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Food processing industry – Current scenario
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Thursday, 28 July, 2022, 15 : 00 PM [IST]
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Sateesh Kulkarni
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India's food processing sector is one of the largest in the world. The sector is worth more than Rs 2.6 trillion and is expected to achieve a total output of $535 billion by 2025-26. The food processing sector contributes 12.8 per cent to the Indian GDP and is also a big employer providing employment directly and indirectly to hundreds of thousands of people.
The food processing industry, has emerged as the biggest employer of labour in the manufacturing sector. It is estimated that over 2 million people are engaged in the food processing units and the sector has emerged a bigger employer than the textiles sector which employs an estimated 1.6 million people. It is important to note that these employment numbers pertain only to employment in the organised sector’s food processing plants. The employment in unorganised or informal agro-processing and preservation activities is in addition to that.
The key sub-segments of the Food Processing industry in India are Fruits and Vegetables, Poultry and Meat processing, Fisheries, Food retail and dairy industry. India has the distinction of being among the major producers in many of these segments. E.g., India ranks 1st in milk production and contributes 23% to global milk production. It ranks 3rd in global egg production and produced at least 122.11 billion nos. in 2020-21 with per capita availability of egg at 91 eggs per annum in 2020-21. India is also the 3rd largest fish-producing country in the world and accounts for 7.96% of the global production. India ranks 8th in meat production in the world.
In spite of this, the levels of processing in India are very low when compared to global standards. There are many reasons contributing to this. Challenges that are faced by the sector include inadequate infrastructure, scale dynamics, quality and consistency of raw materials and forward as well as backward linkages.
A focussed approach in addressing these critical enablers can help the food processing industry and result in significant improvement in production and productivity. Improving quality of produce through better processing infrastructure, investment in infrastructure for the “farm-to-fork” value chain and putting in place links across the value chain are some key determinants that will positively impact the industry and enable it to achieve its full potential.
To manage evolving food demands, significant disruptions would be required at the supply end, to which technology will serve as a key enabler. Simultaneously, production systems need to be geared towards addressing food safety and ensuring traceability of the product to meet evolved consumer demands.
Initiatives
A recent positive trend is the entry of large corporates into food processing. Agriculture is now seen as a viable business opportunity by companies such as ITC, HUL, Bharti Group, Adani group etc. This trend will get only accentuated as food retailing in India gets increasingly organised, and the large food chains start sourcing directly from the farmers. Along with this is the introduction of technology and moderns means of procurement, transportation and delivery. Farmers now have access to global prices and a wider and more timely dissemination of critical price information.
With the entry of the private corporate sector into agriculture, one should expect significant investment in horticulture, an area where India has competitive advantages. Food processing is also underdeveloped and one should expect large investments in setting up the infrastructure to enable national movement of agri-produce and reduce wastage and rent seeking by middlemen.
The Central Government has devised model laws and is incentivising the states to modernise and update local rules and regulations. It talks of a new Agricultural Produce Marketing Committee (APMC) Act, wherein farmers are no longer required to buy and sell produce through designated market places. Under the new model law private sector companies will be able to set up new market places, and food-processing companies will be able to interact and buy directly from farmers bypassing a whole layer of middlemen. Contract farming also becomes much more of a reality in the new set of rules.
With 25,000 MSME food processing companies involved, the base remains agriculture. Technology unites finance with the market. How bank funding reaches the farmer is important. There is a lot of scope in cutting down on wastage from the farmer to processing, to retail sector.
Challenges
The current impact and forecast aftermath of the Covid-19 pandemic: The food sector particularly the F&B sector faced the worst brunt of the coronavirus so far. Large scale disruptions in supply sources, impacted the entire gamut of activities in the sector from manufacturing and supply chain and restaurant sector to food service companies and food delivery firms.
The food processing industry faced various challenges during the pandemic such as shortage of labour, supply chain gaps due to lockdowns. Factories were shut down, and there were huge loss of production as well as employment. The pandemic has accentuated the critical importance of food safety and the management of food surpluses in the country. As a result, the sector's policy measures have shifted the focus from livelihood to processing, distribution, and marketing.
The last couple of years has brought about a paradigm shift in customers’ concerns relating to health and well-being amid rising cases of Covid-19 and its variants. The increasing incidences of food-related disorders have prompted consumers to bring about vital changes in their diet and lifestyle, making them more health-conscious than ever. This has an obvious impact on perception of packaged foods and also the contents of packaged foods.
(The author is a consultant)
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