FOOD PROCESSING

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SUMMARY
  • India offers the largest diversified production base and has a growing food industry. India is: 1
    • 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.
  • 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%.2
  • Nivesh Bandhu is an investor facilitation portal to assist investors on the investment decisions. A special fund of USD 285 Mn has been set up in National Bank for Agriculture and Rural Development (NABARD) for affordable credit.3
  • The Ministry of Food Processing Industries, Government of India has notified 253 designated food parks in different states for the purpose of availing affordable credit from a special fund with NABARD. 3
  • NABARD has already sanctioned a term loan of around USD 65.27 Bn to 11 Mega Food Park projects as of March 2019. 3
  • Loans to food & agro-based processing units & cold chains have been classified under agriculture activities for Priority Sector Lending (PSL). 3
REASONS TO INVEST
  • In addition to the rich resources, India has the sixth-largest food and grocery market globally and the country can provide a perfect blend of traditional and hygienic food, processed and packaged according to modern technology. 4
  • 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 stands at 198.4 mn ha and the reported net sown area is 140.1 mn ha while the total geographical area of the country is 328.7 mn ha, as per the land use statistics 2014-15. 5
  • Benefiting from such a geographical advantage, India is the largest producer of milk, bananas, mangoes, guavas, papaya, ginger, okra, pulses, wheat, tea and sugarcane. 6 
  • World Food India, a mega food event that took place in November 2017, brought together more than 75,000 visitors from 61 countries, resulting in 8,000 B2B meetings over a span of three days. It helped India showcase itself as a preferred investment destination, with MoU’s worth about USD 14 Bn signed by domestic & foreign investors. 7
  • Nivesh Bandhu 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 decisions, the portal also includes a Food Map that can help investors find various project locations. 8
  • 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.
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 contributed 8.33% and 10.66% of GVA in Manufacturing and Agriculture sector respectively in 2017-18. 9
  • Gross Value Added by the Food processing industry in India has been recorded as USD 25.6 Bn in 2017-18. 9
  • In the Food Processing Sector, the number of registered units/ factories is 37,839 and investment in fixed capital is USD 28.17 Bn. 10
  • The Food Processing Industry in India stands as one of the major employment intensive industry, constituting 13.75% of the employment in all manufacturing factories registered under the Factories Act 1948. The total number of persons engaged in the food processing sector is 17,72,259. 10
  • The value of processed food exports stood at USD 35.3 Bn during the year 2018-19. 11
FDI POLICY
  • 100% FDI is permitted under the automatic route in the Food and Processing industry in India. 12
  • 100% FDI is allowed through government approval route for trading, including through e-commerce in respect of food products manufactured or produced in India. 12

 

Read more about Foreign Direct Investment Policy in India >

SECTOR POLICY
  • Food Processing is recognized as a Special Focus Sector in the National Manufacturing Policy. 13
  • Food and agro based processing units can avail loans under Priority Sector Lending. 14 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 USD 265 Mn 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. 15
  • 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. 16 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). The following schemes are included under PMKSY: 17 
  • Mega Food Parks
  • Integrated Cold Chain and Value Addition Infrastructure
  • Creation/ Expansion of Food Processing/ Preservation Capacities (Unit Scheme)
  • Infrastructure for Agro-processing Clusters
  • Creation of Backward and Forward Linkages
  • Food Safety and Quality Assurance Infrastructure
  • Human Resources and Institutions
  • Operation Greens

 

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 USD 7.4 Mn, for setting up the project. In addition, to develop small clusters, a subsidy of 35% of the eligible cost, or USD 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 USD 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 USD 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 2020-21:

  • Budget allocation to the Ministry of Food Processing Industries for FY 2020-21 is USD 164.39 Mn. 18
  • Budget allocation to the Pradhan Mantri Kisan Sampada Yojna (PMKSY) for FY 2020-21 is USD 144.19 Mn. 19

ANIMAL HUSBANDRY INFRASTRUCTURE DEVELOPMENT FUND (AHIDF): 20

  • The Cabinet Committee on Economic Affairs of the Government of India has approved setting up of Animal Husbandry Infrastructure Development Fund (AHIDF). AHIDF will incentivize investments in infrastructure for dairy and meat processing and value addition infrastructure and establishment of animal feed plant in the private sector. 
  • Farmer Producer Organizations (FPOs), MSMEs, Section 8 companies, private companies and individual entrepreneurs with minimum 10% margin money will be the eligible beneficiaries of the scheme. The remaining 90% would be the loan component which will be provided by scheduled banks.
  • A total amount of INR 15000 cr. has been approved for the Animal Husbandry Infrastructure Development Fund (AHIDF).

 

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.

 

Explore projects to invest in 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)
KEY ACHIEVEMENTS
  • Out of the 37 food parks funded under the Mega Food Parks Scheme, 18 are operational and 19 are under implementation as on 27th Feb 2020. 21
  • 291 chain projects have been approved. Out of these, 193 cold are completed and 98 are under development as on 30th April 2020. 22
  • A dedicated Investors' Portal and mobile application called 'Nivesh Bandhu' has been launched. 23 
  • MoUs signed  between the Government of India and the United Nations' World Food Programme for cooperation during 2019 – 2023. 24
SOURCES
  1. Nivesh Bandhu, Investor Portal, http://foodprocessingindia.gov.in/
  2. Annual Report 2018-19, Department of Agriculture, Cooperation & Farmers Welfare, Ministry Of Agriculture & Farmers Welfare, http://agricoop.nic.in/sites/default/files/AR_2018-19_Final_for_Print.pdf
  3. Annual Report 2018-19, Ministry of Food Processing Industries, https://mofpi.nic.in/sites/default/files/eng_mofpi_annual_report_2018-19.pdf
  4. Nivesh Bandhu, Investor Portal, http://foodprocessingindia.gov.in/
  5. Annual Report 2018-19, Department of Agriculture, Cooperation & Farmers Welfare, Ministry Of Agriculture & Farmers Welfare, http://agricoop.nic.in/sites/default/files/AR_2018-19_Final_for_Print.pdf
  6. Nivesh Bandhu, Investor Portal, http://foodprocessingindia.gov.in/
  7. World Food India – 2019, Consulate General of India, https://cgivancouver.gov.in/pdf/WFI.pdf
  8. Nivesh Bandhu, Investor Portal, http://foodprocessingindia.gov.in/
  9. Annual Report 2018-19, Ministry of Food Processing Industries, https://mofpi.nic.in/sites/default/files/eng_mofpi_annual_report_2018-19.pdf
  10. “Annual Survey of Industries Vol I 2017-18”, National Sample Survey Office – Industrial Statistics Wing, Ministry of Statistics and Programme Implementation, http://www.csoisw.gov.in/cms/cms/Files/70.pdf
  11. Annual Report 2018-19, Ministry of Food Processing Industries, https://mofpi.nic.in/sites/default/files/eng_mofpi_annual_report_2018-19.pdf
  12. Consolidated FDI Policy, https://invest-india-revamp-static-files.s3.ap-south-1.amazonaws.com/2020-04/FDI%20Policy%202019%20revised_19%20April%202020.pdf
  13. National Manufacturing Policy, DPIIT, https://dipp.gov.in/sites/default/files/po-ann4.pdf
  14. Press Release, Ministry of Food Processing Industries, https://mofpi.nic.in/sites/default/files/pressnote_eng.pdf_0.pdf
  15. Loans For Food Parks And Food Processing Units In Designated Food Parks, NABARD, https://www.nabard.org/content.aspx?id=570

  16. Draft National Food Processing Policy, Ministry of Food Processing Industries,  https://mofpi.nic.in/sites/default/files/sejda-52v.pdf

  17. About PMKSY Scheme, Ministry of Food Processing Industries, https://mofpi.nic.in/Schemes/about-pmksy-scheme

  18. Expenditure Budget - Ministry of Food Processing Industries, India Budget, https://www.indiabudget.gov.in/doc/eb/sbe41.pdf

  19. Expenditure Budget - Central Sector Schemes, India Budget, https://www.indiabudget.gov.in/doc/eb/stat4b.pdf

  20. Cabinet approves establishment of Animal Husbandry Infrastructure Development Fund, PIB, https://pib.gov.in/PressReleasePage.aspx?PRID=1633918

  21. State/UT-wise details of Mega Food Park projects as of 27.02.2020, Ministry of Food Processing Industries, https://mofpi.nic.in/sites/default/files/37_mfps_stateut-wise_details_as_of_27.02.2020_3.pdf

  22. Consolidated list of State-wise 291 Approved Cold Chain Projects as on 30.04.2020, Ministry of Food Processing Industries, https://mofpi.nic.in/sites/default/files/website_30.04.2020_0.pdf

  23. Nivesh Bandhu, Investor Portal, http://foodprocessingindia.gov.in/

  24. Signing of MOU between the Government of India and the United Nations' World Food Programme for cooperation during 2019 – 2023, Department Of Agriculture, Cooperation & Farmers Welfare, Ministry of Agriculture & Farmers' Welfare, http://agricoop.nic.in/recentinitiatives/signing-mou-between-government-india-and-united-nations-world-food-programme

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