Food Processing- Significance and Challenges
India, with its rich agricultural heritage and varied climate, possesses significant potential in the food processing sector. This industry is a vital component of the nation’s economic development, playing a crucial role in ensuring food security, minimizing waste, boosting farmers’ incomes, and generating employment opportunities.
What is Food Processing?
Food processing involves converting raw agricultural products into consumable food items, enhancing their value and extending their shelf life. Recognized as a ‘sunrise sector,’ it is a key priority under the ‘Make in India’ initiative.
Types of Food Processing
- Primary Products: These are made directly from processed raw materials, such as fruits and vegetables.
- Secondary Products: These involve processing primary food items into new products, including jams, sauces, and butter.
Reasons for the Growing Demand in India
- Changing Lifestyles and Preferences: Increasing disposable income and rising health awareness are driving demand for safe and nutritious processed and packaged foods.
- High Agricultural Output: India leads in the production of milk, pulses, and jute, and ranks second in essential crops like rice, wheat, sugarcane, groundnut, vegetables, fruits, and cotton.
- Export Opportunities: India’s strategic location, with proximity to key export destinations and improved global connectivity, boosts export potential.
- Government Support: Initiatives like the Mega Food Park Scheme and other proactive government policies support the sector’s growth.
Importance of the Food Processing Sector
- Economic Contribution: The food processing sector significantly boosts India’s GDP, with an average annual growth rate of around 8.3% over the last five years, compared to about 4.87% in agriculture and allied sectors (at 2011-12 prices).
- Employment Opportunities: The sector is a key employment provider. The Annual Survey of Industries (ASI) for 2019-20 reported 20.32 lakh people employed in the registered food processing sector. Additionally, the NSSO 73rd Round (2015-16) found that unregistered units supported 51.11 lakh workers, accounting for 14.18% of employment in the unregistered manufacturing sector.
- Foreign Direct Investment (FDI) and Market Scale: Between 2019 and 2022, the sector received $3.28 billion in FDI equity inflows, making it the fifth largest sector in India’s economy.
- Regional Development: The food processing industry supports balanced regional development by consistently driving demand for locally processed food.
- Support for Women Entrepreneurs: The sector creates job opportunities for rural women and fosters entrepreneurial activities, exemplified by ventures like Lijjat Papad.
- Enhanced Nutrition: Processed foods can be enriched with essential vitamins and minerals, addressing malnutrition and improving public health.
Government Schemes and Initiatives for Promoting the Food Processing Sector in India
- Pradhan Mantri Kisan Sampada Yojana (PMKSY): This Central Sector Scheme supports the development of modern infrastructure and efficient supply chain management from farm gate to retail outlet, promoting the food processing sector nationwide.
- Pradhan Mantri Formalisation of Food Processing Enterprises (PMFME): Launched in June 2020 with an outlay of Rs. 10,000 crore for 2020-2025, this scheme promotes ‘Vocal for Local’ by enhancing the competitiveness of microenterprises in the unorganised food processing sector. It aims to formalize the sector and benefit 2 lakh enterprises through credit-linked subsidies and the ‘One District One Product’ approach.
- Food Processing Fund: Established in NABARD during 2014-15 with a corpus of Rs. 2,000 crore, this fund provides affordable credit to both public and private players for setting up Designated Food Parks (DFPs).
- Warehouse Corpus Fund: With a corpus of Rs. 5,000 crore, this fund supports State governments, State-owned agencies, and corporates in creating scientific warehouse capacity through financial assistance.
- Production Linked Incentive Scheme: This scheme aims to create approximately 2.5 lakh employment opportunities in the food processing sector.
- Mega Food Park Scheme: Focused on a ‘cluster’ strategy, Mega Food Parks develop advanced support infrastructure in designated agri/horticultural zones to establish modern food processing units.
Challenges Encountered by the Food Processing Sector in India
- Limited Contribution to GVA Despite High Demand: Despite the rising demand for processed and ready-to-eat foods, the sector’s contribution to overall Gross Value Added (GVA) was only 1.88% in 2020-21, compared to 17.86% for manufacturing and 16.26% for agriculture.
- Scarcity of Skilled Workforce and Modern Technology: The industry faces a shortage of skilled manpower and the use of outdated technologies, affecting efficiency and product quality.
- Infrastructure Constraints: Inadequate cold storage, transportation, and processing facilities contribute to significant post-harvest losses, estimated at over 30% of produce, with annual losses around Rs 90,000 crore according to NITI Aayog.
- High Proportion of Informal and Unorganized Segments: About 75% of the sector is comprised of unorganized segments, leading to inefficiencies in production.
- Inefficiencies in Supply Chains: Fragmented supply chains with numerous stakeholders and poor coordination cause delays, waste, and lower-quality products, as illustrated by disruptions in Bihar’s agricultural supply chain.
- Regulatory Hurdles: Stringent sanitary and phytosanitary (SPS) regulations in export markets limit Indian processed food exports, evidenced by the rejection of certain products by the EU.
Way Forward for the Food Processing Sector
- Adoption of Smart Technologies: Integrate Internet of Things (IoT), Artificial Intelligence (AI), robotics, and automation to enhance productivity and reduce wastage in the food processing sector.
- Emphasis on Horticulture and Animal Products: Aim to establish India as a global leader in at least five key value chains by 2047, including processed fruits and vegetables, fish and seafood, meat, dairy products, and poultry and eggs.
- Development of Skilled Manpower: Increase the number of professionals trained in food technology, quality control, processing methods, and food safety management within the sector.
- Improved Health Markers: Implement better health markers on food packaging and strengthen the regulatory framework governing food safety to ensure better oversight.
- Leveraging Agricultural Products: Focus on promoting food grains and coarse grains like millets, which are gaining popularity for their nutritional benefits and adaptability to different climatic conditions.