India’s population is expected to become the world’s largest in the next 20 years & will increase pressure on available resources. The resulting increase in the demand for food will need to be met through higher agricultural productivity or by increasing food imports or reducing the losses of food by way of Food processing. Food and Agro processing units/industries process materials of plant or animal origin by transformation and preservation through altering physical and chemical characteristics and packaging. They transform raw material into finished products for consumption and exports. Processing makes value addition and is the key for better price realization and utilization of available resources like manpower, infrastructure etc.
The developed world’s food basket consist of 80% of processed food while share is only 1.3% in India though the India is the world’s leading producer of milk, second for Cereals, Fruits and Vegetables and third in Fish production (Table 1)
Table No 1. Agricultural products % share and rank in world production.
|Sr. No.||Agro Products||India’s Rank in World production||India’s share in world production|
From the above figure it is clear that India’s potential is doubtless but India is characterised by high production and high wastage of Food.
The rate of per capita consumption of cereals was observed to be decline from Peak 468 gram per capita per day in 1990-91 to 412 gram in 2005-06 indicating decline of 13 % during the period (GOI, 2008)
Table 2. Per capita availability and Deficit
|Food Item||Per capita availability||ICMR Recommendations||Per Capita Deficit|
|Egg||30 eggs/annum||180 eggs per annum||150 eggs per annum|
|Meat||3.24 kg/annum||10.95 kg per annum||7.71 kg/annum|
The main reason for deficit is High Population and high wastage 3-16 % losses of major agricultural produce at the time of harvest and post harvest. Post harvest losses especially in vegetables and fruits are presently in the range of 20 to 30 percent and contribute higher cost and reduce availability of these commodities.
A recent study conducted by ICAR shows percentage of losses occurred (Table 3)
|Post Harvest Losses (%)|
|Oil Seed||Ground Nut||10|
Table: 3 Post harvest losses in important crops
The food processing based on science and technology will stimulate and give economic reward for farmers, it will increase farmer’s income and rural development
Food processing is India’s solution to reduce Wastage and reduce inflation and maximise our food potential
Need for financing Food and Agro Processing Units:
- Value added processed food in India accounts for only 2 percent of total food production, compared to countries like Brazil, USA and Philippines with 70 percent, Malaysia 83 percent and Thailand with 30 percent
- We process only 2 % of Fruits and Vegetables, 6% of Poultry, 8% of Marine and 35% of milk which is less than 10% of total production
- The food processing will help the farmers earn more and consumer pay less by way of value addition in food
- To achieve the benchmark targets stipulated by Government of India under Priority sector and Agriculture in particular.
Scope and opportunities:
- With increase in income levels, consumption of higher order group like Fruits and Vegetables, dairy pulse and processed food is expected to increase at faster rate than food Grains
- In India income level is rising, middle class and rich families can afford processed food.
- “Y” India doesn’t shy away from trying new food products.
- In India Nuclear families are increasing, usually working couple having less cooking time and increasing expensive maids they need ready to eat / ready to cook food.
- Emergence of shopping mall culture in small cities
- Growing migration from rural to urban India increase income & ultimately demand for bread, butter etc.
- Due to Media penetration, advertisements, “demand” is created for health-drinks, noodles, cream-biscuits, cornflakes etc.
- Celebrity chefs, cookery channels introducing new dishes, international cuisines introduced which create demand for their ingredients, vegetables in India.
- In India the diseases like Diabetes, obesity, Blood pressure, lifestyle diseases increased demand for healthy food.
- Liberalization and the growth of organized retail have made the Indian market more attractive for global players. With a large agricultural sector, abundant livestock and cost competitiveness, India is fast emerging as a sourcing hub of processed food.
- A population of 1.2 Billion people, with the world’s highest youth population – India has 572 Million people under the age of 24.
- Rising income levels and a growing middle class.
- One-third of the population will be living in urban areas by 2020.
- Increasing desire for branded food as well as increased spending power.
- Large and distinct consumer brackets to support customized offerings, new categories and brands within each segment.
- Consumption in India is driven towards packaged and ready-to-eat foods.
- Favorable economic and cultural transformation and a shift in attitudes and lifestyles have consumers experimenting with different cuisine, tastes and new brands. There is an awareness and concern for wellness and health, for high protein, low-fat, wholegrain, organic food.
- Processed food exports and related products have been raising steadily, the main destinations being the Middle East and Southeast Asia.
- India is a global outsourcing hub, with large retailers sourcing from India owing to abundant raw materials, supply and cost advantages.
The Governments Initiative for Food Processing
- Mega Food Park (Central processing centre):
- Integrated cold chain
- National mission on Food processing
- Technology up gradation
- Quality standard: Govt is ensuring standardisation and safety with specialised food testing laboratories and implementation of food safety management system
- Skill India
- Food Map of India: The food map of India prepared by mapping the potential of food processing by identifying surplus of raw material and available on website of Ministry of Food Processing
- Policy Issues: Food and Agro Processing units and clod chain classified under agriculture activities for priority sector lending. Excise duty on Machinery Reduced from 10% to 6%, Service tax on pre-conditioning, Pre-coding ,ripening retail packing, labelling of fruits and vegetables exempted, launched investors portal, strengthened grievance redressal mechanism and facilitating committed to transparency in decision making
- Special fund in NABARD
- Thrust on development : Enhanced allocation on infrastructural development schemes like food park, cold chain projects and Abattoirs
Bankable activities for financing (Investment opportunities):
- Fruits and vegetables: preserved, candied, glazed and crystallized fruits and vegetables, juices, jams, jellies, purees, soups, powders, dehydrated vegetables, flakes, shreds and ready-to-eat curries.
- Food preservation by fermentation: wine, beer, vinegar, the preparation of yeast, alcoholic beverages.
- Beverages: fruit-based, cereal-based.
- Dairy: liquid milk, curd, flavored yoghurt, processed cheese, cottage cheese, Swiss cheese, blue cheese, ice cream, milk-based sweets.
- Food additives and Nutraceuticals.
- Confectionery and bakery: cookies and crackers, biscuits, breads, cakes and frozen dough.
- Meat and poultry: eggs, egg powder, cut meats, sausages, and other value added products.
- Fish, seafood and fish processing – processing and freezing units.
- Grain processing – oil milling sector, rice, pulse milling and flour milling sectors.
- Food preservation and packaging: metal cans aseptic packs.
- Food processing equipment: canning, dairy and food processing, specialty processing, packaging, frozen food/refrigeration and thermo-processing.
- Consumer food: packaged food, aerated soft drinks, packaged drinking water.
- Spice pastes.
- Supply chain infrastructure – this niche has investment potential in food processing infrastructure, the government’s main focus is on supply chain related infrastructure like cold storage, abattoirs and food parks.
- The establishment of food parks – a unique opportunity for entrepreneurs, including foreign investors to enter in the Indian food processing sector.
Role of Indian banks plays an important role in providing technical and financial support to the farmers in various aspects of indicators which decides growth under Agriculture. No doubt that financing of agriculture by the Indian banks brought a change in economy of the farmers, yet financing to agriculture sector is not free from some issues and inconveniences.
The India is predominantly agrarian country with tremendous production of cereals, fruits and vegetables. But the availability of food per individual is very less. One of the reasons is wastage in post harvest. The Food and agro processing unit is one the solution to save wastage and at the same time not only to increase the availability of food but, increasing employment opportunities and contribution to GDP (Gross Domestic Product).
As per recent guidelines from Govt. of India limit up to 100 crore to the Food and Agro Processing units from banking industry is included in agriculture which will be helpful for banks in building the portfolio under Agriculture and also in achieving the benchmarks stipulated by Reserve Bank of India (RBI). This guideline should be absorbed into the minds of bankers as a commercial viable profitable proposition rather than a regulatory obligation.
- M S. Bamji: Background Paper for the sub-group on dietary diversification
- GOI Economic survey 2007-08 New Delhi Ministry of Finance)
- G C Pande and S Priyakumar, “Indian Banker” Volume I No 5 December 2013. Meeting Future Credit Needs of Agriculture.
- Food production & availability – Essential prerequisites for sustainable food security : S. Swaminathan & R.V. Bhavani
About the Author
Union Bank of India
Staff College, Bangalore
Email: [email protected]