Revision: Food Processing in India

Status of Food Processing in India (FPI)

• India’s food production industry is valued at over $400 billion, yet only a small percentage is processed. Despite being the world’s second-largest producer of fruits and vegetables, only about 2% of this produce is processed. Processing levels remain low: 2% of fruits and vegetables, 8% of marine products, 35% of milk, and 6% of poultry.
• Processed food has the potential to significantly increase farmers’ incomes. 
  • For instance, while selling raw bananas provides limited revenue, processing and selling banana-based products, such as chips or purées, can substantially enhance profitability.

Key Drivers of India’s Food Processing Sector

• Global Leader in Production: India is the second-largest producer of fruits, vegetables, marine products, meat, and poultry, and the world’s largest milk producer with 221.06 million tonnes (2021-22).
• Largest Livestock Population: India has the largest livestock population globally, with 512 million animals, including 119 million milch animals.
•  Economic Contribution: Agriculture contributes about 25% to India’s GDP, underscoring its importance in the economy.

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Significance of the Food Processing Industry (FPI)

• Sunrise Industry: FPI connects agriculture with industry, playing a crucial role in economic development.
• Employment Generation: FPI offers significant job opportunities, especially in rural areas, and contributes to poverty alleviation, despite 70% being unorganized and contributing only 15% by value.
• Curbing Migration & Food Wastage: FPI reduces rural migration by providing local jobs and cuts food wastage, with only 6% of perishable food currently processed.
• Income & Inflation: FPI boosts farmers’ income through value addition and helps control food inflation by extending food shelf life.
• Nutritional & Environmental Benefits: Processing enhances food nutrition through fortification and encourages crop diversification, improving soil fertility and sustainability.

Scope of Food Processing in India

• Agricultural Strength: India ranks second globally in producing key commodities like rice, wheat, sugarcane, and tea, indicating its strong capacity to contribute to global food supplies.
• Opportunities in Allied Sectors: Significant growth potential exists in processing fruits and vegetables, fisheries, dairy, meat, poultry, and beverages.
• Global Competitiveness: India consistently ranks among the top five in producing coffee, tobacco, spices, and seeds, positioning itself to cater to diverse international markets and demands.
• Urbanization & Market Growth: With urbanisation at 31.16% of the population, rising disposable incomes, changing lifestyles, and a growing demand for processed foods drive market expansion.

Methods for improving this sector

• Village-Level Procurement: NITI Aayog recommends establishing village-level centres for perishables to enhance supply chain efficiency.
• Human Resource Development: As per the National Skill Development Corporation (NSDC), 17.8 million individuals need to be skilled in food processing by 2022. Currently, there are many unskilled workers in the sector.
• Encouraging R&D: R&D drives innovation, improves product quality, and enhances food safety and efficiency in the industry.
• Streamlining Regulations:  Developing supportive regulations for contract farming and commodity clusters is essential for economic viability.
• Public-Private Partnerships (PPP):  PPPs can foster growth in food processing by investing in infrastructure, technology, and resources through government-private sector collaboration.

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Constraints and Issues in Food Processing

• Supply and Demand Imbalance: Fragmented holdings, low farm productivity, and high seasonality lead to small, dispersed marketable surpluses.
• Low Value Addition: The industry is highly fragmented, with a significant unorganised segment, resulting in minimal value addition, especially nutritionally.
• Quality and Safety Challenges: The large number of players, particularly in the unorganised sector, makes implementing quality and safety norms difficult.
• Regulatory Complexity: Multiple laws governed by different ministries cause delays in legislative and administrative processes.
• Infrastructure Limitations: Inefficient supply chain mechanics and uneven cold storage distribution lead to regional disparities.

Government Initiatives to Promote the Food Processing Sector

• Pradhan Mantri Kisan SAMPADA Yojana (PMKSY):
  • Objective: Modernise food processing and reduce agricultural waste.
  • Key Schemes: Mega Food Parks, Integrated Cold Chain, Food Safety and Quality Assurance Infrastructure, and Operation Greens.
• Matsya Sampada Yojana:
  • Focus: Sustainable development of the fisheries sector.
• Production Linked Incentive Scheme for Food Processing Industry (PLISFPI):
  • Aim: Create global food manufacturing champions and support Indian food brands internationally with a budget of ₹10,900 crore.
• Operation Greens:
  • Goal: Develop infrastructure for key perishable products like Tomato, Onion, and Potato (TOP) and expand to 22 products to enhance agricultural exports.
• FSSAI Regulations:
  • Focus: Ensure food safety and standards through the Food Safety and Standards (Food Product Standards and Food Additives) Regulations, 2011.

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