Unlock India’s food processing potential

The challenge to feed the 10 billion population by mid-century is being deliberated on several fronts.

One of the largest producers of fruits and vegetables in the world to boost processed food in large quantities, India has formulated a unique Production-Linked Incentive Scheme (PLIS) which aims to incentivise incremental sales.

The Production Linked Incentive (PLI) aims to give companies incentives on incremental sales from products manufactured in domestic units. Apart from inviting foreign companies to set shop in India, the scheme also aims to encourage local companies to set up or expand existing manufacturing units.
In April last year, the central government had for the first time notified the PLI scheme for mobile phones and allied component manufacturing.
As a part of the scheme, companies which set up new mobile and specified equipment manufacturing units or expanded their present units would get incentives of 4 to 6 per cent, after they achieve their investment and production value target for each year.
It aimed at making India a hub for manufacturing and exports.
In November, the government announced expansion of the PLI scheme to include 12 more sectors such as automobile and automobile components, food processing, pharmaceutical drugs, textile products, food products, high efficiency solar photo-voltaic modules, white goods such as air conditioners and LED bulbs, and speciality steel products.

Category 1– incentivises firms for incremental sales and branding/marketing initiatives taken abroad.
- 60 Beneficiaries selected under category have been obliged to commit a minimum investment while applying for the scheme.
- Assuming the committed investment as a fixed ratio of their sales and undertaking execution of at least 75% of the projects, the sector is likely to witness at least ₹6,500 crore worth of investment over the next two years.
Category 3– for supporting branding and marketing activities in foreign markets.
- This ensures that India’s share of value-added products in the exports basket is improved, and it may leverage on its unique geographical proximity to the untapped markets of Europe, the Middle East/West Asia, Africa, Oceania and Japan.

Easing access to credit

The access of micro, small, and medium enterprises (MSMEs) to finance is a perennial problem in the country, predominating due to a lack of proper credit history mechanism for MSMEs.

Smart financing alternatives such as peer-to-peer (P2P) lending hold potential for micro-food processors as can be observed by the United Kingdom Government-owned British Business Bank.

Increase spending on infrastructure

A study in the United States concluded that a 1% increase in public infrastructure increased the food manufacturing output by 0.06% in the longer run.
- This correlation holds good for India too as a higher investment is being concentrated in States such as Andhra Pradesh, Gujarat, Maharashtra, Tamil Nadu and Uttar Pradesh.
- These States as reported by the Good Governance Index 2020-21, ranked among the highest in the ‘Public Infrastructure and Utilities’ parameter with ‘Connectivity to Rural Habitations’ showing the highest improvement.

Reform TReDS platform

Access to working capital has in theory been addressed by the Trade Receivables Discounting System (TReDS). However, the platform requires considerable scaling-up and simultaneous enforcement of stringent measures for corporates to comply with.
- Integrating the TReDS platform with the Goods and Service Tax Network’s e-invoicing portal will make TReDS more attractive and give relief to financiers.

A sustainable food ecosystem

New alternatives should be explored which have immense potential in replacing the staples of rice and wheat in the form of Nutri-cereals, plant-based proteins, fermented foods, health bars and even fresh fortified foods for pets.

Conclusion

With growing populations, changing food habits and unrestricted use of natural resources, nations must come together and lay out a road map for a common efficient food value chain.
Efficient ways of production that are both economically viable and ecologically sustainable is the need of the hour.

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