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Status Levels Overview Segmentation Role of Govt Ground Reality Strength Challenges Suggestions
Size of food market in India - Rs. 8,60,000 Crores Primarily processed food market Rs. 2,80,000 crore Value added processed food market Rs. 1,80,000 crore The Sector attracted a total investment of Rs.38,531 Crores during the 9th plan period Investment during the 10th plan is estimated at Rs. 62,105 Crores Industry growth rate during the last five years is estimated at 7.14% against GDP of 6.2% Investment required during next ten years Rs. 1,50,000 crore
Fruits & Vegetables Sector at 2%, Poultry 6%, Milk 35% (only 13% in modern dairies), Marine products 8%, Buffalo meat 21%. Value addition 20% Wastage Rs. 58,000 crore
INDUSTRY OVERVIEW
India is the worlds second largest producer of food next to China, and has the potential of being the biggest with the food and agricultural sector. 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.
Increasing incomes are always accompanied by a change in the food basket. 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. 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.
Food processing is a large sector that covers activities such as agriculture, horticulture, plantation, animal husbandry and fisheries.
The Ministry of Food Processing, Government of India indicates the following segments within the Food Processing industry:
Dairy, fruits & vegetable processing Grain processing Meat & poultry processing Fisheries Consumer foods including packaged foods, beverages and packaged drinking water
OBJECTIVES OF MFPI
Promotion of FPIs resulting in : Reduction in wastages Value / quality addition Employment generation Remunerative income for farmers
Impetus by Govt
Included in the list of Priority sector lending by banks since 1999 Most of processed food Exempted from purview of licensing under the industries (Development & regulation) Act, 1951, except items reserved for small scale sector & alcoholic beverages Excise duty for processed fruits & vegetables, food mixes etc. NIL Excise duty on reefer vans reduced from 16 to 8% Reduction in customs duty on food processing machinery Tax breaks Move towards GST
Low processing
2.20 % in fruits
35 % in milk 6 % in poultry
Value addition 20% Indias current share in world trade of processed foods 1.60 % Poor lab to land transfer of technology and adoption of new varieties. example of pineapple
Source: Task force Report on Development of cold chain in India GOI/CII APEDA data
Market surplus of fruits & vegetables 88% Farmer sells immediately due to perishability & absence of proper infrastructure to keep it for longer period Post Harvest wastage of fruits & vegetables 25 to 35% valued at over Rs 45,000 crore Losses as above in India is more than consumption of same in UK Market surplus of food grains 60% Farmer keeps some for own consumption, seed purpose and to give to labour as wages Loss in above equal to annual food grain production in Australia Cost of wastage 6 times amount spent on food subsidy Farm gate price 25% of domestic consumer retail price against 50% in developed countries Story of Fyffee PLc - in Banana Handling and Processing on the ships before final destination of selling.
Source: Task force Report on Development of cold chain in India GOI/CII
52% cultivable land as against 11% world wide Unsurpassed Natural Advantages All the 15 major climates of the world 46 out of the 60 soil types 17% animal, 12% plant and 10% fish genetic resource of the world Food processing sector ranks fifth in terms of contribution to GDP Indian urban food market estimated at 350,000 crore Estimated investment in Food processing sector during 11th plan 1 lakh crore
Challenges
2006-07 prod was half of 2005-06 Non Efficient storage/warehousing, processing & marketing techniques Non adoption of efficient technology
Shortage of power High electricity tariff Low area under Irrigation High capital cost -Inadequate institutional finance at low rates High insurance premium in risk coverage Farm connectivity by road yet to take off
Challenges (cont.)
Consolidator
Commission agent
Trader
Wholesaler
Retailer
Consumer
High wastage and low margins Consumer Retailer Developed countries Wholesaler Farmer High investments Low wastage better margins
Wide disparity between peak & lean period arrivals usually ranging from 100 150% Long revenue cycle as products to be purchased in bulk during peak season Control of markets by few traders and agents who command large storage capacity Discouragement of farmer lower returns act as disincentive
Crashing of prices during peak season
Larger intermediaries exerts negative pressure on farmer margin, and deteriorates quality due to multiple handling
Non adoptive of cost effective technology High working capital requirement High cost of finance Infrastructural constraints Dependence on intermediaries inadequate farmer processor linkages
Source: Task force Report on Development of cold chain in India GOI/CII
Lack of suitable infrastructure Lack of adequate infrastructure quality control & testing
Suggestions .
productivity in the world Change in cultivation practices such as irrigation for paddy rather than method of flooding the fields
Price stability
Make farming remunerative to attract talent and retain farmer
interest
Incentives to Corporate to enter core farming land ceiling restrictions Increase Mechanization to tackle low availability of labour and to remain a low cost producer Liberalized credit norms for agricultural production , marketing and infrastructure development Changes in market regulatory framework to allow corporate to establish market yards
At present 7521 regulated markets which lack critical infrastructure
Review of legal instruments to facilitate entry in marketing activities Tax holidays and incentives Excise exemptions for CAPEX items.
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