Food & Beverage News: F&B Specials - MoFPI’s VISION 2015

Despite being the youngest union ministry in India, the food processing ministry had achieved almost all planned goals, Ashok Sinha, secretary of food processing ministry, proudly said at the World of Food India conference held in Mumbai recently.

The Vision 2015 was formulated by the union ministry of food processing industries in 2005 during the term of the first UPA government. Through this vision, the MoFPI intended to create one crore jobs by 2015 at a total investment of Rs 1 lakh crore. Vision 2015 also included increasing India’s level of food processing from 6% in 2004 to 20% by 2015, value addition from 20% in 2004 to 35% and share in global trade from 1.5% to 3%. The “Vision – 2015” paper Mofpi also mentioned that the ministry aimed to establish about 30 mega food parks, set up integrated cold chains, modernise abattoirs, set up quality control laboratories, research and developement (R&D) units, upgradation of quality and hygiene of street food.

Mega food parks formed the highlight of the vision for which the government approved a grant of Rs 50 crore subsidy for those coming forward to set up food parks which would be used for infrastructure, basic systems and facilities. The government allowed 100% FDI (foreign direct investment) in the sector to tap the opportunities available in the section.The Centre also offered 25% subsidy for the establishment of food processing units across the country.

According to the MoFPI, as a result of the slew of initiatives introduced by the Government of India and the MoFPI during the first UPA government, the level of processing has already gone up to 10% with consequent wastage of perishables coming down from Rs 58, 000 crore to less than Rs.50, 000 core, value addition has gone up to 26% from 20% and the entire sector’s growth rate has gone up to over 13% from about 7% before 2005.

Overall, the MoFPI has achieved many things in the last two-three years. Growth in horticulture, gradual increase in foreign direct investment (FDI), increasing FP’s contribution to GDP and about 14 per cent annual growth rate are a few phenomenal achievements made by the ministry. According to official data, the Indian food processing sector has received about $15 billion of foreign direct investment (FDI) in the last five years while total investment in the sector could be about Rs 8,000-10,000 crore.

The ministry identified as many as 13 key areas. The ministry also identified nearly 100 measures that it initiated within the first 100 days under second UPA Government to facilitate and enable rapid development of the food processing sector.

The ministry had already started implementing various schemes such as the Scheme for Infrastructure Development, setting up of technology upgradation for food processing industries, a scheme for quality assurance and upgradation of quality of street food.

The sector had been given certain fiscal benefits such as exemption from paying income-tax for fruits and vegetables processing units, reduction of excise duty on ready-to-eat packaged food from 16 to 8%. Also there is an automatic approval for 100% foreign equity in the food processing.The ministry of food processing industries said that the food processing sector has registered 141 foreign direct investments (FDI) inflows accounting for $171.72 million in April 2007-March 2009. The export of more than 100 agricultural and processed food items has increased by 24.43 per cent to Rs 39,461 crore in 2008-09 from Rs 31,712 crore in the previous year due to substantial growth in fresh fruits and vegetables, meat products and processed foods, according to Asit Tripathy, chairman, government's agri-export promotion body APEDA.

In the coming few weeks the ministry would bring out a notice containing a proposal to all national and international food manufacturers to set up around 3-4 mega food parks in the country. Also, the Centre has proposed to extend benefits of the Special Economic Zones (SEZ) to food parks so that the country could quickly emerge as a regional hub for food processing. By the beginning of the next financial year, the venture capital fund will be in place with a corpus of Rs 1,000-1,200 crore.

Food processing minister Subodh Kant Sahai had earlier mentioned that the industry would require investments worth Rs 100,000 crore by 2015. Also, the ministry is proposing to set up joint food labs with countries like France and Russia to reduce the export rejects of India. The food processing industry is suffering from low allocation of funds. In the 11th five-year Plan funds amounting to Rs 4,031 crore had been allotted to the industry. The allotment is almost double the amount assigned in the previous Plan.

The MoFPI in 2009 asked for more than Rs 1,200 crore but only a little over Rs 350 crore was sanctioned. Also, as pointed out by the prime minister recently, the taxation structure in the industry was suffering. Though primary agricultural commodities are mostly exempted from taxes, processed foods are subjected to multiple levies. There is an urgent need to rationalise and simplify the tax structure.

By the end of this year, the Centre will be setting up nodal agencies in every Indian state to simplify the existing rules applicable to the food processing industry. Theses agencies will operate under the supervision of independent commissioners.These agencies are being set up following the decision of the Food Safety and Standard Authority of India. As per the FSSAI Act, every Indian state would also be provided with an exclusive organisation as a link between the ministry of food processing industries and the state government.

Achivements
The year started on a positive note for the MoFPI with the formation of the Indian Grape Processing Board (IGPB) on January 22, 2009. The Board was set up to help tap domestic and export markets, interact with government, policymakers, lay down standards and norms for improving quality and competitiveness and value addition to growers. The government allocated Rs 5.93 crore for a period of over three years to IGPB which will focus on research and development, quality upgradation, market research and information, domestic and international promotion of Indian wine.

The next booster after the Wine Board was the mega food park at Shirwal near Satara in Maharashtra that started its operations on February 28. Shirwal' s food park was one of the 10 mega parks planned for the first phase with an investment of Rs 1500 crore. The other park is under construction at Tirupati in Andhra Pradesh. It would be ready by December 2010, claims the ministry. Other mega food parks nearing completion are located at Dharmapuri in Tamil Nadu, Ranchi and Haridwar in Uttaranchal and Guwahati in Assam.

The month of February also saw the CCEA (Cabinet Committee on Economic Affairs) approving the proposal of the MoFPI to launch a new scheme for modernisation of abattoirs across the country. The approved scheme was aimed at providing modern infrastructure for mechanical slaughter of animals and hygienic processing of meat and meat products and to ensure better value for the producers. The volume of assistance is 50% and 75% of the eligible cost of plant & machinery and Technical Civil Work in general areas and difficult areas respectively with a ceiling of Rs 15 crore per abattoir.

March saw the registration of the National Meat & Poultry Processing Board (NMPPB). The Board was registered on March 26, 2009, under Societies Registration Act, 1860. It was basically formed to oversee the growth and further promotion of meat and poultry sector in the country. The board will also go a long way in helping the rural economy through employment generation.

The Assocham in the month of April sought for the deregulation of the food processing industry. In a note submitted to the Planning Commission and the MoFPI, it said the sector would attract huge investments, particularly to process fruits, vegetables, meat, poultry and fish products in the next couple of years if the industry could be de-licensed.

Assocham told the Planning Commission and the government that a special fund of Rs 5,000 crore should be created so that at least 25% of the meat, poultry and fish production could be processed buy procuring technology and equipment in the next 2-3 years.

After getting a cabinet rank in the new UPA Government, Sahai announced in the month of June that within 100 days, the ministry would see a growth rate of a minimum 20%. Six months has passed since and the growth rate continues at 14 % for the industry.

The CCEA in the same month approved the implementation of a Centrally sponsored scheme, "Poultry Development" from third year of XI Five Year Plan, i.e. 2009-2010, at a total outlay of Rs 150 crore.

The Centrally sponsored scheme combines one component of existing scheme and has two new components, namely: Assistance to State Poultry Farms (continuing component), Rural Backyard Poultry Development (new component) and Poultry Estates (new component).

While addressing a Confederation of the Indian Industry Summit (CII), Ashok Siha indicated that the industry intended to set up an inter-departmental forum to effectively fulfill the coordinative role between the other departments, states etc. He said that the ministry could not utilise its funds better in the past years and was looking forward to utilising the entire Rs 4000 crore allocation for the current 11th Plan period. During the first two years of the ongoing 11th five-year plan, the ministry has crossed 10-20% expenditure limit of Rs 400 thousand crore outlay.

An important concern of the food industry regarding the FDI in food retail was raised in the Economic Survey presented in parliament on July 2. Currently, India allows 51% FDI in single brand retail. It permits 100% FDI in wholesale cash & carry model, but has kept out FDI in multi-brand retail owing to political opposition and concerns over livelihoods of the neighbourhood mom and pop stores.

In July again Sahai told parliament that cold chain storage, value addition & preservation, and infrastructure would get financial assistance from the government as part of the 11th Plan. Schemes have been drawn up for financial assistance in the form of grants of up to 50% of the total cost of setting up plants in general areas and 75% in the North-East.

Finance Minister Pranab Mukherjee's announcement in the budget that investment-linked tax incentives would be extended to the businesses of setting up and operating cold chain and warehousing facilities for storing agricultural produce was also appreciated.

However, a report "Food Processing and Agri Business" said that the country was short by 10 million tonnes of cold storage capacity due to which about 30- 40% of agricultural produce goes waste every year. The report was jointly prepared by Assocham and international advisory company – KPMG.. Recently the ministry has sanctioned 10 cold chains of which 8 are ready to function in a few months. There are 5,101 cold storage units in the country, with a cumulative capacity of 21.7 million tonnes.

July saw another phase of activity for the ministry when Sahai signed a memorandum of understanding (MoU) with the Indian Institute of Crop Processing Technology (IICPT) and the University of Manitoba, Canada. The ministry said that the MoU would facilitate collaborative programmes of research, training, curriculum, institutional development and information dissemination, exchange of faculty, students and staff for the Indian food industry. Sahai also confirmed the ministry's decision to appoint a commission a study to ascertain/identify the requirements of the industry of trained manpower at various levels, prepare a blueprint for training 10 lakh skilled workers and 5 lakh women entrepreneurs in the next 5 years for working in and establishing food-processing industries. This was a part of the ministry's target of an investment of Rs 1 lakh core to fulfill its Vision 2015 of creating one crore jobs.

In another initiative towards development of food processing and agriculture, the Mofpi, has set up state level task forces across 12 regions in the country. The setting up of task forces is done in anticipation of better coordination between the ministry's central task force and the state government. It is also anticipated to ensure proper dissemination of information and the implementation of the central government's plan.

In another initiative towards development of food processing and agriculture, the Mofpi set up state level task forces across 12 regions in the country in August.

The setting up of task forces was done in anticipation of better coordination between the ministry's central task force and the state government. It is also anticipated to ensure the proper dissemination of information and the implementation of the central government's plan.

It was decided that the concerned officials in the charge of a particular state would coordinate the needs of the entrepreneurs or the manufacturer units in the area with the central task force in the ministry by acting as an intermediary between the state and the centre.

The target of 20% growth was set by the ministry of food processing around 2 years ago, and thereafter the government allowed 100 per cent foreign direct investment (FDI) in the sector. Recently, the ministry boasted of registering 141 foreign direct investments (FDI) inflows accounting for $171.72 million in April 2007-March 2009.

"But it is way below the required investment of one lakh crore," said Bipin Sinha, project director of UBM India, an organiser of trade shows on food ingredients in India.

In Agust, the ministry stated that it is in talks with banks and financial institutions to set up a venture capital (VC) fund. By the beginning of the next financial year, the venture capital fund will be in place with a corpus of Rs 1,000-1,200 crore. The fund would lend on a priority basis to units that deal in perishable items like fruits, vegetables, meat, poultry and fish.

A unified law covering the entire gamut of the food processing industry is set to take effect by this year-end, according to Ashok Sinha, secretary, ministry of food processing industries. The Food Safety and Standards Authority of India (FSSAI) will implement the provisions of the Food Safety and Standards Act, 2006, which covers all aspects of food processing, including horticulture products, dairy, seafood, meat and poultry.

The benefit of the industry would be a single point of contact and inspection by one agency, rather than a number of laws, sometimes conflicting, Sinha said.

Despite the steps taken by the Government of India and the state government, there are some critical issues that need to be addressed. These are inadequacy and quality of raw materials for processing, lack of awareness among customers about processed foods, food adulteration and inferior quality of final products, chemical and pesticide residues above the minimum prescribed levels and inadequate database on production and marketing. Though there was great potential, institutional credit from the banking sector was not commensurate to the investment flowing into the food processing sector. Inadequacies continued to affect the sector, though the government had implemented development measures, said Sukhbir Singh, chief general manager, Nabard.

The good news for the industry is that Major FMCG players like Hindustan Unilever (HUL), ITC, Godrej group, Dabur Foods and CavinKare are all set to concentrate on the Rs 35,000 crore branded processed food segment.