10/29/2019 Evernote shared notebook: Economics notes

Secondary agriculture: All processes that add value to primary agricultural commodities by using efficient technology, market
information and consumer preference. It is a sunrise sector for Indian economy due to its immense untapped potential.
Source: FICCI document
Food Processing
Major segments of the food processing sector are

Importance of industry
1. Size:
India’s food processing sector ranks fifth in the world in exports, production and consumption.
India’s food processing industry has grown annually at ~8% for the last 5 years, up to 2012-13 even in the aftermath of
global financial crisis.
Share in manufacturing GDP in 2012-13: ~10%
FDI: $ 460 million.
2. Employment Generation: As per ASI in 2010, Food processing industry generated highest employment among all industry.
3. When agro processing plants are set up near villages, they absorb disguisedly unemployed and also discourage urban
migration.
4. Share of agro inputs in manufacturing sector has declined. Hence development of food processing industry will affect the
linkages between industry and agriculture-> Increase in agricultural income + Value addition to agriculture sector
products-> poverty alleviation
5. Arrests Food Inflation by preventing food wastage and by creating a compact supply chain and increases shelf life: Milk is
more perishable than butter.
6. It will provide incentives for Crop Diversification: In recent years, there has been a shift towards wheat and rice production
due to higher MSP, as a result there is surplus production and even the FCI stocks are way more than the norms and
products like oilseeds are being imported affecting the BoP negatively
7. Malnutrition: It can address the issue of food security and will help in providing nutritious food to people. DM Shubra
Saxena has launched an initiative in which energy bars are produced using local produce and procured by government and
distributed to under weight children.

Potential
India ranks second in production of fruits and vegetables and first in dairy production. This along with 127 agri-
climatic zones imply apt supply of raw material
Growth in organised retail which takes it to the consumers.
Export potential: It is located near to food importing nations.
Changing consumer demands in favour of processed food like ready to eat, convenience food.
Govt. policy
Fiscal incentives: Reduced excise and custom duties, capital subsidies.
42 Mega food parks are begin set up under PPP

Reforming Investments, Institutions, Incentives

Problem Government Steps Way forward

Input APMC law amendment Contract farming for ensuring

APMC restrictions on raw material NAM is a right step for eliminating input quality and quality.
procurement. middlemen in supply chains. Second Green Revolution for
Agri production is biased in favour AGMARK was developed. raising productivity of HVCs using
of grains due to MSP regime, climate specific technology.
leading to shortage of HVCs.

https://www.evernote.com/pub/tj_iitk/economicsnotes#st=p&n=7f364427-7614-4d57-8fff-4661aed97509 1/5
10/29/2019 Evernote shared notebook: Economics notes

Agri- productivity remains poor in

comparison of global standards.
Long and fragmented supply
chains result into poor quality of
input and high wastage.
According to WB 2007 Study on
value chains of mango and litchi in
Bihar, a significant amount is lost
in transport and wastage and
farmers receive 30-40% of price
paid by consumers.

Cold storage and warehousing facilities Scheme for Cold Chain,

Shortage of 10 million tonnes of Value Addition and
capacity in cold storage
Preservation Infrastructure
Cold storage facilities are mostly
was launched in 2008 for
for single commodity leading to
poor utilisation overcoming the shortage.
Warehousing sector:70% of it is in FDI in multi brand retail.
unorganised sector.

Logistics Dedicated Freight Corridors will Develop third party logistics as a

Congestion on highways along allow efficient transport. separate industry to provide end
with night movement of cargo lead Sagarmala Projects is launched to end logistics.
to transit delays. for multi modal transport
most of rural roads are not al development.
weather roads.
Poor connectivity to ports and turn
around times for ships is much
greater due to manual operations.
This affects export potential.
Lack of multi modal connectivity

Access to credit Food processing is considered a MUDRA scheme should

Procedural hurdles and high priority sector for lending. specifically target this sector due
transaction costs Separate fund is created under to its role in rural development.
NABARD.

Food Safety Setting up

Lack of accredited testing of a network of quality control and
laboratories hamper testing laboratories across India
implementation of Food Safety FSSA Act consolidated a number
and Standards Act 2006 of laws and provided for a single
Litigations under the act are regulatory body.
mostly related to small technical Rules and regulations under
violations. FSSAI has been streamlined/

Government policy Exemption form industrial

Lack of comprehensive National licensing has been provided.
Food Processing policy.
Multiplicity of schemes under
various ministries of centre and

https://www.evernote.com/pub/tj_iitk/economicsnotes#st=p&n=7f364427-7614-4d57-8fff-4661aed97509 2/5
10/29/2019 Evernote shared notebook: Economics notes

state, without any coordination.

Shortage of Skilled man power Skill development

and technical know how
Lack of industry- academic
collaboration leads to dependence
on foreign technology
Obsolete technology leads to poor
efficiency in processing.

Low scale of production since Cluster based development

MSMEs dominate the sector. through Mega food parks will
allow reaping benefits of
economies of scale. It will also
provide support for
advertisement, marketing and
R&D.
100% FDI is allowed in Food
processing

Complex taxation regime with variation GST should be enforced as soon

across states as possible
Determination of location of
plants will depend on
infrastructure and demand
considerations rather than tax
implications
There will be no need for setting
up warehouses in each state.
Hence economies of scale could
be reaped by using hub and
spoke model.

Mega Food Parks Scheme

https://www.evernote.com/pub/tj_iitk/economicsnotes#st=p&n=7f364427-7614-4d57-8fff-4661aed97509 3/5
10/29/2019 Evernote shared notebook: Economics notes

1. Aim: Bringing farmers, processors and retailers closer to ensure maximum value addition, minimal wastages, increase in
farmers’ income and creation employment opportunities particularly in rural sector.
2. This will be done by providing modern infrastructure facilities along the value chain from farm gate to the market with strong
backward and forward linkages.

Features
1. The Scheme has a cluster based approach based on a hub and spokes model.
2. It includes creation of infrastructure for primary processing and storage near the farm in the form of Primary Processing
Centres (PPCs) and Collection Centres (CCs) and greater value addition at Central Processing Centre (CPC).
3. Benefits:
Reducing post harvest losses and wastage across food value chain
Enhance competitiveness of supply chain by providing modern infrastructure and economies of scale.
Additional income generation for the farmers. Shifting the farmers to more market driven and profitable farming activities.
Employment generation
Improve product quality, packaging and promote trade related research
4. Difficulties in implementation:
1. Acquiring contiguous land of 50 acres or more
2. Obtaining term loan from the Banks
3. Difficulties in obtaining various statutory clearances from the State Government Departments/Agencies,
4. Timely contribution of equity by the promoters, lack of cohesiveness amongst the promoters

National Food Grid

Purpose: Boost to food processing industries, bring down wastage and protecting farmers from dumping their produce at times
of distress.
Architecture: National Food Map for all food products to pin down the areas of production, surplus and deficit of a particular
commodity.

https://www.evernote.com/pub/tj_iitk/economicsnotes#st=p&n=7f364427-7614-4d57-8fff-4661aed97509 4/5
10/29/2019 Evernote shared notebook: Economics notes

Meat industry
Potential/ Challenges
1. Third largest exporter of meat
2. Large livestock population
3. Increasing domestic demand
4. No excise duty, FDI 100% allowed
5. Need of quality and safety standards especially for enhancing exports. There are sanitary and phytosanitary measures that
can be imposed on Indian products,
6. Beef Ban
7. Need for modern abattoirs
8. Better Veterinary services
9. Better breeding practices and fodder cultivation

Impact of meat industry on health and environment

1. Reduction in livestock population
2. Kept in unhygienic conditions
3. Antibiotics that are given to animals for disease resistance bio accumulate
4. Bio magnification of heavy metals due to water pollution
5. Food chain is disturbed
6. Due to breeding, loss of traditional varieties -> low biodiversity
7. Processed meat is categorised as type 1 carcinogenic by WHO

https://www.evernote.com/pub/tj_iitk/economicsnotes#st=p&n=7f364427-7614-4d57-8fff-4661aed97509 5/5