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Untapped opportunities for the Indian starch industry
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Saturday, 16 November, 2013, 08 : 00 AM [IST]
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Amarnath Rajendran
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fiogf49gjkf0d Introduction
Starch production in India is highly fragmented, with a variety of manufacturers with small to large capacities offering different sources, grades and derivatives of starch. It is estimated that around 1.56 million tonne starch and derivatives were manufactured by about 30 producers in India in 2012.
While maize is the main raw material, to a much smaller extent, potato, tapioca and rice are also utilised for the manufacture of starch. Key products from these raw materials include native starch, modified starches and sweeteners including syrups and polyols.
A large part of the demand for starches arises from the paper, textile, construction and pharmaceutical industries. Their use in foods is growing at a low rate, but the potential in this sector is largely untapped, mostly due to the legal restriction regarding the use of modified starches in food.
Raw material
India has an abundant supply of the three main raw materials used for the manufacture of starch – maize, tapioca and rice.
Issues abound with the use of these raw materials, but our optimism on the short-term growth prospects for the industry stems from the fact that raw material supply is not an issue to be tackled.
The annual maize production in India is around 21 million tonne, whereas that of rice is 108 million tonne, and that of tapioca is 5.4 million tonne.
Maize is predominantly used in an unprocessed state in India, within the poultry feed sector which accounts for around 75 per cent of the total consumption.
A very small proportion of the total yield of maize in India is used for starch manufacture. Apart from starch manufacture, maize is also directly utilised as corn flour, to serve as a texturising agent in many food and beverage matrices.
India is one of the largest cultivators of maize in the world, and it is a crop suitable for all the growing seasons in nearly every agro-climatic zone within the country’s borders.
Chief among the states cultivating maize are Karnataka, Andhra Pradesh and Rajasthan.
India has seen a dramatic increase in maize cultivation over the past few years, which explains its pre-eminence as a starch source among processors.
India is the second largest potato producer in the world, with production concentrated in the North Indian states of Uttar Pradesh and Punjab.
While a large quantity of the cultivated potato is consumed as a root ‘vegetable’, a small proportion goes into processing.
Processing sectors constitute potato chips, flakes and fries. Starch manufacture has recently been added to this repertoire in India.
Tapioca cultivation is largely restricted to the southern part of the country, and in particular to a cluster in Erode in Tamil Nadu.
Tapioca is largely consumed as sabudana in North India. Within Tamil Nadu, as in other parts of the country (except Kerala), there is very little direct consumption of tapioca as a vegetable.
Total yield is estimated to be around 5.4 million tonne, with a small percentage of around 2.5 per cent going into starch manufacture.
Rice is a crop more suited for the tropics, extending through the entire southern portion of India and the areas of the north-east contiguous with the rice-growing regions of South-east Asia and Southern China.
In India, the crop is mainly monsoon-dependent. While irrigation by deep borewells is popular in some regions, the main cropping areas are in the catchment areas of rivers and irrigated by a multitude of canals running from these rivers.
With more than 400 varieties of rice cultivated in India, only a few have volumes significant enough to be considered for commercial utilisation as a raw material for industrial processing.
There is little or no rice starch manufacture in India. Whatever little is meant for domestic consumption is imported. Ingredion sells the Novation range of rice starches in India while traders and distributors take care of the rest of the imports. A small quantity of syrup from rice is produced within the country.
The chief concern in India is that maize production might not be increasing on par with the increase in consumption in many sectors.
It is also of the opinion that reliance on a single raw material is not conducive for greater growth in the long-term.
The industry has to diversify its raw material usage pattern and adopt supply chain management techniques for increasing access to the raw materials.
Based on our extensive experience in the global starch sector through supply and demand studies over the last 30 years, we believe that the Indian starch sector is undergoing a structural change which will lead to a plethora of new actors and a dramatic change in the overall supply dynamics.
Processing and product types
Corn wet milling (CWM) is the chief process employed for processing of maize starch within India.
As stated earlier, a very small quantity of the total starch cultivated in India is used for CWM and production of starch.
Despite this, the starch processing industry can be considered to be one of the top five food processing industries in India. It is an industry with more than 15 years of development behind it.
The growth of the starch industry can be gauged by the fact that nearly 40 per cent of the total companies engaged in starch production are new entrants.
New technologies and management systems are being introduced by these companies providing a dynamic environment for innovation and growth.
The waste-water from potato processing is processed and spray dried to manufacture potato starch in India.
This operation is cost-efficient, particularly due to its elaborate water recycling system, which allows the process to reduce overall water consumption significantly, one of the key problems in potato starch processing.
Potato starch is mainly consumed in the food sector. Spray-dried, alcohol-blended, high-viscosity and cationic starches are created from this source.
Rice starch is more expensive than the other sources of starch. While it is expected that rice starch can successfully replace modified starches in some applications, there is a lack of knowledge and hence demand for rice starch.
There are some manufacturers of rice-based syrups who could manufacture starch from the base slurry if required.
Their lack of enthusiasm in manufacturing starch is indicative of the lack of demand which is also exacerbated by high prices.
The main product types are native starch from different raw materials, modified starches (cationic, oxidised, phosphated, acetylatedacid-treated, alkali-treated and bleached starches) from different raw material and sweeteners (polyols and syrups).
Starch from all the raw material can be modified, and/or processed into syrups and polyols.
There are many issues surrounding the use of starch and starch derivative products in India. While CWM and corn starch processing seems to be on a roll, some specialty starches are till date not manufactured in India.
Potato starch processing is highly dependent on a primary processing industry, which is not conducive for individual growth of this source.
Rice starch is virtually unknown in India, and tapioca supply chain needs more development. We are of the opinion that these issues cannot be tackled at a company level, and need to be addressed at the industry level, with appropriate action targeted at different stakeholders.
Participants in Giract’s 4 starch forums till date have expressed the need for both supply and user sectors to pitch in efforts to highlight issues related to, for example, legislation which prevents greater penetration of modified starches in the food industry.
User sectors
As earlier mentioned, the usage of starches within India is largely by the non-food sectors. These include paper, adhesives, poultry/animal feed, and fireworks.
Within the food sector, soups and snacks, noodles, meat and fish products, confectionery, ready meals and instant gravies and Indian/traditional food products use a large volume of starches and derivatives.
Some unique features of the Indian market include the lop-sided proportions of different end-use sectors within total demand.
Unique sectors such as fireworks have significant utilisation of starches.
In the food sector, for example, unorganised confectioeary and bakery operators contribute to a large proportion of liquid glucose usage.
Conclusion
In the context of the global starch industry, India is still a nascent production centre as well as a market.
While the stagnation in the United States continues, Europe seems to be preparing for a new expansion when the end of the European Union (EU) sugar regime will free the production of isoglucose in Europe in 2017.
This will certainly bring a lot more attention to the bulk sweetener market in the years to come.
On the other side of the world, how China will meet its continuously growing raw material demand for starches and derivatives is another growing concern for all global players.
However, volatile raw material supply, the competitive demand for bio-energy and the link between agricultural raw material prices and oil prices may result in a prolonged pricing volatility that will negatively affect starch choices by end-users, and thus dampen the growth of the starch industry.
Already the top five of the major global players have started to shift, and the first Chinese player is about to enter the top ten.
India still has a long way to go before the industry here can be spoken of in the same league.
About Giract
Giract, the leading transnational consultancy in food ingredient strategy, market and business development, has a background of more than 40 years' research and forecasting global food and beverage ingredient trends.
It has more than 30 years' experience in conducting landmark studies for the global starch and derivatives market, and is recognised as a leading reference in this sector.
For more information please visit www.giract.com
(The author is project co-ordinator. He can be reached at amar@giract.com)
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