Food Processing industries include all those food items going through two processes

(a)  Manufacturing process. If any agriculture, animal husbandry or fisheries product is transformed through a process (involving employees, power. machines or money) in such a way that its original physical properties undergo a change and  the transformed product is edible and has commercial value, then it comes within the domain of food Processing Industries.

(b) Other value-addition process: If there is significant value addition (increased shelf life, shelled and ready for consumption) such produce also comes under food processing, even if it does not undergo manufacturing processes.

Food processing encompasses all the steps that food goes through from the time it is harvested to the time it arrives on consumer’s plate.According to Food and Agriculture Organization (FAO), processed foods can be classified into three types viz. Primary, Secondary and Tertiary.

• The primary processing includes basic cleaning, grading and packaging as in case of fruits and vegetables.
• Secondary processing includes alteration of the basic product to a stage just before the final preparation as in case of milling of paddy to rice.
• Tertiary processing leads to a high value-added ready-to eat food like bakery products, instant foods, health drinks, etc.

Functions of Food Processing

• Traditional food processing had two functions: to make food more digestible and to preserve food during times of scarcity as most crops are seasonal.
• By processing food, it can be customized to suit the nutritional requirements of groups such as the elderly, pregnant women, infants, young children and athletes.
• Modern food processing has three major aims:
• To make food safe (microbiologically, chemically),
• To provide products of the highest quality (flavor, color, texture)
• To make food into forms that are convenient (ease of use)
• Potentials of Food Processing-
• It can prevent food wastages.
• It can curb food inflation by safely storing food to meet demand-supply challenges.
• It can raise agricultural incomes.
• It can arrest disguised unemployment and distress migration in the rural areas by providing a viable source of livelihood.

In the field of Food Processing India has certain unique advantages like diverse soils and climatic zones, long coastline, traditional knowledge base etc. 

Global Food Processing Industry

The global processed food industry is estimated to be valued around USD 3.4 trillion and accounts for three-fourth of the global food sales. The global food industry is ever changing and evolving. However, health, convenience and value continue to be the key value propositions in this industry.  However, only 6 percent of processed foods are traded across borders compared to 16 percent of major bulk agricultural commodities. The United States and European Union together account for over 60 percent of total retail processed food sales in the world.

Trade liberalization policies through multi-lateral and regional trade agreements have led to a rapid growth in food processing. In the Asian region, Japan is the largest food processing market, but India and China are likely to grow at a faster rate in the next decade

Challenges and Opportunities     

Food processing industry ranks as the 5th largest industry in India in terms of production, consumption and exports. It employs over 16 percent of total workforce in organised manufacturing sector and 32 percent in unorganised manufacturing sector. It employs 13 million people directly and- 35 million people indirectly. It has the potential to generate significant employment as the multiplier effect of investment is 2.5 times than in other industries. This industry is dominated by unorganized sector which contributes more than 70 percent of output in. value and 50 percent in volume. Total bank credit deployed is 6 percent of total gross credit deployed across all industry segments. Indian food processing industry stands at $135 billion and is estimated to grow with a CAGR of 10 per Cent to reach $200 billion by 2015.

Key Segments of the Food Processing Industry in India

The food processing industry in India is large and includes segments such as agriculture, horticulture, plantation, animal husbandry and fisheries.

The food processing industry is one of the largest industries in India -- it is ranked fifth in terms of production, consumption, export and expected growth.  It employs over 16 percent of total workforce in organised manufacturing sector and 32 percent in unorganised manufacturing sector. It employs 13 million people directly and- 35 million people indirectly. This industry is dominated by unorganized sector which contributes more than 70 percent of output in. value and 50 percent in volume. Total bank credit deployed is 6 percent of total gross credit deployed across all industry segments. Indian food processing industry stands at $135 billion and is estimated to grow with a CAGR of 10 per Cent to reach $200 billion by 2015. Processed food market accounts for 32 per cent of the total food market. It accounts for US$ 29.4 billion, in a total estimated market of US$ 91.66 billion.. According to the Confederation of Indian Industry (CII) the food-processing sector has the potential of attracting US$ 33 billion of investment in 10 years and generate employment of 9 million person-days.

Growth drivers/opportunities/ Potentials for Food Processing Industry

Food processing Industry offers distinct benefits to both the producers as well as processors. The following changes in the market conditions reaffirm the potential for the sector.

1)   Increasing food and grocery spending - 53 % total consumption expenditure on retail and grocery in                  rural areas and 40% in urban areas.

2)   Rapid growth in organized retail- due to change in lifestyle and higher incomes which will lead to    more demand and sale for processed food products so a catalyst for the food industry

3)   Consumer trend towards convenience food and ‘enjoying life’ driven by change in demographic pattern -Median age of Indian population is 24 years and nearly 65 % of population is below 35 years of age, leading to Explosive demand  of convenience foods, value-added foods and eating-out

4)   Rising income-levels -Increasing willingness to pay premium for healthy and quality processed products so more demand for processed food products

5)   More women in the workforce- percentage of working women as a percentage of total population has increased to 25% which translates to more demand for convenience food.

6)   Global shift to outsourcing from India across products/ services including food

High-margin businesses possible in niche export markets (e.g. organic foods, herbal products)

Producers have to meet stringent export requirements that leads to Quality improvement, which spill-over to domestic markets resulting in availability of better quality food products in india

7)   De-regulation and liberalization of the Indian economy-  It’s easy to bring in global technology, know-how and investments resulting in ease of entry for new businesses and capacity addition

8)   Changes happening on the supply side - In addition to the demand side, there are changes happening on the supply side with the growth in organised retail, increasing FDI in food processing and introduction of new products.

9)   Central government has given a priority status to ail agro-processing businesses – which is boosting growth, Government incentives in the field of mega food parks, cold chain and exports benefits are also playing an important role in promoting food processing.

Challenges

• Most of the food processing units in India are small and hence can’t realise the benefits of economies of scale. As a result their products are not competitive in the market.
• Due to small size they cannot invest in R&D, marketing, retailing etc.
• Supply chain problems like low productivity, presence of large number of intermediaries due to PAMC acts, poor transport infrastructure etc.
• Inadequate storage infrastructure.
• Indian consumers are price sensitive. Therefore most of the products are packaged in small units thereby leading to high packaging costs for the food processing industry.

Steps being taken

The Eleventh Rive Year Plan marked a major departure in terms of overriding focus on this industry. This is reflected not only by way of nearly a seven-fold hike (over Rs. 4000 crores) in outlays for this industry, as compared to the 10th year plan (Rs.650 crores) but also by launching a flagship scheme called Mega Food Parks along with various other initiatives as follows:         

(a)  Establishment of' cold chain, value addition and preservation infrastructure

(b)  Promotional activities like seminars/workshops/studies/surveys/exhibition/fairs advertising publicity

 (c) Scheme for technology upgradation

(d)  Scheme for human resource development

(e)  Entrepreneurship development programme

(f)  Food processing training centre

(g)  Scheme for R and D and upgradation of food testing laboratories

(h)  Scheme for upgradation of Street food quality

(i)   Scheme for strengthening of institutions

(j)   Modernization of Abattoirs

(k)  Modernization of meat shops

(j)  Food Processing is major component of Make in India.

Mega Food Parks Scheme (MFPS) was approved by the government in September 2008 and has the following objectives:

• Scheme formulated to accelerate growth of food processing industry in the country
• Raising the processing of perishables in the country from the existing 6% to 20%
• Raising value addition from 20% to 35%
• Raising India's share in global food trade from 1.5% to 3% by the year 2015.

Objectives Of The Mega Food Parks Scheme

• The idea is to provide excellent infrastructure facilities for food processing industries along the value chain from the farm to the market. It will include
• Creation of infrastructure near the farm, transportation, logistics and centralized processing centers.
• The main feature of the scheme is a cluster based approach.
• The scheme will be demand driven; pro-market and would facilitate food processing units to meet environmental, safety and social standards.

Salient Features

• Cluster Based Approach i.e cluster of products and producer who would be the source of backward linkage
• Demand driven with focus on strong backward and forward integration- size of MFPS and types of products would depend on the region in which the MFPS is being developed.
• The scheme aims to facilitate the establishment of a strong food processing industry backed by an efficient supply chain, which would include farm proximate Collection Centres (CCs) and Primary Processing Centers (PPC) and cold chain infrastructure. The food processing units, under the scheme, would be located at a Central Processing Centre (CPC) with need based common       infrastructure required for processing, packaging, environmental protection systems, quality control labs, trade facilitation centres, etc.
• Stakeholder participation with private initiative through Special Purpose Vehicle. These farms are to be developed and set up by creating SPV's under Indian companies act 1956. govt equity in this SPV can’t exceed 26%. An SPV can be set up by processors, farmers, organised retailers, local/state authorities, private sector or any other entrepreneurs. it is mandatory to have,  in a SPV , an entity from the processed food sector who must have minimum equity of 26% so that his expertise is used to develop the park and food processing sector .
• The extent of land required for establishing the CPC is estimated to be between 50-100 acres. Though the actual requirement of land would depend upon the business plan, which may vary from region to region. The land required for setting up of PPCs and CCs at various locations would be in addition to land required for setting up CPC.
• It is expected that on an average, each project will have around 30-35 food processing units with a collective investment of Rs 250 crores that would eventually lead to annual turnover of about Rs 450-500 crores and creation of direct and indirect employment to the extent of about 30,000. However, the actual configuration of the project may vary depending upon the business plan for each Mega Food Park.
• Assistance for creation of common enabling facilities from Ministry is Limited to non-land component of the project
• 50% of project cost limited to Rs 50 crore in general areas
• 75% of project cost limited to Rs 50 crore in difficult & hilly areas and ITDP notified areas.
• The Scheme is co-terminus with the 11th Plan period. However, projects which have received the final approval under the scheme shall continue to receive the grant support and benefits of the scheme.

Expected Outcome Of The Mega Food Parks

• The expected outcome is increased realization for farmers, creation of high quality rural processing infrastructure, reduction in wastage, capacity building of the producers and processors and creation of an efficient supply chain along with significant direct and indirect employment generation.
• Benefit to 6000 farmers / producers directly and 25000-30000 farmers indirectly
• Estimated investment is around Rs.100 Crore and additional investment potential is around Rs.250 Crore.
• Estimated annual turnover of Rs.500 Crore.
• Each project has potential of establishment of 30-40 food processing industries.

Role Of State Government

• Providing assistance to SPVs in procurement of suitable land.
• Providing all the requisite clearances, wherever needed, for setting up the MFP and its components thereof and providing the necessary assistance for Power, Water, Approach roads and other external infrastructure to the project
• Providing flexible and conducive labour environment and consider special facilities like exemption of stamp duty, VAT/Sales Tax exemption etc. for the MFP and the units located in the MFP
• Providing a fast track single window agency to facilitate clearances and permissions required for the project.

Twelfth Five Year Plan and Food Processing Sector

An outlay of over 15,000 crores has been earmarked for this sector during the plan. The most significant initiative during 12th Plan is launching of a National Mission on Food Processing (NMFP). This would be a paradigm shift in Ministry’s approach and is driven by the need to make food processing truly a national initiative.

It is also fully, realized that unless State Governments become implementing agencies of Ministry’s varies Schemes and programmes there would remand a limitation on size and depth of Ministry’s programmes.

The success achieved by initiatives like National Horticulture Mission also suggests that Ministry may adopt a similar approach to reach farmers and small entrepreneurs. The NMFP is thus guided by twin principles of Decentralization and Outreach.

The Mission seeks to make India a global leader in production, consumption and export of safe, hygienic, nutritious and quality processed food-Items by enhancing processing levels, value addition and reduction in wastage, institutional strengthening, food safety and quality assurance and capacity building. The targets of the Mission are:

(i)   Increasing the levels of Processing of perishables from 6 percent to 20 percent

(ii)  Value addition from 20 to 30 percent

(iii) Increasing share of India in global food trade from 1.5 to 3 percent

(iv) Skill development to the tune of 1.5 million

Objectives Of NMFP

(a) To spread the message of significance of food processing for enhancing agricultural productivity and farmers’ income in the country.

(b)  To assist the State Governments in creating requisite synergy between their agricultural plans and development and food processing sector.

(c)  To assist the State Governments in addressing both Institutional and Infrastructural gaps along the value chains and thus create efficient supply chains for agriculture produce.

(d)  To promote initiative, for skill development, training and entrepreneurship which would meet needs of both post-harvest management and food processing industry.

(e)  To, assist MSMEs in setting up/modernization of food processing units by providing need based support in terms of capital/technology/skill etc.

(f) To assist food processing industry to meet requisite standards in terms of food safety laws and market demand, both domestic and international.

Five Guiding Principles of the Mission:

(a) Organizing the unorganized food processors, including Self-Help Groups, to help them reap advantages of Mission initiatives.

(b) Ensuring advantages of programmes/Schemes/institutions/infrastructure of NMFP reach Micro and Small Enterprises on preferential basis.

(c)  Dedicated, professional, sensitive and accountable support structure to initiate and implement the Mission initiatives in a transparent manner.

(d)  Mission initiatives to be shaped and driven by proposed beneficiaries.

(e)  Adoption of best practices for scaling up programmes/initiatives.

All these schemes would be implemented as centrally sponsored schemes or through additional central assistance route by giving responsibility of implementation to the state governments. The mission would operate at National, State and District levels.

PM KISAN SAMPADA YOJANA

The Central Sector Scheme - SAMPADA (Scheme for Agro-Marine Processing and Development of Agro-Processing Clusters) was approved by the cabinet in May 2017 for the period of 2016-20 coterminous with the 14th Finance Commission cycle. The scheme has now been renamed as the "Pradhan Mantri KisanSampada Yojana (PMKSY)".

It is an umbrella scheme incorporating ongoing schemes of the Ministry like Mega Food Parks, Integrated Cold Chain and Value Addition Infrastructure, Food Safety and Quality Assurance Infrastructure, etc. and also new schemes like Infrastructure for Agro-processing Clusters, Creation of Backward and Forward Linkages, Creation / Expansion of Food Processing & Preservation Capacities. Under PMKSY the following schemes are to be implemented.

• Mega Food Parks
• Integrated Cold Chain, Value Addition and Preservation Infrastructure
• Creation/Expansion of Food Processing/Preservation Capacities
• Infrastructure for Agro Processing Clusters
• Scheme for Creation of Backward and Forward Linkages
• Food Safety & Quality Assurance Infrastructure
• Human Resources and Institutions