FOOD PROCESSING

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SUMMARY
  • 200.9 million hectares of the Gross Cropped Area in 2013-14.
  • 141.4 million hectares of Net Sown Area.
  • 127 agro-climactic zones
  • 9 Mega Food parks operationalized, 42 got sanctioned.
  • Nivesh Bandhu, an investor one-stop platform.
REASONS TO INVEST
  • India ranks second in terms of availability of arable land with 127 diverse agro-climatic zones, having a share of 11.2% of the total arable land in the world. In addition, the resource-rich country, has the 6th largest food and grocery market and 5th largest retail market globally. Thus, India is capable of providing world a perfect blend of traditional and hygienic food processed and packaged according to the modern technology.
  • Food processing industry is indigenous to India, because simple home-based techniques such as fermentation has resulted in creation of world-wide acknowledgment of Indian pickles, papads, chutneys and murabbas.
  • The Gross Cropped Area accounting for around 61.11% of the total geographical area of the country, stands at 200.9 million hectares as per the land use statistics (2013-14). In the similar period, the net sown period is 141.4 million hectares, with a cropping intensity of 142% , up from 139% in 2012-13 . The total area sown under Rabi crops in 2017-18 as on 29th December, 2017 stands at 56.57 million hectares. Whereas, the area under wheat and rice stands at 27.38 and 1.63 million hectares.
  • Benefiting from such a geographical advantage, India is the largest producer of milk, bananas, mangoes, guavas, papaya, ginger, okra, second largest producer of wheat, rice, fruits, vegetables, tea, sugarcane and cashew nut and the third largest producer of cereals, coconut, lettuce, chicory, nutmeg, mace, cardamom and pepper globally.
  • India is also globally acknowledged as the leading producer of agriculturally allied products. It is the world's biggest milk producer . Milk production in India in 2015-16 stood at 155.5 million tonnes. With a total fish production of 10.07 million metric tonnes, India makes for around 6.3% of the global fish production. Hence, India’s vast coastline of 8129 km, makes it third and second largest in fisheries and aquaculture respectively.
  • The Horticulture sector has recorded a production of 300.6 Million Tonnes, which is 5% higher than in the previous year . The sector has witnessed an average growth rate of 5.5% annually over the last ten years.
  • It also gains from its locational advantage from the viewpoint of trade, as it has close connectivity with Europe, Middle East & Africa from the western coast, and Japan, Singapore, Thailand, Malaysia, Korea, Australia & New Zealand from the eastern coast.
  • World Food India, a mega food event that took place in November 2017, brought together 75000 business visitors, from 61 countries , 75 International & National policy makers and Heads of State, 60 Global CEOs and 100 Indian CEOs; resulting in 5000 B2B meetings over a span of three days . It helped India showcase itself as a preferred investment destination, with MoU’s worth USD 13.56 billion signed by domestic & foreign investors. At present, Global industry players such as GEA Group, Tetra Laval, Buhlar, Alfa Laval, Heat and Control and HRS process are reaping the benefits.
  • Nivesh Bandhu, an investor friendly portal launched recently brings together Central and State Government policies and incentives provided for the food processing sector. It is a one-stop platform for all stakeholders of the industry, including farmers, processors, traders, and logistics operators. To further help investor make strategic decision, the portal also includes a Food Map that can help investors take decision relating to project location.
  • Apart from it, an Investor tracking and facilitation desk has also been set up with a dual objective to identify new potential investors and help Ministry to organize trade shows both on domestic as well as international front. Such an initiative will help India to meet its investment needs.
  • Private Sector participation has been on a continuous rise in many segments of value chain. And, there exists huge opportunities for investments in the fields of contract farming, raw material sourcing and creation of agri linkages. Many international companies have gained a major foothold in contract farming initiatives.
  • Under the scheme of Mega Food Parks, Government has sanctioned 42 parks, and out of these 9 have been made operational so far . Additionally, under the scheme of Integrated Cold Chain and Value Addition Infrastructure, the Ministry is presently assisting 228 such projects , and in 2017, 16 projects got operationalized, creating an additional capacity of 0.24 million metric tonnes of cold storage, 72.70 metric tonnes per hour of individual Quick Freezing (IQF), 3.45million litres per day of Milk of processing/ storage and 472 reefer vans during 2014 - 2017.
  • FSSAI, the apex regulatory body has taken wide steps aiming to simplify product approval along with creation of a single-interface portal, “The Food Regulatory Portal” for effective and transparent implementation of the food safety laws in the country.
  • Product-specific developments are also being undertaken, for example, setting up of a Common Food Processing Incubation Centre for Shallots in Perambalur.
  • Under the scheme of Modernization of Abattoirs, one project at Panaji (Goa) has been operationalised.
  • Further, during the year 2016, 10 Food Testing Labs have been completed.
  • Sector Specific Skill Development Initiatives are also being taken up, with National Institute of Food Technology, Entrepreneurship and Management (NIFTEM) and Indian Institute of Food Processing Technology (IIFPT) being recognized as Centers of Excellence.
  • Thus, with such major developments, the market for plant and machinery in the food processing sector in the year 2024-25 is posed to stand at USD 51.41 billion .High growth food segments within the Food & Beverage Industry are Breakfast Cereals, Savory Snacks, Ingredients such as seasonings and dressings and pet food.
  • Apart from growing population and burgeoning purchasing power, rising urbanization, rising retail trade due to initiatives such as Digital India, together with presence of global players of the industry can be considered as the major growth drivers for the industry. As, India having a population base of 1.3 billion offers a large demand driven market, with a retail sector that is expected to treble by 2020. Hence, total consumption of the food and beverage segment domestically is expected to reach to US$1.142 trillion by 2025.
STATISTICS
  • The Food Processing Industry has emerged as one of the important segment in terms of its contribution to Indian economy, as it contributes 9 % and 11% of GDP in Manufacturing and Agriculture sector respectively.
  • Gross Value Added by agriculture & allied sectors stands at 322. 01 USD’ billion, contributing approximately 17% to total GVA in 2015-16. The share of Food Processing Sector in GVA of manufacturing sector was 8.71% and in that of agriculture, forestry and fishing stands at 10.04% in 2015-16.
  • The average annual growth rate (AAGR) of Food Processing Sector for the period 2011-12 to 2014-15 has outnumbered as that of agriculture, standing at 2.26% as compared to 1.69%.
  • The number of registered food processing units has increased from 37,450 in 2013-14 to 38,608 in 2014-15.
  • Investment in Fixed Capital in registered food processing sector has grown from 25.90 USD’ billion in 2013-14 to 29.53 USD’ billion in 2014-15, witnessing a growth rate of 14%.
  • Food Processing Industry stands as one of the major employment intensive industry, constituting 12.77 % of employment generated in all manufacturing factories registered under Factories Act 1948. Additionally, the sector constitutes 13.72% of employment in unregistered manufacturing sector.
  • The sector makes up for 13% of India’s exports and 6% of total industrial investment. Additionally, the sector is considered as the 13th largest recipient of FDI in India.
FDI POLICY
  • 100% FDI is permitted under the automatic route in food processing industries.
  • 100% FDI is allowed through government approval route for trading, including through e-commerce in respect of food products manufactured or produced in India .
SECTOR POLICY
  • Food processing is recognised as a priority sector in the new manufacturing policy in 2011.
  • Reserve Bank of India has classified loan to food & agro-based processing units and Cold Chain under agriculture activities for Priority Sector Lending (PSL) subject to aggregate sanctioned limit of USD 15.38 million per borrower from the banking system. It will ensure greater flow of credit to entrepreneurs for setting up of food processing units and attract investment in the sector.
  • Government has set up a special fund called "Food Processing Fund" of approximately USD 300 million (at INR 67.25 to 1 USD) in National Bank for Agriculture and Rural Development (NABARD) for extending affordable credit to designated food parks and the individual food processing units in the designated food parks. Of this, NABARD has sanctioned term loan of 65.79 USD’ million to 10 Mega Food Park projects and 2 processing unit. In addition, 157 designated food parks in different states have also been notified for provision of affordable credit from this special fund.
  • A Dairy Processing & Infrastructure Development Fund (DIDF) has been set up with an outlay of USD 1.67 billion during the period from 2017-18 to 2028-29. Out of 1.67 USD’ billions of financial outlay for project components of DIDF, 1.23 USD’ billion shall be loan from NABARD to National Dairy Development Board (NDDB) and National Dairy Development Cooperation (NCDC). This investment is expected to benefit 95, 00,000 farmers in about 50,000 villages.
  • Ministry of Food Processing Industries is also keen on developing an integrated and comprehensive National Food Processing Policy , for which a draft has already been circulated among the stakeholders in order to receive suggestions and recommendations. It aims to build India’s National Food Grid and National Cold Chain Grid apart from the retail markets at every nook and corner of the country.
  • Ministry of Food Processing Industries ( MoFPI) provides a host of financial assistance to food processing companies in India, under the umbrella scheme of Pradhan Mantri Kisan Sampada Yojna (PMKSY), with an allocated amount of USD 882 million, that is expected to leverage investment USD 4.6 billion, in addition to creation of employment for 0.5 million people by 2019-20. Under this, emphasis has been paid to creation of infrastructure facilities, such as Mega Food Parks and Cold Chains.
FINANCIAL SUPPORT
  • Under the scheme of Mega Food Parks, MoFPI provides an assistance of 50 % of the project cost (excluding land), subject to a maximum of USD 7.4 million, for setting up the project. In addition to develop small clusters, a subsidy of 35% of the eligible cost, or USD 1.5 million (whichever is less), is also being provided to agro-processing clusters.
  • In order to catalyse the creation of integrated cold chains and preservation infrastructure facilities, an assistance of 50 % of the project cost (excluding land), up to a limit of USD 1.5 million is being made available for such projects. Further, for creation/expansion of food processing/preservation capacities, an assistance of 35 % of the eligible project cost is being provided with a ceiling of USD 0.75 million
  • To ensure best-in-class food quality and safety, MoFPI provides grant-in-aid of 50 % of cost of laboratory 25% of the cost of technical civil works to house the equipment and furniture and fixtures associated with the equipment without ceiling which is decided on a case to case basis.

INCOME TAX:

  • Businesses involved in Processing, preservation and packaging of fruits and vegetables, or integrated business of handling, storage and transportation of food grains( starting operations from 1 April 2001) and in Processing, preservation and packaging of meat, meat products, poultry, marine or dairy products (staring operations from 1 April 2009), are eligible for Profit Linked Tax Holiday under Section 80-IB of the Income Tax Act 1961, as per follows:
    • For the first five years, 100% of profits and gains derived will not be taxable.
    • And, for the next five years, there would be a tax deduction of 25% (and, 30% in the case of a company).
  • Under Section 35-AD of the Income-tax Act, 1961, specified business are eligible for investment linked deductions, receiving 150% weighted deduction. And, these specified businesses are:
    • Setting-up and operating a cold chain facility
    • Setting-up and operating warehousing facility for storage of agricultural produce
    • Setting-up and operating a warehousing facility for storage of sugar
    • Bee-keeping and production of honey and beeswax
    • Production of fertilizers in India
  • Additionally, units that have been set up in an SEZ prior to 1 April 2021, engaged in the manufacture or production of any article or thing are eligible for the following deductions for profits and gains derived:
    • For the first five years, 100% deduction of profits derived from exports
    • For the next five years, 50% of profits and gains derived from exports.
    • And, for another five years, 50% of profits derived are subject to deduction amount being debited to a “Special Economic Zone Re-investment Account” and used for certain specified purposes (such as purchase of plant and machinery).

GST:

Ministry of Food Processing Industries, has streamlined the rates for products under GST regime, at specified rates of 0% (Nil), 5%, 12%, 18% and 28%.

PROJECT IMPORT SCHEME:

Under the Project Imports Scheme, industrial plants, irrigation projects and power projects are eligible for concessional customs duty. Detailed mention of the concessional duty are:

  • The basic customs duty rate for goods imported under the Project Imports Scheme is 5%.And, for certain specified projects such as a specified drinking water supply project, the basic customs duty rate is 0%.
  • After the introduction of GST, goods that were initially subject to countervailing duty, are liable to an IGST at 18 %.

KEY POINTS IN THE UNION BUDGET 2018-19:

  • Budget Allocation to the Ministry of Food Processing doubled to reach to 215.38 USD’ million, with the objective of doubling the income of farmers by 2022.
  • In order to curtail price volatility of basic perishable commodities like Tomato, Onion and Potato (TOP), an initiative named, “Operation Greens” has been earmarked with a corpus of 76.92 USD’ million.
  • Another revolutionary initiative includes establishment of Specialized Agro Processing Financial Institutions to deal with installation of capital intensive projects in order to ensure affordable, timely and accessible credit to the sector.
  • Other development initiatives include:
    • Promotion of cluster based development of agriculture commodities.
    • 100 % income tax deduction to Food Processing Organizations (FPO’s) having annual turnover of 15.38 USD’ million derived from post-harvest value addition activities.
    • To strengthen quality benchmarks, there will be setting up of state of art testing facilities in all 42 Mega Food Parks.
INVESTMENT OPPORTUNITIES
  • Fruits and vegetables: preserved, candied, glazed and crystallised 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, yeast preparation, alcoholic beverages.
  • Beverages: fruit-based, cereal-based.
  • Dairy: liquid milk, curd, flavoured 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 and 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.
FOREIGN INVESTORS
  • Kraft (USA)
  • Mars (USA)
  • Nestle (Switzerland)
  • McCain (Canada)
  • Danone (France)
  • Ferrero (Italy)
  • Del Monte (USA)
  • Kagome (Japan)
  • Kelloggs (USA)
  • Pepsi (USA)
  • Unilever (United Kingdom)
  • Perfetti (Italy)
  • Cargill (USA)
  • Coca Cola (USA)
  • Hershey (USA)
  • Metro Cash & Carry (Germany)
  • Walmart (US)
  • Yakult (Japan)
  • Amazon (USA)
SOURCES
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