Food Processing: Overview and Growing Demand in India | UPSC

Introduction

• • • Food processing transforms raw agricultural products into consumable food items, enhancing their value and shelf life. It is a key priority under the ‘Make in India’ initiative.
    • To achieve developed nation status in the next 25 years, India’s food processing sector will be crucial in transforming the primary agriculture sector. 
    • This transformation will enhance productivity and profitability while ensuring sustainability and resilience.

Types of Food Processing

• • • Primary Products: Processed from raw materials like fruits and vegetables. 
    • Secondary Products: Made by processing primary products into new items, such as jams and sauces. 

Reasons for Growth in India

Changing Lifestyles and Preferences:

• • • Rising incomes and increased health awareness are driving demand for safe and nutritious processed foods.
    • Example: Ready-to-eat meals from brands like MTR and ITC Foods have become popular due to their convenience and nutritional value. 
    • These products cater to busy urban lifestyles and offer a healthy alternative to traditional cooking.

High Agricultural Output:

• • • India is a leading producer of milk, pulses, rice, wheat, sugarcane, and various fruits and vegetables.
    • Example: Amul and Mother Dairy capitalize on India’s high milk production to provide a wide range of dairy products, from milk and butter to cheese and yogurt. These companies have built extensive supply chains that support millions of farmers.
    • Example: Parle and Britannia use India’s abundant wheat production to manufacture biscuits and bakery products, meeting both domestic and international demand.

Export Opportunities:

• • • India’s proximity to key export destinations and improved global connectivity boost export potential.
    • Example: The export of processed mango products, such as mango pulp and juice, to the Middle East and Europe has grown significantly. 
    • Companies like Jain Irrigation Systems and Manama are key players in this market, ensuring that Indian mangoes reach international consumers in various processed forms.
    • Example: India’s seafood industry, particularly frozen shrimp, has seen substantial growth in exports to the United States and Japan. Companies like Avanti Feeds and Apex Frozen Foods are leading exporters in this sector.

Government Support:

• • • Government initiatives like the Mega Food Park Scheme are crucial in boosting the sector.
    • Example: Sikkim Mega Food Park provides modern infrastructure for food processing units in a well-defined zone, enhancing value addition and reducing wastage. This park supports local farmers and entrepreneurs, enabling them to access better markets and technology.
    • Example: The Kakinada Mega Food Park in Andhra Pradesh has created a platform for local agribusinesses to process and package their products efficiently. It includes facilities for cold storage, quality control labs, and logistical support, making it easier for small and medium enterprises to scale up their operations.
    • Example: The Pradhan Mantri Kisan Sampada Yojana (PMKSY) includes multiple schemes such as Agro-Marine Processing and Development of Agro-Processing Clusters, which aim to create processing and preservation capacities and modernize existing food processing units. This helps in reducing food wastage and ensures better returns for farmers.

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Significance of the Food Processing Sector

Economic Contribution:

• • • The food processing sector contributes significantly to India’s GDP with an 8.3% growth rate, outpacing the agriculture sector, which grows at 4.87%. This robust growth underlines the sector’s importance in the overall economy.

Employment Generation:

• • • The sector is a major employment generator, employing millions in both registered and unregistered units.
    • Example: Nestlé India employs thousands of workers across its multiple factories, which produce a wide range of products from instant noodles to dairy items.
    • Example: Haldiram’s employs a large workforce in its manufacturing units for snacks and sweets, supporting both direct and indirect employment.

FDI Inflows and Market Size:

• • • The sector attracted $3.28 billion in FDI between 2019-2022, indicating strong investor interest.
    • Example: Companies like PepsiCo and Coca-Cola have made significant investments in India, expanding their production facilities and supply chains.
    • Example: Danone, a global leader in dairy products, has invested heavily in India’s food processing sector to tap into the growing demand for health-focused foods.

Regional Development:

• • • The food processing sector promotes balanced regional development by creating demand for locally processed food.
    • Example: The establishment of the Telangana Mega Food Park has led to significant regional development by providing modern infrastructure for food processing and reducing post-harvest losses.
    • Example: The Himachal Pradesh Mega Food Park supports local fruit growers by providing facilities to process and package apples and other fruits, boosting the local economy.

Women Entrepreneurship:

• • • The sector provides opportunities for rural women to engage in entrepreneurship.
    • Example: Lijjat Papad, started by a group of women in 1959, has grown into a multi-million dollar enterprise, providing employment to over 45,000 women across India.
    • Example: SEWA (Self-Employed Women’s Association) helps rural women in Gujarat to process and market spices and pickles, empowering them economically.

Nutritional Improvement:

• • • Fortified foods address malnutrition and improve public health.
    • Example: The fortification of wheat flour with iron and folic acid helps combat anemia, a prevalent issue in India.
    • Example: Edible oils fortified with vitamins A and D are widely promoted to address deficiencies and improve overall health outcomes, especially in rural areas.
    • Example: Tata Salt Plus, which is fortified with iodine and iron, helps tackle the problem of iodine deficiency disorders and iron deficiency anemia in the population.

Government Schemes and Initiatives

Pradhan Mantri Kisan Sampada Yojana (PMKSY):

• • • This scheme supports the creation of modern infrastructure and efficient supply chain management from farm gate to retail outlet. It aims to provide better prices to farmers, reduce wastage, and improve processing capabilities.
    • Example: The establishment of cold chain projects in Haryana under PMKSY has significantly reduced post-harvest losses and ensured that fresh produce reaches markets efficiently.

Pradhan Mantri Formalisation of Food Processing Enterprises (PMFME):

• • • This scheme promotes microenterprises and the formalization of the unorganized food processing sector, enhancing the competitiveness of individual microenterprises.
    • Example: In Karnataka, PMFME has supported small enterprises producing traditional snacks, helping them improve packaging and marketing to reach wider markets.

Food Processing Fund:

• • • Instituted by NABARD, this fund provides affordable credit for setting up Designated Food Parks, aiming to boost infrastructure and processing capabilities.
    • Example: The establishment of the Ludhiana Mega Food Park in Punjab with financial support from the Food Processing Fund has facilitated the growth of food processing units, especially those focusing on dairy and agricultural products.

Warehouse Corpus Fund:

• • • This fund supports the creation of scientific warehouse capacity to reduce storage losses and improve the quality of stored produce.
    • Example: The creation of modern warehousing facilities in Maharashtra under this fund has helped farmers store their produce safely and sell it at better prices when market conditions are favorable.

Production Linked Incentive Scheme:

• • • This scheme aims to generate employment for approximately 2.5 lakh people by encouraging investments in food processing and manufacturing.
    • Example: The incentives provided to companies like ITC and Britannia under this scheme have led to the establishment of new manufacturing units, creating jobs and boosting local economies.

Mega Food Park Scheme:

• • • This scheme develops infrastructure in agri/horticultural zones, creating a cluster-based approach to food processing.
    • Example: The North East Mega Food Park in Assam has provided a platform for local farmers and processors to access modern facilities, reducing wastage and increasing value addition.
    • Example: The Patanjali Food and Herbal Park in Uttarakhand has become a major hub for processing Ayurvedic products and herbal supplements, benefiting local farmers and contributing to the regional economy.
    • Example: The Satara Mega Food Park in Maharashtra focuses on processing fruits and vegetables, providing farmers with modern processing facilities and helping them achieve better returns for their produce.

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Challenges Faced by the Sector

Low GVA:

• • • Despite the high demand for processed foods, the sector’s contribution to the Gross Value Added (GVA) is relatively low at 1.88%. This disparity indicates inefficiencies and untapped potential within the industry. Efforts to improve productivity and value addition are needed to boost its economic contribution.

Lack of Skilled Manpower and Modern Technology:

• • • Many food processing facilities in India use outdated technologies, which reduce efficiency and product quality. The sector also suffers from a shortage of skilled manpower trained in modern food processing techniques.
    • Example: Small and medium enterprises (SMEs) in the food processing industry often lack access to advanced machinery and technology, resulting in lower product quality and higher production costs.

Infrastructure Bottlenecks:

• • • Inadequate cold storage and transportation systems lead to significant post-harvest losses, estimated to exceed 30% of produce.
    • Example: The spoilage of tomatoes and bananas due to lack of cold storage facilities highlights the critical need for improved infrastructure. Investments in cold chain logistics are essential to preserve the quality and extend the shelf life of perishable items.
    • Example: Farmers in rural areas face difficulties in transporting their produce to processing units, leading to wastage and reduced earnings.

Informal and Unorganized Segments:

• • • The food processing sector has a high concentration of unorganized units, representing almost 75% across product categories. This fragmentation causes inefficiencies in the production system, such as inconsistent product quality and lower economies of scale.
    • Example: Small roadside vendors and home-based food processing units lack the resources and expertise to meet modern food safety standards, limiting their market reach.

Supply Chain Inefficiencies:

• • • Fragmented supply chains with multiple stakeholders and poor coordination lead to delays, waste, and low-quality products.
    • Example: In Bihar’s agricultural regions, the broken supply chain results in significant delays and wastage, as farmers struggle to get their produce to markets and processing units in a timely manner. Streamlining these supply chains can reduce losses and improve profitability for farmers.

Regulatory Challenges:

• • • Stringent sanitary and phytosanitary (SPS) measures in export markets impede the growth of Indian processed food exports.
    • Example: The European Union’s rejection of Indian processed mango pulp due to pesticide residues underscores the challenges faced by exporters in meeting international standards. Strengthening compliance with global food safety regulations is crucial for expanding export opportunities.
    • Example: The dairy sector faces challenges with cold chain logistics. In regions without adequate refrigeration, milk spoilage is common, affecting the quality and availability of dairy products.
    • Example: The seafood processing industry struggles with compliance to international hygiene standards, leading to periodic bans on exports from certain regions, as seen with the EU’s occasional restrictions on Indian shrimp imports due to antibiotic residues.

Way Forward

Smart Technologies:

• • • Use IoT, AI, robotics, and automation to increase productivity and reduce waste.

Focus on Horticulture and Animal Products:

• • • Lead in global trade for processed fruits, vegetables, seafood, meat, dairy, poultry, and eggs by 2047.

Skilled Manpower:

• • • Employ more professionals in food technology, quality control, and safety management.

Better Health Markers:

• • • Strengthen regulatory mechanisms and include better health indicators on packaging.

Popularity of Agricultural Products:

• • • Promote nutritious grains like millets. Example: Millet-based products as a healthy alternative.