with little cost. A threat involved with the power of suppliers is that suppliers can fairly easily integrate forward into the industry and become a rival. and costs. POWER OF SUPPLIER The suppliers have little power because there are numerous throughout India that industry can choose who to buy from. The most important determinants of buyer power are the size and the concentration of customers. The firm has less room for negotiation if buyers know market demand. but they will purchase if they are selling it again to a retailer. if the firm can select the customers who have little knowledge of the market and have less power. y y Reducing the Bargaining Power of Buyers The firm can reduce the bargaining power of their customers by increasing their loyalty by selling directly to consumers. The bargaining power of buyers is high where there is a large number of undifferentiated small suppliers. switch to another product. or increasing the inherent or perceived value of a product by adding features or branding. due to competition when Agro Tech Foods launched their lower-priced blended oil under Sundrop umbrella they acquired mass market in edible oils. If the brand is homogenous or similar to all of the others. In addition. they will have significant leverage to negotiate lower prices and other favorable terms because the threat of losing an important buyer puts you in a weak position. so this would be considered an opportunity for industry. prices. y Customers can easily. Buyers also have power if they can play suppliers against each other. Customers may not purchase a barrel of oil. The products represent a relatively large expense for the customers. y The firm s product is not unique and can be purchased from other suppliers. y The retailers have access to and are able to evaluate market information. If your business sells to a few large buyers. For example. buyers will base their decision mainly on price. .setting a price that earns positive but not excessive profits could lessen the threat of new entry in the industry. the firm can enhance their profitability.

and supplier s costs. It is difficult for the firm to switch to another supplier. then the firm is in a weak position and may has to pay a higher price or accept a lower level of quality or service. Conversely. They are less able to negotiate if they have little information about market demand. If the force is weak. Factors Affecting the Bargaining Power of Suppliers Suppliers have the most power when: The input(s) the firm requires are available only from a small number of suppliers. retooling and redesigning that are incurred when a customer switches to a different type of product or service. Threat of substitutes The threat that substitute products pose to an industry's profitability depends on the relative price-toperformance ratios of the different types of products or services to which customers can turn to satisfy the same basic need. thus they will have less bargaining power with their supplier. form a buying group of small producers to buy as one large-volume customer. then the firm may be able to negotiate a favorable business deal for themselves. there are many suppliers for raw materials like in flour milling. The inputs the firm requires are unique. If the firm has the resources. changing to another supplier may require the firm to change their entire manufacturing process. The cost of the inputs can have a significant effect on the industry s profitability. they may choose to integrate back and produce their own inputs by purchasing one of their key suppliers or doing the production their self. In the food grain processing industry. Reducing the Bargaining Power of Suppliers To increase the firm s power. raw materials. If a firm produces a commodity product that is undifferentiated. the costs in areas such as retraining. prices. For instance. the firm can buy wheat directly from the farmers or ITC or the wholesaler. Products from one business can be replaced by products from another. if the force is strong. So the force is weak and the firm is able to negotiate a favorable business deal. The threat of substitution is also affected by switching costs that is. Whether the strength of suppliers represents a weak or a strong force hinges on the amount of bargaining power they can exert and. If the firm uses a certain enzyme in a food manufacturing process.Every business requires inputs labor. customers can easily switch . services etc. for example Jaora Gold . This may be very costly to the firm. rice mainly produced in southern region of the country so the rice milling firm in northern region has small number of suppliers. making it costly to switch suppliers. parts. ultimately. Suppliers would prefer to sell to the firm at the highest price possible or provide the firm with no more services than necessary. The firm does not have a full understanding of their supplier s market. on how they can influence the terms and conditions of transactions in their favor.

is based on the substitution of need. an industry with two or three dominant firms may experience intense rivalry when these firms are battling to achieve market leader status. and prices may fall below break-even levels. Factors Affecting the Threat of Substitution Substitutes are a greater threat when: A firm s product doesn t offer any real benefit compared to other products. provide fewer products for the price. when competitors with diverse strategies and relationships have different goals and the rules of the game are not well established. What will hold their customers if they can get an identical product from their competitor? Customers have little loyalty. If the competitive force is weak. Substitute products are those that can fulfill a similar need to the one that a firm s product fills. there may be a distinct penalty for switching if their product is unique or essential for their customer s business. In that case. and earn more profits. Factors Influencing Rivalry among Competitors The most intense rivalries occur when: One firm or a small number of firms have incentive to try and become the market leader. or creating a stronger brand image than competitors. the threat of substitutes is greater. Rivalries can occur on various playing fields. rivalry will be more intense. it may be necessary to enhance product offerings to keep customers. they may go to another supplier. competition may be about offering customers the most attractive combination of good ingredients. the advertising required to differentiate is more than one firm can bear. Reducing the Threat of Substitutes The firm can reduce the threat of substitutes by using tactics such as staying closely in tune with customer preferences and differentiating their product by branding. In food grain processing industries.It also involves: Product-for-product substitution (soya oil for groundnut oil). . In other industries. In some cases.away from their product to a competitor s product with few consequences. a family restaurant may prefer to buy the processed pulse by a firm. In contrast. but can vary widely among industries. companies may be able to raise prices. rivalries are centered on price competition especially industries that sell edible oils. collective advertising for an industry may be more effective. When price is the customer s primary motivator. If competition is intense. but if given a better deal. RIVALRY AMONG COMPETING FIRMS IN INDUSTRY Rivalry among competitors is often the strongest of the five competitive forces. groundnut oil). In some cases. As an example. for example the Agro Tech Foods launched their lower priced Sundrop edible oil. In other situations. Substitution that relates to something that people can do without (soya oil.

distributing your product in a novel channel.For example the government is providing grants for establishing new flour and rice milling. Undifferentiated products (commodities) compete mainly on price. Products are not unique or homogenous. Reducing the Threat of Rivals Threats of rivals can be reduced by employing a variety of tactics. or trying to form stronger relationships and build customer loyalty. In these situations. There are high fixed costs of production. This may tempt companies to drastically cut prices when there is excess capacity in the industry in order to sell greater volumes of product. Because firms do not experience any insulation from price competition. there is more likely to be active rivalry. the businesses in the industry will be vying for market share. distinguish the product from the competitors by innovating or improving features. Other tactics include focusing on a unique segment of the market. Sellers are more likely to price aggressively if they risk losing inventory due to spoilage or if storage costs are high. SWOT ANALYSIS OF FOOD PROCESSING INDUSTRY STRENGTHS Abundant availability of raw material Priority sector status for agro-processing given by the central Government Vast network of manufacturing facilities all over the country Vast domestic market WEAKNESSES Low availability of adequate infrastructural facilities Lack of adequate quality control and testing methods as per international standards Inefficient supply chain due to a large number of intermediaries . Products are perishable and need to be sold quickly. When a large percentage of the cost to produce products is independent of the number of units produced. To minimize price competition. Intense rivalry is likely when customers in a given industry can easily switch to other suppliers. because consumers receive the same value from the products of different firms. Customers can easily switch between products. businesses are pressured to produce larger volumes.

It is important to note that the value chain need not be sequential as shown and can jump a level or two in a few cases. Seasonality of raw material OPPORTUNITIES Large crop and material base offering a vast potential for agro processing activities Setting of SEZ/AEZ and food parks for providing added incentive to develop greenfield projects Rising income levels and changing consumption patterns Favourable demographic profile and changing lifestyles Integration of development in contemporary technologies such as electronics. offer vast scope for rapid improvement and progress Opening of global markets THREATS Affordability and cultural preferences of fresh food High inventory carrying cost High taxation High packaging cost OPPORTUNITIES IN FOOD PROCESSING CHAIN Depicted below is a generic representation of Food value chain. It involves multiple steps and relationships between multiple players with multiple ministries and departments providing policy and regulatory support. Inadequately developed linkages between R&D labs and industry. material science. bio-technology etc. .High requirement of working capital.

PepsiCo and Cadbury's examples of contract farming in India can be a model for others to follow. Farmers. increase processing levels and hence value addition. With organized retail penetration increasing and government's proposed mega food parks obviating the need foran intermediary. .Farm input Companies that provide farm equipment. Farmers can also choose to sell the crop directly to the consumers dependingupon the nature of the crop. seeds. tomatoes and oranges for example. 2. if they are big enough and/or nearer tothe processor.Eighty percent of India's 115 million farms are situated on plots of less than 2 ha. or are under a direct procurement contract etc. India still produces varieties of crops. We import apples from USA as the apples of Himachal Pradesh lack enough juice for processing. 3. price realization and minimizing wastage. Lack of infrastructure is a major roadblock impeding the growth of the processed food segment. labor and investment. it is imperative that investments in infrastructure are a must and should have favorable policy framework and fiscal incentives. Farming Agricultural production combines the farm inputs with other inputs such as land. distribution and marketing. Investment in infrastructure through PPP. The lack of production and identification of items with commercial viability contributes to the significant wastage. The key attributes that help sell the final goods to the consumers are design. can directly sell to theprocessor. Contract Farming is an opportunity for the processors that will help in better handling. Consumers can be individual or institutions. Process able varieties of crops. The potato farming initiated by Pepsi in Jharkhand can be useful in making potato chips that can be supplied to food chains like Mc Donald's and others. Processors to Consumers The processor does some value addition to the primary foodsand delivers processed food to consumers with the help of Logistics providers and Retailoutlets. At an overarching level is the government policy that provides an enabling environment for all players to function in the industry competitively and in a socially responsible manner Key Opportunities1.India is blessed with multiple agri-climatic zones and has advantages of round-the-year cultivation capability. and Knowledge about the market. that are not commercially viable for producers. fertilizers etc. Infrastructure Both hard and soft. Enablers: At each stage of the process. Transport. A little over 1 percent of all farms are larger than 10 hectares and these constitute 15 percent of the cultivated land. Quality and Safety certifications.Marketing/Aggregator Farmers usually sell the crop to a market aggregator who buys frommultiple farmers and sells to a processor. With a lot of emphasis on value addition in food processing.. Contract forming. India needs to focus on more process able variety of crops to reduce wastage. the players are supported by a set of business enablers like Financing.Government has announced various policy measures and tax incentives for cold chain and warehousing.water. Food Parks and Agri -Export Zones to augment the storage and processing capacity.

there will be a need for Food Safety certifyingagencies (for ISO 22000) authorized by the importing countriesor standards setting boards.development will take place. unavailability of cold storages in close proximity to farms. With a chain developing from the farm gate to the retail shelves with collection and distribution centers and central processing centers in between. The opportunity in food processing industry is significant. etc. grading and packaging along with irradiation. poor transportation infrastructure. food incubationcum. The parks would be set up through private consultants with the government providing grants of up to INR 1 500 million each. where functions like sorting. Each mega food park will have a minimum catchment area of five districts. but so are the challenges that ail the sector.MEGA FOOD PARKS Lot many State governments have taken the policy directive from the center and have planned Mega Food parks with associated fiscal incentives. About 30 percent of the fruits and vegetables grown in India (40 million tons amounting to USD 13 billion) get wasted annually due to gaps in the cold chain such as poor infrastructure. INTEGRATED COLD CHAIN India wastes more fruits and vegetables than it consumes. Certain limitations could be seen as an opportunity waiting to be exploited for the allied sectors and others as a guiding light to a roadmap for government's intervention. insufficient cold storage capacity. This move will also help farmers realize better prices by removing intermediaries. . Food Safety Management Systems Food safety is a growing concern across both developed anddeveloping nations. Foodretailers/Independent bodies/Exporters should take theinitiative in educating the backward linkages. The proposed mega-food parks will be between 10 and 100 hectares in size and 30 locations across India had already been identified. the food processing ministry hopes this initiative to be a commercial success. Goingforward. The proposed food parks aim to bring together all players in the value chain together so as to minimize waste and improve value addition in the industry. The processors also will be benefited by a better inventory management and production planning. This results in instability in prices. The introduction of Sanitary andPhytosanitary Agreement and stringent safety regulations means the Indian Processors/Producers should beknowledgeable of the Food Safety requirements. farmers not getting 2 remunerative prices and rural impoverishment. Government plans to encourage setting up of Integrated Cold Chain facilities to improve storage and reduce waste by not missing any link in the value chain from the farmer to the consumer/retailer.

fresh or processed foods Organised retail and private label penetration Changing demographics and rising disposable incomes Increased urbanization Improved standards of living Increasing disposable income Emergence of organised food retail Changing lifestyles and food consumption patterns CONSTRAINTS: y y y y y y y y y y y y y y y y y y Low income and the high share of basic food in the household consumption expenditure Easy availability of raw materials for cooking. preference for consumption of food at home etc. Inability to attract investment by large corporate houses who complain of unreliable sources of supply of raw material. etc Lack of adequate quality control and testing infrastructure Inefficient supply chain and involvement of middlemen High inventory carrying cost High taxation High packaging cost Access to Credit for farmers as well as small and medium food processors is a key issue. Lack of access to modern technology. APMC Act which restricts sourcing materials from farmers. In-adequate infrastructure for sorting.KEY GROWTH DRIVERS OF FOOD PROCESSING SECTOR IN INDIA: y y y y y y y y y y y Increasing spending on health and nutritional foods. technology and market arrivals. Over 75% rely on informal credit at very high interest rates leading to increase in cost of production affecting competitiveness. Increasing number of nuclear families and working women Changing lifestyle Functional foods. Low productivity. Inability of Government Schemes to have the desired impact on productivity. Lack of suitable infrastructure in terms of warehousing. Lack of trained man power for various stages of processing. . Lack of a common policy on Contract farming. grading. marketing and branding. storage. packing etc. in addition to the high cost of raw material (at processors level). high wastage.

. Excise duty on reefer vans (refrigerated motor vehicles) has been reduced from 16% to 8%. fish and poultry. Excise duty on aerated drinks has been reduced from 24% to 16%.00 crore to 1. NABARD has created a refinancing window with a corpus of Rupees one thousand crore for agro processing infrastructure and market development. the Centre has requested state Governments to undertake the following reforms: y y y y Amendment to the APMC Act Lowering of VAT rates Declaring the industry as seasonal Integrate the promotional structure POLICY INITIATIVES Several policy initiatives have been taken from time to time to promote growth of the processed food sector in the country. Licensing powers have been delegated to regional offices under Fruit Products Order. 1955. Automatic approval for foreign equity upto 100% is available for most of the processed food items excepting alcohol and beer and those reserved for small scale sector subject to certain conditions. Excise duty on ready to eat packaged foods and instant food mixes. preparations of meat. Government has included food processing industries in the list of priority sector for bank lending. 2001-02. ice cream. In the Budget of 2004-05 income tax holiday and other concessions were announced for certain categories of food processing industries. pasta and yeast. In the Budget 2006-07 excise duty has been waived on condensed milk. Food processing industries were included in the list of priority sector for bank lending in 1999. Excise duty on processed fruit and vegetables has been brought down from 16% to zero level in the Budget.50 crores. 1951. Exemption limit of excise duty for small scale industry has been raised from Rs. except items reserved for small-scale sector and alcoholic beverages. In Budget 2007-08 excise duty has been waived on all kinds of food mixes including instant mixes. Fruit and vegetable processing units are already exempted from payment of excise duty. 2005 Apart from these initiatives. Soya Bari. 1. (Food supplement) and ready to eat packaged foods and on Biscuits. pectins. To ensure easy availability of credit. like dosa and idli mixes have been reduced from 16% to 8%.GOVERNMENT INITIATIVESy Formulation of the National Food Processing Policy y Excise duty waived on fruits & vegetables processing from 2000 01 y Income tax holiday for fruits & vegetables processing from 2004 05 y Food Safety & Standards Bill. Some of these are: y y y y y y y y y y Most of the processed food items have been exempted from the purview of licensing under the Industries (Development & Regulation) Act.

An Integrated Food Law i. The Institute will be of international standards. Human Resource Development to meet the growing requirement of managers. . Sevottam. 2006 has been notified on 24. Widening the R&D base in food processing by involvement of various D institutes and support to various D activities.e. entrepreneurs and skilled workers in the food processing industry. Entrepreneurship and Management (NIFTEM) at Kundli in Haryana. Charter mark in service delivery for excellence is being introduced in the Ministry. The Act will enable in removing multiplicity of food. REGULATORY INITIATIVES The Ministry regulates the fruit and meat processing industry through the following regulatory orders: y y Implementation of Fruit Products Order (FPO). Central sales tax reduced from 4% to 3%. Institute will start functioning from academic year beginning from July 2009. DEVELOPMENTAL INITIATIVES y y y y y y y y y Providing assistance under various Plan schemes to Food Processing Industries.2006. Decentralization of processing and disbursement of grant under Scheme for Technology Up gradation / expansion / modernization of food processing industries through Bank financial institutions. Special additional duty of 4% has been waived in the case of refined edible oil. duty on sunflower oil (crude) reduced from 65% to 50% and on sunflower oil (refined) reduced from 75% to 60%. Assistance for setting up analytical and testing laboratories.y y y y Customs duty on refrigerated motor vehicles has been waived while customs duty on food processing machinery reduced from 7. Implementation of Meat Food Product Order (MFPO).5% to 5%. 50 lakhs have been exempted from service tax for the first three years. 1973. Ministry of Health & Family Welfare has been designated as the nodal Ministry for administration and implementation of the Act. 1955.08. active participation in the laying down of food standards and their harmonization with international standards. Food Safety and Standards Act. All services provided by Technology Business Incubators and their Incubatees whose annual business turnover do not exceed Rs. Laws and regulatory agencies and will provide single window to food processing sector. Ministry has set up a national level institute called National Institute of Food Technology.

Second Green Revolution in Agriculture The first Green Revolution has run its course. On the Infrastructure front. Some packaged foods which are of daily necessities. Comprehensive National Level policy on Food Processing The comprehensive policy will ensure private sector investment in infrastructure development. there is paramount need to take big ticket measures to catapult the growth of food processing sector and take to the high growth trajectory. holding this sector back are impaired access to credit. Even today we are grappling with issues of quality and quantity of raw produce. constraints in land availability and low labor productivity with slow adoption of technology. we have supply chain and wastage related problems and low levels of value addition etc. be classified at lower rate of taxation. Implementation of GST as per the set deadline Government should ensure timely implementation of GST to provide incentive to the food processing sector. Inter-Ministerial Working Group to Address the Issues The Government should set up Inter Ministerial Working Group (IMWG) under the leadership of Ministry of Food Processing to look at comprehensively addressing various issues that are holding this sector back. This high end initiative requires commitment from all the stakeholders in the food value chain. at the Center and at the State level to work as one single cohesive unit. inconsistency in state and central polices. Cereal yields are rising very slowly. the Government initiatives aimed at bringing about regulatory reforms and infrastructure development in agriculture marketing and private sector investment in infrastructure creation have created the much desired vibrancy in the sector in recent times. increasing farm productivity and up gradation of quality and give further impetus to the food processing sector. which requires all of us.CHALLENGES: It has been repeatedly emphasized time and again that this sector offers immense opportunities across the entire value chain. However. Policy Intervention needed:Whilst. The other issues of concern. fragmentation of land holdings. . and agricultural growth is also low. Implementation of all the Provisions of Model Act across all States/UT s. however. we still have some way to go before we are able to grab these opportunities. while removing subjectivity in treatment and classification of various food products. Implementation of Food Safety and Standards Act (FSS Act) Government should ensure the enforcement of the Food Safety and Standards Act in spirit including increasing radically the number of trained inspectors and state of the art lab facilities. India needs a second Green Revolution in India which takes rice and wheat cultivators beyond the grain production stage to agro-food processing and gives value addition. water tables are plunging.

SelfHelp Groups (SHGs) or Joint Liability Groups (JLGs) of individual farmers without limit and to others (such as corporates. fishery. must be created so that no separate rules and regulations comes from different ministries to impact the sector without due deliberations.) directly to individual farmers. Small and Medium Enterprises Development Act. meals (edible). the Reserve Bank of India (RBI) has come out with revised guidelines on priority sector lending which take into account the revised definition of small and micro enterprises as per the Micro. . etc. piggery. Indirect finance to agriculture shall include loans given for agriculture and allied activities. to lend credit to food processing industries. with the issue of lack of access to credit from banks. bee-keeping. malt extract. confectionery (including cocoa processing and chocolate). partnership firms and institutions) up to the limits indicated in Section I. All Industry incentives under single window clearance. poultry. As per the revised guidelines RBI will allow banks to include direct finance to companies for agriculture and allied activity of up to Rs1 crore as priority sector lending (PSL) exposure as against the earlier exposure of Rs20 lakh. always grappling.One of major issues holding the sector back is the non-implementation of all the provisions of the Model Act across all the sates/UT s. A nodal body under Food processing Industry with single window clearance of all issues. Government should bring all Industry incentive policies under single window clearance. high protein food. FINANCIAL AND BANKING POLICIESThe following items within the food and agro-based processing sector would be eligible for classification as priority sector for lending by banks: y y y y y y y y y Fruit and vegetable processing industry· Food grain milling industry Dairy products Processing of poultry and eggs. meat products Fish processing· Bread. breakfast foods. oilseeds. on the lines of NABARD. 2006. Direct finance to agriculture shall include short. This will ensure speedily disbursals of the funds to food processing sector. Credit Access to Food Processing Industries The Government should establish a National bank. biscuits. for taking up agriculture/allied activities. protein isolate. weaning food and extruded/other ready to eat food products Aerated water/soft drinks and other processed foods· Special packaging for food processing industries Technical assistance and advice to food processing industries Based on the recommendations of an Internal Working Group. The Government should ensure speedily implementation of all the provisions of the act. medium and long term loans given for agriculture and allied activities (dairy.

Education loans include loans and advances granted to only individuals for educational purposes up to Rs10 lakh for studies in India and Rs. and all other service enterprises.20 lakh for studies abroad.Direct finance to small enterprises shall include all loans given to micro and small (manufacturing) enterprises engaged in manufacture/ production. Indirect finance to small enterprises shall include finance to any person providing inputs to or marketing the output of artisans. Provision of credit and other financial services and products of very small amounts not exceeding Rs. appended. professional & self-employed persons.50. Retail Trade shall include retail traders/private retail traders dealing in essential commodities (fair price shops). and whose investment in plant and machinery and equipment (original cost excluding land and building and such items as mentioned therein) respectively.000 per borrower. does not exceed the amounts specified in Section I. village and cottage industries. either directly or indirectly through a SHG/JLG mechanism or to NBFC/MFI for on-lending up to Rs. processing or preservation of goods. The favorable policy environment and increasing interest of corporate in agro food processing sector. which is well on track to become one of the leading food nations of the world. will constitute micro credit.1 lakh in rural and semi-urban areas and up to Rs. and consumer co-operative stores. handlooms and to cooperatives of producers in this sector. and micro and small (service) enterprises engaged in providing or rendering of services. small business. augurs well for India. and do not include those granted to institutions.000 per borrower.50.20 lakh to individuals for purchase/construction of dwelling unit per family. Loans up to Rs. The industry needs larger companies. At present small players dominate the Indian food processing industry.2 lakh in urban and metropolitan areas. CONCLUSION Indian food industry is making an important mark in the global food arena as a large producer and exporter of agro food products. . which have financial muscle for establishing a large market network and also to invest in technology. (excluding loans granted by banks to their own employees) and loans given for repairs to the damaged dwelling units of families up to Rs. The micro and small (service) enterprises shall include small road & water transport operators.

agricoop.cifti.nic. 7.agri. 2.rbi.in www.com www.in www.fciweb. 10. 3.com .com www.com www.REFERENCE 1.fcinez.nic. www.com www.org. 9. 4. 11.in www.in www.mofpi.wikipedia.in www. 8.nic.nic.dacnet.in www.gujrat. 5.gov. 6.antya.google.

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