Grocery shopping in the US is fun. There is an ample choice of brands to choose from and the range of prices for the same product is similarly wide allowing one to make a choice that suits one’s tastes, life-style habits and of course, budget. There are breakfast cereals, yogurt, milk, biscuits, tea, coffee and a host of daily food products that are enriched with vitamins, minerals, fibre or are low fat, 1% fat, 2% fat or fat and cholesterol free or are served with many natural flavours. If one gets tasty, ready to eat and healthy food at economical prices, why will one not buy them regularly and in bulk?

 India is the world’s second largest producer of agricultural products after China. Yet, we don’t offer as much choice to our consumers. The Indian food processing industry has tremendous potential because it has a huge domestic market whose demands keep on rising as well as in the foreign market, not just made up by the rapidly growing diaspora but also by international consumers. Today, there are many Indians who are extremely busy and may not have the time to cook. At the same time, they are getting health conscious. They want farm fresh and convenient food that will not spoil soon. The food processing industry finds its prospects for investment and export in the changing life-style demands of especially the growing middle class and urbanites.

By the end of this year, it is estimated that some 200 million will be added to the 300 million estimated consumers of processed food in India. With the growing per capita income, the Ministry of Food Processing in its Vision 2015 document on the prospects and opportunities of the sector, estimated that its size would soon treble. This is backed by an Ernst and Young estimation of it growing by 30% to 40% in the next ten years. We are expected to double our agricultural exports to USD 20.6 billion in the coming five years. According to the Agricultural and Processed Food Products Export Development Authority (APEDA), our share of farm exports in global trade will grow from 2% to 5%.

 India’s favourable climate and topography that allows for the cultivation of a wide range of agricultural products that form a solid raw material base for the industry, an expanding consumer population with disposable income and an industry keen to invest in modern equipments and  improve sales, can turn these guesstimates of growth into a guarantee.

 What we need?

Convenience and choice for the consumers should be the main concerns. We need to improve our packaged food industry. Just to take one product and see how many opportunities it offers for product diversity and consequently more consumers and more sales, we can take one of the most basic that is milk. We can have different varieties of milk or yogurt (in terms of flavours, fat content, as well as enriched with digestives) where a bottle can last 15 days. The packaged milk or yogurt should be easily affordable for any income group. Now let us imagine that all the ingredients that are needed to prepare an elaborate meal like spices, vegetables, oil, batter, garnishing, etc are packaged and easily available. What would have taken us an hour to prepare would take us some 15 minutes or so. Think of coffee and tea of different varieties, caffeinated, decaffeinated or semi-caffeinated, in powder form, ground form, in sachets, etc and how easy it will be for us to make our favourite beverage. Custom made products can soon become general or routine food items and be affordable when the consumer base is large.

 The production cost in India is 40% less than in developed markets. So this is another thing in our favour. We are getting the technology, machinery and skills to enhance processing, packaging and retailing of food. There are new opportunities to invest in the sub sectors like soft drinks, confectionary, aquaculture, grain-based products, meat and poultry processing, alcoholic beverages, ready to eat food, food additives and flavours. A big entrant in the market is the health food sector that is clued on to the needs of the urban population.

What’s stopping us?

Advantages are offset by the hurdles posed by an underdeveloped infrastructural support system; a supply chain beset with problems of inefficiency and wastage; high costs of inventory, packaging and taxation and inadequate quality control and testing facilities. Even processing of simple products like rice, wheat, oats, and pulses have to be done so as to prevent their getting spoiled and guard them against microbial attacks. It is unacceptable that in a country where millions go hungry, 40% of food gets wasted during the lack of food processing. Another strike against us is that out of 312 food testing laboratories, only a few of them are properly equipped. The storage facilities leave a lot to be desired.

The challenges to make the sector more organised are yet to be taken up boldly with a concrete strategy.

 What has been envisaged?

The aim is to come out with food products that score highly on nutritional value and flavour (aroma, texture and taste), have a high shelf-life, are hygienic and well packaged and are affordable. Branding and marketing of products will obviously increase their saleability.

The Vision 2015 has set specific targets like raising the level of processing of perishables from 6% to 20%, increasing value addition to 35% and increasing India’s share of global trade to 3%. These would entail an investment of USD 20.6 billion. While FDI has grown, the government is pretty serious about the sector. The Prime Minister Manmohan Singh on October 6,2009 suggested simplifying the tax structure, having a clear National Food Processing Policy and improving rural infrastructure. The Union Food Processing Minister Subodh Kant Sahai has stated that the centre would commit USD 21.50 billion to the sector in the next 5 years. It is collaborating with state governments on setting up Food Parks and Agriculture Export Processing Zones. The PPP model is being promoted to attract investors.

The private sector is keen to invest as is evident from the growing companies and MNCs operating in our food processing market. There are a host of incentives like full repatriation of profits and capital, automatic approvals for FDI up to 100% barring a few cases, increase of institutional credit by banks and financial institutions, new industries in fruits and vegetable segment being allowed income tax rebate, zero duty on import of capital goods and raw materials for export-oriented units, reduction of customs duty on packaging machines to 5% and of central excise duty on meat, poultry and fish to 8%.

The thrust is on boosting agriculture-industry linkage so that there is a seamless functioning throughout the turnkey process. Encouraging technology transfers and building up the logistics along the supply chain is crucial. As with all other sectors, this one demands high R&D initiatives and investments. With manufacturers looking to integrate backward along the value chain, the government is set to promote terminal markets in cities like Kolkata, Mumbai, Nagpur, Nasik, Chandigarh, Patna and Bhopal. Private companies like Pepsi Co are increasingly opting for contract farming whereby a farmer agrees to produce a particular crop on his land needed by a company where its quantity and price is agreed upon by both the parties.

States like Andhra Pradesh, Madhya Pradesh, Uttar Pradesh, Punjab and Karnataka are aggressively wooing private investors and their food processing units have a high revenue return and rate of employment.

The government going an extra mile to boost the sector is paying off. It has attracted INR 9000 crore in FDI in April-November 2009, which is the highest ever.

We have a lot to offer. Our food processing industry is on the rise and if proper policies are implemented at the right time, we will soon find many of our food brands gracing the grocery shelves and kitchens not just in India but in the world as well.