1. Vast
source of raw material
- India is one of the
largest producers of wheat and rice.
- Coconuts, cashew nuts, ginger, turmeric and
black pepper is widely grown in some parts of the country.
- India is the second
largest producer of groundnuts, fruits and vegetables. That it accounts
for about 10 per cent of the world's fruits production with the country
topping in the production of mangoes and bananas.
- Due to the high processing levels milk
products offer a significant opportunity in India. India is the world's
largest producer of milk owing to the strong business models formed
through cooperative movements in the country. Milk and related products
account for 17% of India's total expenditure
on food. This segment enjoys liberal regulations as all milk products
except malted foods are automatically allowed 51% foreign equity
participation and all exports of dairy products are freely allowed.
- Alcoholic beverages have been categorised as
the new high opportunity sector in India. Liquor
manufactured in India is categorised as
Indian Made Foreign Liquor (IMFL). The sector is still barred from the
import of potable alcohol as it is subject to government licensing. In
the meanwhile, India has recently
started producing wine for domestic consumption.
- Meat and poultry has also gained popularity
due to the emergence of producers that have integrated breeding, feed
milling, contract growing and marketing facilities for improved
productivity. Meat, fish, and poultry are in rural areas as they are
easily affordable and provide necessary nutrients. India has the potential
to be a leading global food supplier if it employs the right marketing
strategies and creates an efficient supply chain.
2. Conventional farming to commercial faming
In recent years, there
has been a shift from conventional farming of food grains to horticulture
which include fruits, vegetables, ornamental crops, medicinal and aromatic
plants, spices, plantation crops which include coconut, cashew nuts and cocoa
and allied activities
3. Market in
the form of large urban middle class
With a huge population of
1.08 billion and population growth of about 1.6 % per annum, India is a large and growing
market for food products. Its 350 million strong urban middle class with its
changing food habits poses a huge market for agricultural products and
processed food.
4. Low
Production cost
The relatively low-cost
but skilled workforce can be effectively utilised to set up large, low-cost
production bases for domestic and export markets.
5. Change in
consumption patterns
Increasing incomes are
always accompanied by a change in the food habits. Over the last three
decades in India a shift in food habits
have been observed. The report observes that the proportionate expenditure on
cereals, pulses, edible oil, sugar, salt and spices declines as households
climb the expenditure classes in urban India while the opposite
happens in the case of milk and milk products, meat, egg and fish, fruits and
beverages.
For instance, According
to report of ICRA the proportionate expenditure on staples like cereals,
grams and pulses declined from 45 per cent to 44 per cent in rural India while the figure settled
at 32 per cent of the total expenditure on food in urban India.
A large part of this
shift in consumption is driven by the processed food market, which accounts
for 32 per cent of the total food market. It accounts for US$ 29.4 billion,
in a total estimated market of US$ 91.66 billion. The food processing
industry is one of the largest industries in India -- it is ranked fifth in
terms of production, consumption, export and expected growth.
According to the
Confederation of Indian Industry (CII) the food-processing sector has the
potential of attracting US$ 33 billion of investment in 10 years and generate
employment of 9 million person-days.
6.
Government Assistance
The Government has
introduced several schemes to provide financial assistance for setting up and
modernizing of food processing units, creation of infrastructure, support for
research and development and human resource development in addition to other
promotional measures to encourage the growth of the processed food sector.
7. Foreign
Direct Investment
Foreign direct investment
(FDI) in the country's food sector is poised to hit the US$ 3-billion mark in
coming years. FDI approvals in food processing have doubled in last one year
alone. The cumulative FDI inflow in food processing reached US$ 2,804 million
in March '06. In '05-06, the sector received approvals worth US$ 41 million.
This figure is almost double the US$ 22 million approved in 2004-05.
The US-based private
equity fund, New Vernon Private Equity Limited (NVPEL), has decided to invest
Rs 45 crore in Kochi-based spice major, Eastern Condiments, which is the
flagship company of Eastern Group.
America's largest chocolate and
confectionery-maker Hershey is acquiring 51 per cent stake in Godrej
Beverages and Foods for US$ 54 million.
8. Food
Parks
In an effort to boost the
food sector, the Government is working on agri zones and the concept of mega
food parks. Twenty such mega parks will come are proposed across the country
in various cities to attract Foreign Direct Investment (FDI) in the
food-processing sector.
The Government has
released a total assistance of US$ 23 million to implement the Food Parks
Scheme. It has so far approved 50 food parks for assistance across the
country. The Centre also plans US$ 22 billion subsidy for mega food
processing parks.
9.Conducive
food processing policy environment
The national policy on
food processing aims at increasing the level of food processing from the
present 2 per cent to 10 per cent by 2010 and 25 per cent by 2025.
The
government has allowed 100 per cent FDI in processing sector.
The Policy
will seek to create an appropriate environment for entrepreneurs to set up
Food Processing Industries through:
- Fiscal initiatives and
interventions like rationalization of tax structure on fresh foods as
well as processed foods and machinery used for the production of
processed foods.
- A concerted promotion campaign
to create market for processed foods by providing financial assistance
to Industry Associations, NGOs/Cooperatives, Private Sector Units, State
Government Organization for undertaking generic market promotion.
- Harmonization and
simplification of food laws by an appropriate enactment to cover all
provisions relating to food products so that the existing system of
multiple laws is replaced and also covering issues concerning standards
Nutrition, Merit goods, futures marketing, equalisation fund
etc.
- Efforts to expand the
availability of the right kind and quality of raw material round the
year by increasing production, improving productivity.
- Strengthening of database and
market intelligence system through studies and surveys to be conducted
in various States to enable planned investment in the appropriate sector
matching with the availability of raw material and marketability of
processed products.
- Strengthening extension
services and to the farmers and co-operatives in the areas of post
harvest management of agro-produce to encourage creation of
pre-processing facilities near the farms like washing, fumigation,
packaging etc.
- Efforts to encourage setting
up of agro-processing facilities as close to the area of production as
possible to avoid wastage and reduce transportation cost.
- Promotion of investments, both
foreign and domestic.
Simplification
of documentation and procedures under taxation laws to avoid unnecessary
harassment arising out of mere technicalities.
Infrastructual
Development
The Policy
will facilitate:
- Establishment of cold chain,
low cost pre-cooling facilities near farms, cold stores and grading,
sorting, packing facilities to reduce wastage, improve quality and shelf
life of products.
- Application of biotechnology,
remote sensing technology, energy saving technologies and technologies
for environmental protection.
- Building up a strong
infrastructural base for production of value added products with special
emphasis on food safety and quality matching international
standards.
- Development of Packaging
Technologies for individual products, especially cut-fruits &
vegetables, so as to increase their shelf life and improve consumer
acceptance both in the domestic and international markets.
- Development of new
technologies in Food Processing & Packaging and also to provide for
the mechanism to facilitate quick transfer of technologies to field
through a net work of R&D Institutions having a Central Institute at
the national level with satellite institutions located strategically in
various regions to cover up the whole Country and to make available the
required testing facilities. This could be done by establishing a new
institution or strengthening an existing one.
- Development of area-specific
Agro Food Parks dedicated to processing of the predominant produce of
the area e.g., apple in J&K, pineapple in North East, Lichi in
Bihar, Mango in Maharashtra and Andhra Pradesh etc. etc.
- Development of Anchor
Industrial Centre and/or linkage with Anchor Industrial Units having
network of small processing units.
- Development of
Agro-industrial multi-products units capable of processing a cluster of
trans-seasonal produces.
Backward
Linkage
The Policy
will promote:
- Establishment of a sustained
and lasting linkage between the farmers and the processors based on
mutual trust, understanding and benefits by utilizing the existing
infrastructure of cooperative, village panchayats and such other
institutions.
- Mechanism to reduce the gap
between the farm gate price of agro-produce and the final price paid by
the consumer.
- Development of Futures Market
in the best interest of both the farmers and the processors ensuring a
minimum price stability to the farmer and a sustained supply of raw
material to the processor.
- Setting up of an Equalization
Fund to ensure sustained supply of raw material at a particular price
level and at the same time to plough back the savings occurring in the
eventuality of lower price to make the Fund self-regenerative.
Forward
Linkage
The policy will promote:
- Establishment of a strong
linkage between the processor and the market to effect cost economies by
elimination of avoidable intermediaries.
- Establishment of marketing
network with an apex body to ensure proper marketing of processed
products.
- Development of marketing
capabilities both with regard to infrastructure and quality in order to
promote competitive capabilities to face not only the WTO challenge but
to undertake exports in a big way.
Given the trends in the Indian food and beverage sector including key
industry consideration, it is imperative for the Indian industry to leverage
the emerging opportunities at once. These could be:
- Exploitation of the huge untapped
potential in processed foods.
- Opportunities presented by contract
farming, captive supplies of raw materials, disintermediation and direct
access to farmers, availability of new and improved seeds and farm
technology.
- Value addition to unprocessed
categories of food such as dairy, fruits and vegetable, staples and
edible oils.
- Exploitation of increasing health and
safety awareness of the Indian consumer - this would pave the way for
value added products on a health platform.
- Investment in supply chain in order
to improve costs, tighten supplies and minimize wastage.
- Investment in better packaging and
cold chain infrastructure will aid the processed food and beverage
sector as these would aid in processing of fruits and vegetables.
- Exploration of appropriate regional
branding strategies in order to appeal to the deep rooted traditions,
values and customs of the consumer
- Taking advantage of the inherent
ethnic tastes and food habits of the Indian consumer -- this provides
the local food players a distinct advantage over foreign entrants into
the sector and poses an entry barrier for the latter
- Exploitation of the increasing
consumerism fuelled by new job opportunities, larger disposable incomes
and the emerging boom in modern retail trade.
- Opportunities for growth through the
inorganic route, both domestically and outbound this would provide
access to new product categories, brands, markets and new technologies.
- The SEZ /AEZ opportunity would also
provide players the added incentive to develop greenfield projects
within these zones and enjoy additional fiscal benefits
The Indian Foods & Beverage industry is poised for a significant
leap forward -- these are interesting times and continued success will
depend on a proper understanding of the landscape and challenges
therein, quickly exploiting emerging opportunities, skillful execution
of strategic mergers and acquisitions and effecting a seamless
organisation to evolve into truly global players.
Thrust Areas
The vision
2015 of the Government of India for the food-processing sector aims at:
- Enhancing and
stabilizing the income level of the farmers
- Providing
choice to consumers in terms of wide variety and taste including
traditional ethnic food
- Providing greater
assurance in terms of safety and quality of food to consumers
- Promoting a dynamic
food processing industry
- Enhancing
the competitiveness of food processing industry in both domestic as well
as international markets
- Making
the food processing sector attractive for both domestic and foreign
investors
- Achieving
integration of the food processing infrastructure from farm to market
- Having a transparent
and industry friendly regulatory regime
- Putting
in place a transparent system of standards based on science
The following
specific targets would be to increase:
- The level of
processing of perishables from 6% to 20%
- Value addition from
20% to 35%
- Share in global food
trade from 1.5% to 3%, by the year 2015
An estimated
investment of Rs. 100,000 crores is required to achieve the discussed vision,
of which Rs.45,000 crores is expected to come from the private sector, Rs.
45,000 crores from Financial Institutions and Rs. 10,000 crore from
Government.
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