FOOD PROCESSING

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SUMMARY
  • India offers the largest diversified production base and has a growing food industry. India is:
    • World’s largest milk producing nation
    • World’s largest producer, consumer and exporter of spices
    • World’s second largest producer of food grains, fruits, and vegetables.1
  • The total geographical area of India is 328.7 mn ha and the Gross Cropped Area is 198.4 mn ha with a cropping intensity of 142% in 2014-15.2
  • The reported Net Sown Area as recorded in 2014-15 is 140.1 mn ha.3
  • As per the National Agricultural Research Project (NARP), India has been divided into 127 agro-climatic zones. Out of the total 42 Mega Food Parks sanctioned, 17 Food Parks have been operationalized as on May 2019.4
  • Nivesh Bandhu is an investor facilitation portal to assist investors on the investment decisions. A special fund of US$ 285 mn has been set up in National Bank for Agriculture and Rural Development (NABARD) for affordable credit.5
  • Loans to food & agro-based processing units & cold chains have been classified under agriculture activities for Priority Sector Lending (PSL).6
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 sixth largest food and grocery market and fifth largest retail market globally. Thus, India can provide a perfect blend of traditional and hygienic food, processed and packaged according to modern technology.
  • The Food processing industry in India is indigenous because simple home-based techniques such as fermentation have resulted in the creation of worldwide acknowledgment of Indian pickles, papads, chutneys and murabba.
  • The Gross Cropped Area accounting for around 60.3% of the total geographical area stands at 198.4 mn ha, as per the land use statistics (2014-15). In a similar period, the net sown period is 140.1 mn ha, with a cropping intensity of 141.6%.7
  • The total area sown under Rabi crops in 2017-18 stands at 63.23 mn ha.8 The total area sown under Kharif crops in 2017-18 stands at 21.08 mn ha, whereas, the area under wheat and rice stands at 30.59 and 43.20 mn ha.9
  • 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. India is the world's biggest milk producer. Milk production in India in 2017-18 stood at 176.35 mn tonnes.10
  • India makes for around 6.3% of the global fish production with a total fish production of 12.60 mn metric tonnes in 2017-18. More than 50 different types of fish and shellfish products are being exported to 75 countries around the world. Fish and fish products have presently emerged as the largest group in agricultural exports from India.11
  • The Horticulture sector has recorded a production of 306.82 mn tonnes in 2017-18, which is 2% higher than 2016-17.12
  • India has a 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 and New Zealand.
  • World Food India, a mega food event that took place in November 2017, brought together 75,000 business visitors, from 61 countries, 75 International & National policymakers and Heads of State, 60 Global CEOs and 100 Indian CEOs; resulting in 5,000 B2B meetings over a span of three days. It helped India showcase itself as a preferred investment destination, with MoU’s worth US$ 13.56 bn 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 an investor make strategic decision, the portal also includes a Food Map that can help investors take decision relating to the project location.
  • An Investor tracking and facilitation desk has also been set up with a dual objective to identify new potential investors and help the Ministry to organize trade shows both on domestic as well as the 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 the value chain. There exist 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 17 have been made operational so far.13 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 MMT of cold storage, 210.75 metric tonnes per hour of individual Quick Freezing (IQF)14, 3.45 mn litres per day of milk of processing/ storage and 472 reefer vans during 2014 - 2017.
  • Food Safety & Standards Authority of India (FSSAI), the apex regulatory body has taken wide steps aiming to simplify product approval along with the 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 operationalized.
  • During the year 2016, 10 Food Testing Labs were 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 Centres of Excellence.
  • With such major developments, the market for plant and machinery in the Food Processing industry in the year 2024-25 is poised to stand at US$ 51.41 bn. 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 the presence of global players of the industry can be considered as the major growth drivers for the segment. India has a population base of 1.3 bn offering a large demand-driven market, with the retail sector expected to treble by 2020. Hence, the total consumption of the food and beverage segment domestically is expected to reach US$1.142 tn by 2025.
STATISTICS
  • The Food Processing Industry in India has emerged as one of the important segment in terms of its contribution to the Indian economy, as it contributes 9% and 11% of GDP in Manufacturing and Agriculture sector respectively.
  • Gross Value Added of the Food processing industry in India has been recorded as US$17.50 bn in 2016-17.15
  • The number of registered food processing units has increased from 38,608 in 2014-15 to 39,748 in 2016-17.16
  • Investment in Fixed Capital in registered food processing sector has grown from US$29.50 bn in 2015-16 to US$32.30 bn in 2016-17, witnessing a growth rate of 9.50%.17
  • The Food Processing Industry in India stands as one of the major employment intensive industry, constituting 12.77% of employment generated in all manufacturing factories registered under the Factories Act 1948. Additionally, the sector constitutes 13.72% of employment in the unregistered manufacturing sector.
  • The Food Processing Industry in India contributed approx. US$3.92 bn to India’s exports in the year 2017-18.18
FDI POLICY
  • 100% FDI is permitted under the automatic route in the Food and Processing industry in India.
  • 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 recognized as a priority sector in the new manufacturing policy in 2011.
  • Food processing units can avail preferential rates under Priority Sector Lending.19 It will ensure a greater flow of credit to entrepreneurs for setting up food processing units and attract investment in the industry.
  • Government has set up a special fund called "Food Processing Fund" of approximately US$285 mn 20 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.
  • A Dairy Processing & Infrastructure Development Fund (DIDF) has been set up with an outlay of US$1.15 bn during the period from 2017-18 to 2019-20.21 This investment is expected to benefit 95,00,000 farmers in about 50,000 villages.
  • Ministry of Food Processing Industries is also keen on developing an integrated and comprehensive National Food Processing Policy, for which a draft has already been circulated among the stakeholders to receive suggestions and recommendations. It aims to build India’s National Food Grid and National Cold Chain Grid apart from the retail markets at every nook and corner of the country.
  • Ministry of Food Processing Industries (MoFPI) provides a host of financial assistance to food processing companies in India, under the umbrella scheme of Pradhan Mantri Kisan Sampada Yojna (PMKSY), with an allocated amount of US$ 882 mn, that is expected to leverage investment US$ 4.6 bn, in addition to the creation of employment for 5,30,500 22 people by 2019-20. Under this, the emphasis has been paid to the creation of infrastructure facilities, such as Mega Food Parks and Cold Chains.
FINANCIAL SUPPORT
  • Under the scheme of Mega Food Parks, MoFPI provides assistance of 50 % of the project cost (excluding land), subject to a maximum of US$ 7.4 mn, for setting up the project. In addition, to develop small clusters, a subsidy of 35% of the eligible cost, or US$ 1.5 mn (whichever is less), is also being provided to agro-processing clusters.
  • To catalyze 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 US$ 1.5 mn is being made available for such projects. For creation/expansion of food processing/preservation capacities, an assistance of 35% of the eligible project cost is being provided with a ceiling of US$ 0.75 mn.
  • To ensure best-in-class food quality and safety, MoFPI provides grant-in-aid of 50% of laboratory cost, 25% of technical civil works cost 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.
    • 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, investment-linked deductions of 150% will be provided for the following businesses:
    • 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. These are in turn 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 the purchase of plant and machinery).

GST:

  • Ministry of Food Processing Industries has streamlined the rates for products under the 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 is:
    • 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 2019-20:

  • Budget Allocation to the Ministry of Food Processing doubled to reach to US$ 170.85 mn, with the objective of doubling the income of farmers by 2022.23
  • 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 US$ 76.92 mn.
  • Another revolutionary initiative includes the establishment of Specialized Agro Processing Financial Institutions to deal with the installation of capital intensive projects 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 an annual turnover of US$ 15.38 mn 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

INVESTIBLE PROJECTS:

  • 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, yeast preparation, alcoholic beverages. Beverages: fruit-based, cereal-based.
  • Dairy: liquid milk, curd, flavored yogurt, processed cheese, cottage cheese, Swiss cheese, blue cheese, ice cream, milk-based sweets.
  • Food additives and nutraceuticals.
  • Confectionery and bakery: cookies and crackers, biscuits, bread, 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 focus is on supply chain related infrastructures like cold storage, abattoirs and food parks.
  • The establishment of food parks – a unique opportunity for entrepreneurs, including foreign investors to enter in the Food Processing industry in India.
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)
KEY ACHIEVEMENTS
  • 296 Approved Cold Chain Projects as on May 201924
  • 4 Abattoirs projects completed
  • Creation of labs: 222 labs accredited by National Accreditation Board for quality testing of food25
  • A dedicated Investors' Portal and Mobile APP called 'Nivesh Bandhu' launched by the Prime Minister during the inaugural function of the World Food India 2017
  • MoUs signed during 'World Food India 2017' in November 2017 - signed between the Government of India and the United Nations' World Food Programme for cooperation during 2019 - 202326
SOURCES
  1. Ministry of Food Processing India, World Food Industries, World Food India – 2017, http://mofpi.nic.in/sites/default/files/ambassador_ppt_25_feb_final.pdf accessed on 03 June 2019
  2. Department of Agriculture, Cooperation & Farmers Welfare, Annual Report 2017-18, http://agricoop.nic.in/sites/default/files/Krishi%20AR%202017-18-1%20for%20web.pdf accessed on 03 June 2019
  3. Department of Agriculture, Cooperation & Farmers Welfare, Annual Report 2017-18, http://agricoop.nic.in/sites/default/files/Krishi%20AR%202017-18-1%20for%20web.pdf accessed on 03 June 2019
  4. Ministry of Food Processing Industries, Mega Food Park, http://mofpi.nic.in/Schemes/mega-food-parks accessed on 03 June 2019
  5. Ministry of Food Processing Industries, New initiatives and achievements, http://mofpi.nic.in/sites/default/files/mofpibookenglish_newinitiativesandachievements.pdf accessed on 03 June 2019
  6. Press Information Bureau, Ministry of Food Processing Industries, Investment in Food Processing Sector, http://pib.nic.in/newsite/PrintRelease.aspx?relid=159621 accessed on 03 June 2019
  7. Department of Agriculture, Cooperation & Farmers Welfare, Annual Report 2017-18, http://agricoop.nic.in/sites/default/files/Krishi%20AR%202017-18-1%20for%20web.pdf accessed on 03 June 2019
  8. Press Information Bureau - Ministry of Agriculture & Farmers Welfare, Rabi Crops Sowing Crosses 632 Lakh Ha, http://pib.nic.in/newsite/PrintRelease.aspx?relid=176104 accessed on 03 June 2019
  9. Press Information Bureau - Ministry of Agriculture & Farmers Welfare, Kharif crop sowing crosses 165.21 lakh ha area, http://pib.nic.in/newsite/PrintRelease.aspx?relid=180305 accessed on 03 June 2019
  10. Food Safety & Standards Authority of India, Milk production up 6.6% at 176.35 million tonne in 2017-18, https://www.fssai.gov.in/dam/jcr.../FSSAI_News_Milk_Economic_30_07_2018.pdf accessed on 03 June 2019
  11. National Fisheries Development Board, About Indian Fisheries, http://nfdb.gov.in/about-indian-fisheries.htm accessed on 03 June 2019
  12. Department of Agriculture, Cooperation & Farmers Welfare, Area and Production of Horticulture Crops - All India: 2016-17 to 2017-18, http://agricoop.nic.in/sites/default/files/3rdadvest.pdf accessed on 03 June 2019
  13. Ministry of Food Processing Industries, Mega Food Park, http://mofpi.nic.in/Schemes/mega-food-parks accessed on 03 June 2019
  14. Press Information Bureau Government of India Ministry of Food Processing Industries, Year Ender 2017: Ministry of Food Processing Industries, http://pib.nic.in/newsite/PrintRelease.aspx?relid=174865 accessed on 03 June 2019
  15. Ministry of Food Processing Industries, Annual Survey of Industries (2016-17), http://www.mofpi.nic.in/sites/default/files/asi_state_wise_2013-14_to_2016-17.pdf accessed on 03 June 2019
  16. Ministry of Food Processing Industries, Estimated Fixed Capital in Registered Food Processing units from (2007-08 to 2016-17), http://www.mofpi.nic.in/sites/default/files/fpi_reg_indus_1.pdf accessed on 03 June 2019
  17. Ministry of Food Processing Industries, Estimated Number of Registered Food Processing units from 2007-08 to 2016-17: Industry-wise, http://www.mofpi.nic.in/sites/default/files/fixedcap_regfpi_1.pdf accessed on 03 June 2019
  18. Agricultural & Processed Food Products Export Development Authority, Processed Foods, http://apeda.gov.in/apedawebsite/six_head_product/PFV_OPF.htm accessed on 03 June 2019
  19. Press Information Bureau, Ministry of Food Processing Industries, Year Ender 2017: Ministry of Food Processing Industries, http://pib.nic.in/newsite/PrintRelease.aspx?relid=174865 accessed on 03 June 2019
  20. National Bank for Agriculture and Rural Development, Department of Storage and Marketing, https://www.nabard.org/about-departments.aspx?id=5&cid=467 accessed on 03 June 2019
  21. National Dairy Development Board, DIDF - Dairy Processing & Infrastructure Development Fund, https://www.nddb.coop/didf/didf-in-brief accessed on 03 June 2019
  22. Pradhan Mantri Yojana, Pradhan Mantri Kisan Sampada Yojana (PMKSY) 2018-19 Food Processing Scheme, https://www.pradhanmantriyojana.co.in/pm-kisan-sampada-pmksy-food-processing-scheme/ accessed on 3 June 2019
  23. Agro & Food Processing, Critical analysis of interim budget 2019, http://agronfoodprocessing.com/critical-analysis-of-interim-budget-2019/ accessed on 3 June 2019 
  24. Ministry of Food Processing Industries, Consolidated list of State-wise 296 Approved Cold Chain Projects as on 31.05.2019, http://mofpi.nic.in/sites/default/files/may_update.pdf accessed on 03 May 2019
  25. National Accreditation Board for Testing and Calibration Laboratories, Laboratory Search, https://www.nabl-india.org/nabl/index.php?c=search&m=index accessed on 03 May 2019
  26. Ministry of Agriculture & Farmers' Welfare, MoU between GoI and the United Nations World Food Programme on Cooperation for 2019-2023, http://agricoop.nic.in/recentinitiatives/signing-mou-between-government-india-and-united-nations-world-food-programme accessed on 03 June 2019
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