India - At a Glance (+) Size : 3,287,263 square kilometers 7th - - PDF document

Suman Project Consultants Pvt. Ltd.

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Dilemma WITHIN INDIAN FOOD PROCESSING INDUSTRY

Date : 22nd March, 2010

India - At a Glance

(+)  Size: 3,287,263 square kilometers – 7th largest country in the world  Population: 1.17 billion people – 2nd largest population in the world  Economy: GDP per capita - US$2,941 purchasing power parity

• r US$1,031 nominal (2009)

(-)

• Employment: 10% unemployment (2010)
• Inflation: 9% inflation (2010)
• Poverty: 25% of the population lives below the poverty line

(2007)

Indian Agriculture - At a Glance

(+)  Major crops: rice, wheat, oilseeds, cotton, jute, tea, sugarcane, lentils,

• nions, potatoes, dairy products, sheep, goats, poultry, fish.

 Livestock: India has the world’s largest buffalo population, and second largest cattle population.  Economy: 17.5% of GDP is related to agriculture  Employment: 52% of labour force  Land Use: 48.83% arable land (-)

• Farms: 50% of farms are less than 2.5 acres.
• Arable but with No Production:

Fruit Scenario in India

6

Fruit Scenario in India

6

(+)  Fruits & Veg. – India is ranked 1st in World Fruit Production and Second in World Vegetable Production after China. (-)

• Variety Data: No data Quantifying the Variety of Fruits and Vegetables in

the country. Increasing Urbanisation - Lifestyle and Aspirations Increasing Nuclear Families and Working Women Increasing spending

• n processed food

products

Food Processing Demand Drivers

Changing demographics – Rise in disposable incomes Demand for Functional Foods/ Neutraceuticals Growth of Organised Retail and Private Label Penetration

Food Processing Sector– Growth Potential

5

Supply Chain Institutional Gaps (Middlemen / commission agents ) Inadequate link between production and processing (lack of processable varieties) Supply Chain Infra Gaps (Lack of primary processing, storage and distribution facilities)

Challenges for Food Processing Sector

Lack of product development and Innovation Seasonality of

• perations and low

capacity utilization Enforcement of quality and safety standards

Food Processing Sector– Impediments

6

Source: A study by CIPHET, 2010

Wastage of Agriculture Produce

Crop Cumulative Wastage (%) Cereals 3.9-6.0 Pulses 4.3-6.1 Oil Seeds 6.0 Fruits & Vegetables 5.8-18.0 Milk 0.8 Fisheries 2.9 Meat 2.3 Poultry 3.7

• A nation wide study on quantitative assessment of harvest and post

harvest losses for 46 agricultural produces in 106 randomly selected districts was carried out by CIPHET.

• Percentage of losses estimated for major produces.

4

Supply chain – a comparison with Developed countries

India High wastage and low margins

Farmer Commission agent

Consolidator Trader Wholesaler Retailer Consumer Developed countries High investments – Low wastage - better margins Farmer Wholesaler Retailer Consumer

Source: Annual Survey of Industries

Growth of Food Processing Sector

Capital Investment in Registered Units in Food Processing Sector (Rs. in Crore)

20000 40000 60000 80000 100000 120000 140000 1998-1999 1999-2000 2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 2005-2006 2006-2007 2007-2008 Invested Capital Working Capital Fixed Capital 3

(+)  Dedicated Ministry : We have a dedicated ministry which has contributed.  Subsidy : Subsidy is available from MoFPI for setting up of Food Processing Plants / Infrastructure projects. (-)  Approvals : The gestation period for approval of subsidy application is

• significant. Should be Maximum of 3 months from date of application and

within 2 months of receipt of request  Subsidy : Subsidy cap for last decade has remained the same while the cost of establishing Food processing plants has significantly increased.  Prioritizing Priorities : Govt. priority has narrowed down to Infrastructure. Need to rejuvenate Small and Medium enterprises / entrepreneurship within Food Processing sector.

• Govt. of India Policy

(-)  Import Duty : The import duty for imported plant & machinery is approx 30%. China, on the other hand, gives incentive / subsidy of 30% for importing plant & machinery. Import duty needs to be reduced to enhance the competetive edge of Indian Food Processing Industry.  Plant & Machinery suppliers : No incentives to the backbone of the Industry.

• Govt. of India Policy

How do we conclude this Dilemma ? Suggestions

 Farm Size : Increase farm size by involving private sector. Put reasonable production & productivity goals.  Variety Data : Appoint Multi agency Multi Sate agencies to track and collect variety data of Fruits and Vegetables.  Encourage Small & Medium Enterprises : Subsidy should be 25% of Technical Infrastructure. Cap on subsidy should be increased to at least Rs. 1 Cr, if not more.  Plant & Machinery suppliers : Incentives to enterprenuer in case he sources Indian manufactured goods. “Buy Indian” policy will lead to number of Foreign companies set up their “Fabrication Units” in India. No incentives to the backbone of the Industry. Encourage R & D.  Import Duty : Import duty of Food Processing machinery needs to be reduced to a minimum of 5%.  APMC Act : Amend APMC act to enable direct procurement from

• Farmers. Should encourage private sector participation.

Thank You

Contact : Suman Project Consultants Pvt. Ltd. B-168 East of Kailash New Delhi – 110065 Tel #: 011-26848961 / 26313391