SHREE SARASWATI MAHAVIDHYALAYA

RASHMITA NAYAK
(ASST. PROF.)
CH: 6 Agro Based Industries in India
Agro-Based industries in general are those industries that have direct or indirect links with agriculture. It
covers a variety of industrial, manufacturing and processing activities based on agricultural raw materials
as well as activities and services that go as inputs to agriculture.

The Famine Enquiry Commission,1944 defined Agro-based industries as “those, which are involved in
supplying the farm with agricultural inputs besides handling the farm products.”

In this article, we shall be discussing various aspects of Agro-Based industries in India, issues surrounding
the sector. Further, this article covers other important dimensions, keeping in mind the demands of the
preliminary as well as main examination of the UPSC IAS Exam.

Why is it in News?

Recently the honourable Vice President M. Venkaiah Naidu, in one of his addresses, has emphasized the
need to promote agro-based industries in rural areas so as to create employment opportunities for the
rural youth. He further stressed the role of agro-industries in augmenting the income of the farmers with
allied activities.

Why are Agro-Based Industries Needed?

 Helps in the upliftment of the rural economy.

 Proper utilization and achieving the potential of the rural economy sector, where plenty of raw
materials are available.

 Provide rural populations with an opportunity for employment.

 Generate income and thereby improve the economic condition of people – which in turn creates
the potential for demand-based industries.

 Provide an opportunity for the dispersal of industries instead of concentrating at a particular

place.

 Solve the problem of exploitation of the farming community by traders and middlemen.

 Farmers could be assured of better prices for their produce.

 Encourage bringing more and more areas under various crops – increase agricultural production
and improve the nation’s economy.

 The transportation cost of agricultural products can be minimized – thereby helping to minimize
the cost of finished goods.

 Avoid wastage of perishable agricultural products.

  Help to develop backward areas based on their suitability for setting up agro-industries.

 Prevent migration of people from rural to urban areas.

 To encourage balanced growth between agriculture and industry.

What are the Different Constituents of the Agro-Based Industries?

Agro-produce processing units:

 It deals with processing the raw material so that it can be preserved and transported at a cheaper
cost.

 No new product is manufactured. e.g. – Rice mills.

Agro-produce manufacturing units

 Manufacture entirely new products.

 Finished goods will be entirely different from their original raw material.

 Example-Sugar factories, bakery, solvent extraction units, textile mills, etc.

Agro-inputs manufacturing units

 Industrial units which produce goods either for mechanisation of agriculture or for increasing
productivity come under this type.

 Example: Agricultural implements, seed industries, pumpset, fertilizer and pesticide units, etc.

Agro service centres

 They provide auxiliary and necessary services for the sectors.

 Example- Workshops and service centres that are engaged in repairing and servicing pump sets,
diesel engines, tractors and all types of farm equipment.

What are the Challenges in Establishing Agro-Based Industries?

 Proper guidance is not available to entrepreneurs.

 It involves some element of risk-taking

 Change in crops/cropping pattern

 Change in variety of crop due to technological improvement

 Failure of monsoon may hit the raw material supply.

 The multiplicity of agricultural produce and the absence of suitable methodology to select the
best-suited industries to a given region.
  Seasonal supply of agricultural produce may result in underutilization of capacity of the units as
the unit will not be working throughout the year.

 Industries based on fruits and vegetables may not get the same variety throughout the year, but
they may get some other variety.

 Uncertainty about future market demands.

 Absence of information about quantity and quality of the market.

 Absence of proper integration among the various agencies of development in the district.

 Proper guidance, training for modern and sophisticated agro-industries are not available.

 As modern small industries are capital intensive, the supply of finance will be a considerable
problem.

 Promotional activities such as conducting intensive campaigns, identifying industries and

explaining to entrepreneurs about prospects are inadequate.

Institutional Arrangements for Promotion of Agro-Based Industries

Different Government Departments and Agencies

 Ministry of Agriculture-Deals with rice mills, oil mills, sugar mills, bakeries, cold storage.

 Khadi And Village Industries Board: Covers traditional agro-based industries like “gur‟,
handicrafts, khandsari.

 Agro-Industries Development Corporation- In each state mainly supply agricultural machinery,

inputs and agricultural advisory services to farmers. Some corporations have also undertaken
certain manufacturing activities in the agro-industries sector.

 Small Industry Development Organization- Deals with small agro-industries like hosiery,
processing of food products, beverages, food and fruit preservation, agricultural implements.

Policy Directives by the Government

Agro Processing Cluster

 The scheme aims at the development of modern infrastructure and common facilities to
encourage groups of entrepreneurs to set up food processing units based on a cluster approach.

 It seeks to link groups of producers or farmers to the processors and markets through a well-
equipped supply chain with modern infrastructure.

 At least 5 food processing units with a minimum investment of Rs. 25 crores.

 The units are set up simultaneously along with the creation of common infrastructure.

 At least 10 acres of land is required to be arranged either by purchase or on lease for at least 50
years for setting up an Agro-Processing Cluster.

 Each agro-processing clusters under the scheme have two basic components i.e.
  Basic Enabling Infrastructure, such as roads, water supply, power supply, drainage.

 Core Infrastructure or Common facilities such as warehouses, cold storage, IQF, tetra
pack, sorting, grading.

Mega Food Park

 The Mega Food Park Scheme is based on the “Cluster” approach and envisages the creation of
state of art support infrastructure in a well defined agri-horticultural zone for setting up modern
food processing units in industrial plots provided in the park with a well-established supply chain.

 It aims at providing a mechanism to link agricultural production to the market by bringing together
farmers, processors and retailers.

 Intends to ensure maximizing value addition, minimizing wastage, increasing farmers income and
creating employment opportunities particularly in the rural sector.

 Mega food parks typically consist of supply chain infrastructure including collection centres,
primary processing centres, central processing centres, cold chains and around 25-30 fully
developed plots for entrepreneurs to set up food processing units.

 The Mega Food Park project is implemented by a Special Purpose Vehicle (SPV) which is a Body
Corporate registered under the Companies Act.

 State Governments, State Government entities and Cooperatives are not required to form a
separate SPV for implementation of the Mega Food Park project.

 Subject to fulfilment of the conditions of the Scheme Guidelines, the funds are released to the
SPVs.

 There are 41 Mega Food Parks funded under the scheme.

Creation/ Expansion of Food Processing/ Preservation Capacities (Unit Scheme)

 The main objective of the Scheme is the creation of processing and preservation capacities and
modernisation/ expansion of existing food processing units with a view to increasing the level of
processing, value addition leading to reduction of wastage.

 The processing activities undertaken by the individual units cover a wide range of post-harvest
processes resulting in value addition and/or enhancing shelf life with specialized facilities required
for the preservation of perishables.

 While the expansion of processing capacity is necessary to increase the level of processing and
reduce wastage, the induction of modern technology is intended to make a clear difference in
terms of process efficiencies as well as improve the quality of the end product.

 The setting up of new units and modernization/ expansion of existing units are covered under the
scheme.

 Scheme is implemented through organizations such as Central & State PSUs/ Joint Ventures/
Farmer Producers Organization (FPOs)/ NGOs/ Cooperatives/ SHGs/ Pvt. Ltd companies/
 individuals proprietorship firms engaged in establishment/ upgradation/ modernization of food
processing units.

Conclusion

Agro-based industries are going to be the driver of growth for India in the coming decades. Further, as the
government strives to double the farmers’ income, reduce employment dependence on the agriculture
sector, and also the labour contribution, developing competitive agro-industries is crucial for generating
employment and income opportunities. Agro-industries have the potential to provide employment for
the rural population not only in farming but also in off-farm activities such as handling, packaging,
processing, transporting and marketing of food and agricultural products.

Further, Agro-Based tourism will boost the farm economy and will also act as a detox therapy for urban
tourists by letting them experience the natural beauty of the place, ethnic food, unique flora, and fauna.
Agricultural journalism is growing to promote information dissemination and help thrive
entrepreneurship. It is high time the potential of Agro Based industries is leveraged to their full potential.