Scope of food processing industry

• India being among the world’s top producers of many key farm commodities, the scope for the value-addition of surplus agricultural output is immense.
  • The country ranks first in the production of milk; second in that of fruit, vegetables and fisheries; and third in eggs.
  • It also produces a variety of health foods and therapeutically important herbs which can be processed into nutritious snacks and other kinds of high-value products for domestic and export markets.
• A higher level of processing would also generate additional income for farmers and off-farm employment and entrepreneurship opportunities for rural people.

Status of food processing industry

• The gross value added (GVA) of the food-processing sector has surged from Rs 1.34 trillion in 2014-15 to Rs 2.37 trillion in 2020-21.
• A recent study report released by the Federation of Indian Chambers of Commerce and Industry indicates that the food processing sector may grow at an even faster pace of around 15 per cent a year from now on.

Reasons for the success of food processing sector

• A favourable policy environment has played a major role in the rapid expansion of this sector.
• The government has allowed 100 per cent foreign direct investment under the automatic route for manufacturing and retail trading, including e-commerce, of food products made in India.
• The government has extended the Production-Linked Incentive Scheme to the food processing industry to impart further impetus to its growth.
• Notable government initiatives targeted specifically at promoting small-scale or cottage-level food processing for the benefit of producers.
  • Pradhan Mantri Kisan SAMPADA Yojana that aims primarily at creating modern post-harvest infrastructure for value-addition in farm products and their down-the-line value-chain
  • PM-Formalisation of Micro Food Processing Enterprises Scheme which is meant to provide financial, technical, and business support for setting up small-scale ventures and the upgrade of the existing micro food-processing units on the basis of the one-district-one-product approach.

Issues surrounding food processing industry

• Despite impressive growth over the past few years, the food processing industry has failed to effectively serve its prime objectives of
  • Bolstering farmers’ incomes
    • Gains from the value-addition of agricultural products are accruing largely to the industry rather than the farmers
  • Curtailing wastage of farm produce.
    • Post-harvest losses of farm output continue to be rather high up to 40 per cent in some perishable items which is equivalent to Rs 60,000-80,000 crore annually in monetary terms.

Reasons for not serving the sector’s prime objectives

• Incompetent post-harvest handling, transportation, storage, and marketing the produce
• A low level of on-farm processing to enhance the value and extend the shelf-life of the harvested stuff
• Lack of direct linkage between growers and processors.

Why are large food processing units not economically viable?

• Several distinct characteristics of the Indian farm sector that make small and micro food-processing units economically more viable than the larger ones. The notable ones among them are the
  • Perishable and seasonal nature of farm produce and its scattered availability in small lots
  • Paucity of commodity-specific warehousing and transportation facilities and
  • The issues related to product quality, especially in terms of its suitability for processing.
  • Obligation of processing units to procure raw material from markets operated by agricultural produce marketing committees (regulated mandis) also acts as a constraint.
  • Small-scale and cottage-level processing units located near production hubs can prove more useful than large industrial ventures in Indian conditions, where holdings are small and growers need to supplement their income through other economic activities.

Way forward

• • Promote small-scale and village-level agro-processing units even while continuing to support the organised sector food-processing industry.
  • Preferential treatment should be given to the small- and medium-scale sectors as they directly impact farm incomes.
  • Encourage farmers to set up mini or micro agro-processing centres, individually or collectively, through cooperatives or farmers’ producer organisations.
• At least 25 percent of the farm harvest should be subjected to some kind of value-enhancing treatment or processing to reduce spoilage, facilitate the year-round availability of seasonal agricultural products, and soften volatility in their prices.