Tuesday, April 03, 2012: 06:03:38 PM

Food Processing Guest Column

Budget and Indian food processing sector - Dhirajlal Patel, Champion Agro

The food processing sector, which witnessed a very positive Budget last year, has again witnessed new boosts and schemes announced this year to enhance its contribution to the country’s economy

The food processing sector has been growing at an average of over 8% in the past 5 years. Budgetary allocation for the sector has been fixed at Rs 660 crore for the current fiscal, up from Rs 600 crore in 2011-12.

With the food processing sector poised for a major boom with the entry of international players and rapid growth in the sector due to advent of new technology and government funded R&D, the proposed scheme could well be a turning point for the industry. The government has for long emphasised on the importance of the food processing sector and its role in enhancing the shelf life of food and reducing wastage. 
Key areas emphasised
India lags behind the world in the food processing sector, as a result of which fruits and vegetables worth nearly Rs 44,000 crore are lost annually due to lack of proper infrastructure and facilities. The allocation of Rs 20,000 crore for rural infrastructure development, Rs 5000 crore for creating warehousing facilities along with the increased deduction to 150% in capital expenditure and viability gap funding in setting up of modern cold storage facilities will provide thrust to this sector by shortening the supply chain gap between the farm and the end consumers.
Also, a new centrally sponsored scheme titled 'National Mission on Food Processing' would be started, in cooperation with the state governments in 2012-13 in order to increase the outreach in compliance with the local needs. Under the mission, the state governments will set up food processing units on a large scale, while the Centre will provide them technological and logistical support and also assist in skill development, promotional activities and setting up of non-horticultural cold storages.
This year’s Budget has also provided a much needed impetus to food technology by announcing R&D grants of Rs 200 crore to agri varsities across the country. These grants will not only boost R&D in the food processing sector and agricultural issues at ground level but also provide opportunity to new players planning to enter the food processing or food technology segment..
Government efforts need to be more channelised in the pulses, oil palm and vegetable sector to provide these products at competitive prices. MSP should be worked out for certain vegetables to save the farmers from distress selling. With the government planning to set up company to support minor irrigation works, the low-cost drip technology could be introduced in the list to support the small farmers directly.
The extent of value addition of horticultural products in India has increased from 2% to 6% in the last 5 years while the post-harvest losses are high at almost 30%, which is low but still promising, owing to the increased investment in this sector. These statistics present a grim picture when compared with the developed countries such as the US and France, which have value-addition to the extent of 70% and 50%, respectively, with minimal wastages. The reason for this can be attributed to:
  • Preferential demand for fresh fruits and vegetables than processed products by a majority of population and hence little availability for processing
  • Low market surplus due to sustenance farming rather than market-driven farming
  • Lack of awareness about primary and minimal processing
  • Small-size of land holdings is unable to support the industry with suitable raw material
  • Tendency of the industry to procure from mandi where there is no control over the grades and quality, which reduces the processing efficiency
The major issues in post-harvest management of fruits and vegetables relate to inadequate post-harvest infrastructure and inadequate processing facilities for fruits and vegetables. Also, in context with the international quality standards, lack of R&D for quality fruits and vegetables and contamination by pesticide residues renders Indian processed products non-preferable in foreign markets. But with the increased government support and the ever-increasing disposable income and changing lifestyle of consumers, the sector is likely to grow rapidly and bring lower wastage of food in demand for the ever burgeoning population.
Dhirajlal Patel is the CMD of Champion Agro Limited, a Gujarat based agri-retail company

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