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Present and future scenario of food processing industry in Maharashtra
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Saturday, 01 February, 2014, 08 : 00 AM [IST]
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Prabodh Halde
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fiogf49gjkf0d Introduction
India is the second-largest producer of food, and has the potential to be the largest on a global food and agriculture canvas, according to a Corporate Catalyst India (CCI) survey. The food industry in India comprises the food-producing and processing industries. The food processing industry is one of the largest in India – it is ranked fifth in terms of production, consumption, export and expected growth. Maharashtra is the leading state in India as far as food processing is concerned.
The agriculture sector is vital for any nation, and in India, it is the principal source of livelihood for more than 58 per cent of the population. It is the base for the majority of the food processing industry, and grew at the rate of 4.4 per cent in 2012-13. At a national level, the foodgrain production is close to 245 million tonne (MT). The food processing industry is growing at the rate of 13 per cent, and for the Indian economy and the overall growth of the nation, the growth of food processing industry is very important, as it takes care of farmers and employment for skilled and unskilled labour.
Food processing overview: Indian scenario
Annually, India produces 205 million tonne fruit and vegetables, and is the second-largest country in the world as far as farm production is concerned. However, it processes just 4.6 per cent of its output. In contrast, countries like the United States (65 per cent), China (23 per cent) and Philippines (78 per cent) are far ahead of India in reducing wastage and enhancing the value addition and shelf-life of the farm products. The fact that a large volume of India’s agricultural output is wasted is an alarming signal for the country.
About 35 per cent of the fruit and vegetables is wasted annually, due to poor storage facility, amounting to a revenue loss of Rs 500 billion. Approximately 80 per cent of the vegetables rot due to their high water content and the lack of processing facility, resulting in revenue loss of Rs 125 billion. India aims to increase the processing level to 20 per cent by 2015 [Ministry of Food Processing Industries (MoFPI), 2011].
I consider the food processing sector an extention of agriculture sector. Both are interdependent on each other for their progress. In developed countries, the developments in the food processing sector have created a demand in the agriculture sector. India will follow the same path.
Food processing is a process which results in the transformation of raw ingredients obtained from farmers into manufactured food products sold in the retail space. Depending on the level of processing and the degree of value addition, processed foods can be classified as primary, secondary or tertiary.
Primary foods (such as packaged fruits and milled rice) undergo a quick and simple transformation. Secondary and tertiary processing (such as preparing bread from wheat, cheese from milk and pickles from vegetables) is a high value-add process involving complex and longer techniques, and result in a complete change in the raw materials.
Indian food industry
The Indian food industry is projected to grow from $100 billion to $300 billion by 2015, according to a report by a leading industry body and Technopak.[footnote]. During the period, the share of processed food in terms of value is expected to increase from 43 per cent to 50 per cent of the total food production.
The food processing industry is of enormous significance for India's development, as it has efficiently and effectively linked the nation’s economy, industry and agriculture. The linking of these three pillars has synergised the development process and promoted the growth of the nation to a great extent.
There are 25,367 registered food processing units in the country, with total invested capital of Rs 84,094 crore ($17.81 billion), as per a competitiveness report of the National Manufacturing Competitiveness Council. The food processing sector is presently growing at an average rate of 13.5 per cent per annum. The Vision Document 2015 envisages increasing the value addition from 20 per cent to 35 per cent by 2015.
The food processing industry is one of the largest industries operating in India and is divided into several segments, including fruit and vegetables; meat and poultry; dairy; marine products, and grains and consumer foods (which includes packaged foods, beverages and packaged drinking water).
The fruit and vegetable processing industry is highly decentralised, but a large number of units are in the cottage, household and small-scale sectors, having small capacities of upto 250 tonne per annum. Since 2000, the food processing industry has seen large growth in ready-to-serve beverages, fruit juices and pulps, dehydrated and frozen fruit and vegetable products, pickles, mushrooms and ready-mix vegetables. These small-scale units engaged in these segments of processing are export-oriented. The value-addition of food products is expected to increase from eight per cent to 35 per cent by 2025. Fruit and vegetable processing is also expected to increase from the current level of four per cent to 25 per cent of total production by 2025, as per the CCI report.
The dairy sector, which has the highest share in processed food market, has large unexploited potential. The report revealed that 37 per cent of the total dairy produce is processed, of which only 15 per cent is done by the organised sector. Hence, there are abundant opportunities for investment and development.
The food processing industry in India attracted foreign direct investment (FDI) worth $1,273.96 million between April 2000 and June 2011, according to data provided by the Department of Industrial Policy and Promotion (DIPP).
Food processing overview: Maharashtra scenario
Maharashtra covers an area of approximately three lakh sq km and its population exceeds 12 crore. The state’s contribution to the Indian food processing industry is about 13 per cent, and if proper focus is given, it can increase to 25 per cent. It produces various cereals, fruit, vegetables, dairy and fishery products. The following are the production figures for these sectors.
Cereals
Fruit
Vegetables
Maharashtra is the leading producers of onions in India.
Livestock and dairy
Though Maharashtra is a leading producer of agricultural, horticultural and marine products, it is poor as far as their processing is concerned.
As per my estimates, the state’s overall processing rate - excluding those of dairy and foodgrains - is about seven per cent. It certainly can increase its value addition to 25 per cent over the next ten years with proper focus and implementation policies.
Major processing sectors in Maharashtra
Maharashtra accounts for about 90 per cent of India’s wine production, and is a leading processor of mangoes and onions. Oil is another commodity in which the state’s processing industry has a major share.
It is also known for the processing of grapes, bananas, oranges, pomegranate, cashewnuts, strawberries, tomatoes, sugarcane, milk and milk products and fish. There is a good scope for the processing of all the aforementioned commodities, as there is a huge production base.
I see huge potential in the post-harvest treatment of fruit and vegetables in the coming days. Due to the changes in lifestyles and urbanisation, the demand for quality fruit and vegetables is increasing. Even the demand for ready-to-use fruit and vegetables is increasing. The scope for cut vegetables is also high due to the growing demand.
Apart from traditional food processing (viz the processing of mangoes, bananas, grapes, sugarcane, dairy products, etc.), the sector needs value-addition to be able to pay back higher returns to the farming community and have inclusive growth.
Maharashtra is seeing a paradigm shift, and sectors such as nutraceuticals, wine processing, pre- and probiotics, packaged water, ready-to-eat foods, traditional foods, cut vegetables, fruit treated post-harvest, exports, food additives and manufactured food processing equipment could fuel the growth of food processing and be game-changers for the state.
Maharashtra’s advatages over other states
For the last 40 years, Maharashtra has been a leader in food processing, owing to many advantages, such as political stability; friendly government policies (particularly from MoFPI); good work in basic agricultural research and hybridisation; forward-thinking farmers and good production supply; a good industry base; closeness to the market (a result of growing urbanisation) and high export potential.
Challenges
For the growth of the food processing industry, many inputs (including raw material) are required.
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The biggest challenge faced by the food processing sector is that it is dominated by unorganised players, who contribute to 80 per cent of the industry’s volume. There is a conversion of unorganised players to organised ones, but a fair distance still needs to be crossed.
The main challenges are the unavailability of a processable quality and quantity of fruit and vegetables; the low productivity of agri products; the smallland holdings of farmers; the poor processing conversion; the low technology base and low automation; labour-intensive operations, the high degree of seasonality and erratic input availability; the high operating costs due to small-scale operations; the fact that it is a less competitive sector, etc.
These challenges could be overcome by proper planning and focus if given to this sector.
Potential
The Indian food processing sector has been called a sunrise industry due to its inherent potential. Maharashtra’s food processing sector has such advantages as urbanisation; high consumer purchasing power; growing market potential; rising domestic demand; new food safety regulations (for instance, the clubbing of the nutraceutical sector with the food processing sector); high agricultural production, development of infrastructure and great investment potential.
Maharashtra has a family base of about three crore, taking into account an average family size of four. If each family spends Rs 2,500 on foods (such as milk, oil, grains, vegetables and fruit), the state’s monthly expenditure on food is Rs 7,500 crore. This works out to an annual food expenditure of Rs 90,000 crore.
Now the questions are: (a) Is the state able to cater to a market of that size; (b) Are its resources being utilised fully to cater this market; (c) Does it have adequate facilities to fulfill the demand, and (d) Is it dependent on imports from other states or countries?
Considering its adequacy of infrastructure and facilities and its closeness to big markets, Maharashtra has larger potential in value addition processing than traditional commodity base processing.
Maharashtra’s position on India’s food processing map
Maharashtra’s share in Indian food processing, as stated earlier, is about 13 per cent, and its overall growth is about 12 per cent. Its gross state domestic product (GSDP) is Rs 11,99,548 crore. Of this, only 15 per cent is contributed by the agricultuire and food processing sector. However, 55 per cent of the population is dependent on the agri and food processing sector. This is mainly due to the lack of value addition by the processing sector. This scenario needs to be changed and the money should be repaid to the farmers as per their value addition. The agri and food processng sectors should contribute equally to the GSDP, which is possible in Maharashtra because of the aforementioned advantages. However, proper focus is a must.
Way forward
Recently, the Centre announced the scrapping of the Agricultural Produce Marketing Committee (APMC) Act, thus fuelling direct trade between the farmers and the consumers. To boost exports, India must work on improving its supply quality.
The government and the industry should focus on market needs and try to meet the demand, rather than putting our own production in the market with low realisation.
The focus should be market-backward, and not production-forward. If there is a demand for seedless guava or orange, we must supply the same instead of supplying the same fruit, thus fetching a lower price. Although it is a long process and will take time, the government, agricultural universities and companies should focus on this.
Success stories include grapes (from seeded to seedless) and banana (from normally-grown to grown by tissue culture). They have changed the economics of the trade. The same route must be followed in case of other fruit and vegetables. In short, the mantra is, ‘Meet the market demand’.
Conclusion
Maharashtra, being India’s leading state with respect to food processing, is the natural choice for investors. However, this sector has a huge scope for future growth. Various other sectors within the food processing industries (such as nutraceuticals, the post-harvest sector, traditional foods and convenience foods) are still in a nascent stage, and Maharashtra has the potential to be a hot destination in those as well. They can boost economic growth by bringing good value addition to the farmers, the processors and the consumers.
Key references and important links
? http://www.midcindia.org/ (MIDC website for all investment related information)
? http://maidcmumbai.com/ (Maharashtra Agro Industries Development Corporation)
? http://nhb.gov.in/ and http://agricoop.nic.in/ (For horti and agri production information)
? http://msamb.com/ (For agri-marketing-related information)
? http://mahavat.gov.in/ (For taxation-related information)
? http://www.mahaagri.gov.in/ (Department of Agriculture, Maharashtra)
? http://mswarehousing.com/ and http://fciweb.nic.in/ and http://cewacor.nic.in/ (For warehousing-related information)
? http://mofpi.nic.in/ (Ministry of Food Processing Industries, Govt of India)
? http://mahades.maharashtra.gov.in/ (Directorate of Economics & Statistics, Maharashtra)
? http://industry.maharashtra.gov.in/default.aspx (Department of Industries, Maharashtra)
? http://censusindia.gov.in/ (Census of India)
[The author is vice-president, The Association of Food Scientists and Technologists (India); joint convenor (regulatory), The Solvent Extractors’ Association of India (SEA India), and head, regulatory, Marico Ltd. He can be contacted at Prabodhh@maricoindia.net]
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