New initiatives, incentives reshape food-processing sector

With total food production likely to double in the next 10 years, could you please provide an overview of the food-processing sector in India and its potential for growth in the short, medium and long run, especially in regards to value addition and employment generation?

The food-processing sector has emerged as an important segment of the Indian economy in terms of its contribution to GDP, employment and investment. During 2014-15, the sector constituted as much as 9.0% and 10.1% of GDP in the manufacturing and agriculture sectors respectively. The food-processing industries sector has grown at 7.1% as compared to 0.2% in agriculture during the same period. The food-processing industry is one of the major employment-intensive segments, constituting 13.04% of employment generated in all the registered factory sector in 2012-13, followed by the textile and basic metal sector. According to the latest Annual Survey of Industries (ASI) for 2012-13, the total number of persons engaged in the registered food-processing sector is 16.89 lakhs (1,689,000). During the five years ending 2012-13, employment in the registered food-processing sector has been increasing at an average annual growth rate (AAGR) of 2.41%. The unregistered food-processing sector supports employment to 47.9 lakh workers as against 348.88 lakh workers in overall industries, as per the NSSO 67th Round, 2010-11.

Given that the food-processing sector is growing faster than agriculture and manufacturing, how can you as a policymaker best find a balance between the rights of consumers and the concerns of the industry, while at the same time adhering to best business practices?

The right of the consumer to safe food is paramount and non-negotiable. The Food Safety and Standards Authority of India (FSSAI) is mandated to lay down science-based standards for articles of foods and to regulate their manufacture, storage, distribution, sale and import to ensure the availability of safe and wholesome food for consumers. The FSSAI is also required to coordinate with state governments in matters relating to enforcement. The FSS Act, 2006, also envisages that measures taken by the FSSAI shall be proportionate and no more restrictive to trade than is required to achieve appropriate level of health protection.

We have been sharing the difficulties faced by the food-processing industry with the Ministry of Health and the FSSAI from time to time. A major issue being faced by the industry was the insistence of the FSSAI on the requirement of product-by-product approval in the case of all non-standardized products, called proprietary food. The Supreme Court, in the judgment delivered on August 19, 2015, has quashed the product approval advisory of the FSSAI. Consequently, upon the Order of the Hon’ble Supreme Court, the FSSAI has discontinued with the process of product approval. We have requested the Ministry of Health and FW for expeditious framing of regulations to govern product approvals.

In the meantime, the FSSAI has already uploaded, for public comments, around 11,500 draft standards for food additives, which are harmonized with Codex. The FSSAI has also uploaded the draft standards for health supplements, nutraceuticals, food for special dietary uses, food for special medical purposes, functional foods and novel foods. After the specified timeline for public comments is over, the FSSAI will take further action to finalize these regulations. After these regulations come into operation, the requirement of product approval would certainly be reduced.

The Ministry of Health and Family Welfare has also been requested to expedite the process of framing regulations so as to ensure that the food-processing industry/consumers do not suffer.

We are hopeful that the new regulations being framed by the FSSAI will be industry friendly, while ensuring protection of the interests of the consumer, thus maintaining the balance.

Following the unfortunate Maggi episode that did not leave a very positive taste in anybody’s mouth, what specific role do you see for the FSSAI and what is your opinion on self-certify compliance?

The guiding principle of the FSS Act, 2006 is self-regulation by the industry. However, in reality, the lack of updated standards and the insistence on product-by-product approvals by the FSSAI have undermined the principle of self-regulation.

Increasing the number of standards and harmonizing them with international standards will allow the industry to self-regulate in a much better way.

One of the pre-requisites for self-regulation by the industry would be for the samples to be tested in accredited/notified food testing laboratories. MoFPI provides financial assistance under its scheme of setting up/upgrading of quality control/food testing laboratories so that more such labs come into operation to cater to the needs of the food-processing industry.

Given the potentially very negative impact of food incidents on the image of India abroad, what is your message to foreign investors who might be taken aback by the Maggi incident and its potential consequences on the organization of the sector?

The food-processing sector continues to be one of the bright spots for foreign investment in India. The Maggi affair does not represent the entire food-processing sector, and even this incident has been resolved through the judicial process. The wider issue to be looked into for the sector to grow is by having a robust regulatory structure, supporting infrastructure, and providing incentives to the investors, etc. The Government of India has taken a number of steps to promote the growth of this sector.

Could you please give an overview of your main objectives when you took the reins of this Ministry in September 2014? How would you evaluate your achievements after a little more than one year of government, and what are your main priorities for 2016?

The achievements of the Ministry are given below:

➢            Out of 23 mega food parks (MFPs) under implementation, five MFPs have been made functional so far, one each in Karnataka, Andhra Pradesh, Uttarakhand, Punjab and Assam. Out of these, three MFPs have been made functional during the present government – one each in Karnataka (Tumkur), Punjab (Fazilka) and Assam (Nalbari).

➢            17 new mega food parks were sanctioned by the Ministry in March, 2015. These MFPs will entail fresh investment of around Rs.2330 crore. This will include grant-in-aid for an amount of Rs.850 crore. It will attract a total investment of around Rs.4,000 crore, and the annual turnover of the food-processing units in these MFPs would be more than Rs.8,000 crore. These new MFPs, when fully functional, will create employment for about 80,000 persons and benefit about 5 lakh farmers directly and indirectly.

➢            This Ministry has the mandate to implement 138 cold chain projects, out of which 68 projects have been completed and started commercial operation, which have created a cold chain infrastructure capacity of 2.68 lakh MT of cold storage/CA/deep freezer and 89.80 lakh liters per day of milk processing, 47.75 MT/ hour of individual quick freeze [IQF], besides providing 345 reefer transports to date. Out of these 68 completed projects, 30 new projects have been completed during the present government. Thirty cold chain projects were sanctioned in May 2015. These projects on completion will create an additional capacity of 1.12 lakh MT of cold storage/CA/deep freezer, 11.1 lakh liters per day of milk processing, and 28.5 MT/ hour of individual quick freeze [IQF], besides providing 209 reefer transports.

We have also taken following new initiatives to foster the growth of food-processing sector:

➢            Recently, the Reserve Bank of India has classified loans to food and agro-based processing units and cold chain under agriculture activities for priority sector lending (PSL) subject to an aggregate sanctioned limit of Rs.100 crore per borrower. It will ensure greater flow of credit to entrepreneurs for the setting up of food-processing units and attract investment in the sector.

➢            An ‘Investors’ Portal’ has been developed by the Ministry with the intention to disseminate information on the state specific resource potential, policy support, and fiscal incentives offered to investors in the food-processing sector. The investors, both domestic and foreign, can also seek guidance on specific issues by using information disseminated on the portal. Investors can access and avail these services through the Investors’ Portal (http://foodprocessingindia.co.in/) or through the Ministry’s website (http://mofpi.nic.in).

➢            Excise duty on food-processing and packaging machinery has been brought down from 10% to 6% in the 2014-15 budget.

➢            Services of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labeling of fruits and vegetables have been exempted from service tax in the 2015-16 budget.

➢            For the ease of doing business, the requirement of supporting documents such as affidavits, agreements, etc., to be submitted with a proposal has been reduced.

➢            Surplus and deficient areas of various agricultural and horticultural produce in the country have been identified. It will help in planning processing clusters by means of setting up suitable facilities in different parts of the country. The map is available on the website of the Ministry.

Priorities for 2016:

We aim at building a sector which provides safe, hygienic and quality food products to the people, makes available nutritious food items to all sections of the society, builds a competitive and highly productive industry, and promotes awareness of hygiene and safety issues relating to food and availability of choice to the consumers.

We also aim to develop a knowledge-based industry which promotes high value addition, and through that, higher incomes and employment in the economy, besides bringing the benefits of technology to the food-processing sector and promoting the modernization of agriculture as an essential component of a strong and expanding economy.

How is your Ministry boosting the food-processing sector in India so that agriculture can grow exponentially and becomes the growth engine for Make in India?

My Ministry has taken following initiatives under Make in India:

•            The food-processing sector has been identified as one of the priority sectors under Make in India, an initiative of the Prime Minister of India, with a view to attract investment to this sector.

•            A strategy had been discussed during the National Workshop on November 29, 2014, for various departments, including food-processing industries, to attract investment. For the food-processing sector, the following short-term initiatives (for one year) and medium-term initiatives (for three years) were proposed.

Short-term initiatives for one year:

➢            FSSAI – Abolish system of product-by-product approval for ingredients already approved. Align standards to Codex.

➢            Promote the “Product of India” brand for processed food to drive exports; allow deduction of 200% for brand-building expenditure (at par with R&D).

➢            Provide fiscal incentives on primary processing of perishables, e.g. IQF, Cold Chain.

➢            To provide incentives for increased usage of solar and other renewable sources of energy for food parks and cold chains; the issue has been taken up with the Ministry of New and Renewable Energy (MNRE) at the level of Minister. (A concept paper indicating the technologies, cost estimates, etc., integral to the viability of operating cold chain projects on solar and solar hybrid solutions has been prepared by the Solar Energy Corporation of India and is under consideration of this Ministry.)

➢            The Ministry is targeting an additional six mega food parks and 50 cold chain projects under the Make in India program this year.

Targets for medium-term achievement for three years under Make in India:

➢            Complete all 42 mega food parks and 138 cold chain projects; support the creation of an additional 7.5 million MT of cold chain capacity.

➢            Push for reform in APMC (e.g. removal of perishables from APMC’s purview); remove stock limits on storage by processors.

➢            Impose lower tax on processed food products under GST.

➢            Set up additional 50 NABL-accredited modern food testing laboratories.

➢            Given the seasonal nature of food processing, align fixed electricity charges, labor laws and income tax provisions accordingly.

Apart from these initiatives, the Ministry has also been disseminating information to potential investors to attract investment to the sector through a dedicated Investors Portal in which a range of information like resource base, availability of land, state-specific policies, and fiscal incentives are shared with potential investors. Investors can also put their queries in the Investors Portal, which is promptly attended to by the Ministry to guide the investors.

Please share your views on the role and importance of the mega food park scheme and the agri-export zone in further increasing exports and investments.

To give a major boost to the food-processing sector by adding value and reducing food wastage and loss at each stage of the supply chain, with particular focus on perishables, the Ministry of Food Processing Industries has been implementing the mega food park scheme in the country since 2008. A mega food park, located in an area of at least 50 acres, works on a cluster-based approach based on a hub and spokes model. Infrastructure is created for primary processing and storage near the farm in the form of primary processing centers (PPCs) and collection centers (CCs) located in production areas. Common facilities and enabling infrastructure are located at a central processing center, like modern warehousing, cold storage, IQF, sorting, grading, packaging, pulping, ripening chambers, tetra-packaging units, roads, electricity, water, ETP facilities etc.

A total of 42 mega food parks have been sanctioned by the government to be set up in the country. Currently, 23 projects are under implementation. This will create a huge modern infrastructure for the food-processing sector and provide impetus to the growth of the sector. These 42 mega food parks, when they become functional, should attract investment of around Rs.5,000 crore in modern infrastructure, additional collective investment of around Rs.10,500 crore in 1,250 food-processing units in the parks, and an annual turnover of Rs.21,000 crore. These parks, when fully functional, will create employment for about 2.5 lakh persons and benefit about 12.5 lakh farmers directly and indirectly.

The timely completion of these mega food parks will provide a big boost to the growth of the food-processing sector in the concerned state, help to provide better prices for farmers, reduce wastage of perishables, add value to the agricultural produce, and create huge employment opportunities, especially in rural areas. These will also help in stabilizing prices of food products and containing inflation in the country.

With over a million Indians entering the labor market every month, how can your Ministry capitalize on this enormous potential providing the appropriate skills?

As previously mentioned, the food-processing industry is one of the major employment creating segments.

A well-developed food-processing sector with a higher level of processing helps in the reduction of wastage, improves value addition, promotes crop diversification, ensures better returns for the farmers, promotes employment, and increases export earnings. This sector is also capable of addressing critical issues of food security, food inflation, and providing wholesome, nutritious food to the masses.

The food-processing sector has emerged as an important segment of the Indian economy in terms of its contribution to GDP, employment and investment. The sector constitutes as much as 9.0% and 11.0% of GDP in the manufacturing and agriculture sectors, respectively. During the five years ending 2012-13, the food-processing industries sector has been growing at an average annual growth rate (AAGR) of around 8.4%, as compared to around 3.3% in agriculture and 6.6% in manufacturing.

The Ministry has initiated a skill development program through the Sector Skill Council for food processing which has been set up by the FICCI. The Sector Skill Council for food processing – i.e. Food Industry Capacity & Skill Initiatives (FICSI) – is working on the identification of job roles and competencies required for each position so as to develop National Occupational Standards (NOS) for different sectors of food processing. It will include the major sectors of the food-processing domain, viz: fruits and vegetables, food grain milling (including oilseeds), dairy products, meat and poultry, fish and seafood, bread and bakery and beverages. To date, FICSI has developed 38 draft qualification packs (QPs) for the food-processing industry; 27 national occupational standards (NOSs) relating to bakery, grain milling, etc., have been approved by the National Skill Development Corporation (NSDC). Based on NOSs and QPs developed by FICSI, course content and training modules including multimedia content in various languages is being developed through the National Institute of Food Technology Entrepreneurship and Management (NIFTEM), deemed to be a university under the Ministry.

The skill development program has been launched through FICSI in 30 centers across 11 states of the country on September 4, 2015.

Please share your thoughts on India’s business climate today and on the main challenges ahead for the country to reach the objective of entering the top 50 by 2017, and please comment on the initiatives of your Ministry to help easing business in the food and processing sector.

As previously mentioned, regarding the ease of doing business, the requirement of supporting documents such as affidavits, agreements, etc. to be submitted with a proposal has been reduced.

Surplus and deficient areas of various agricultural and horticultural produce in the country have been identified, and there is the Investors’ Portal.

Foreign direct investment (FDI) is permissible in the food-processing sector up to 100% under the automatic route except for items reserved for micro and small enterprises (MSEs), subject to applicable laws/regulations, securities and other conditions. For the manufacture of items reserved for micro and small enterprises, FDI is permissible under the automatic route up to 24% of the capital. If foreign investment is more than 24%, an Industrial License under the Industries (Development & Regulation) Act 1951 is required.

What is your vision of the bilateral relations between India & US and to what extent would you agree with US Secretary of Commerce Penny Pritzker when she stated recently that the commercial relationship between both countries has simply not lived up to its enormous potential?

India and the US are the two biggest democracies in the world. India has surplus agro-produce which can be processed. The US has got the latest technology, which may be helpful in the food-processing sector, thus there are better avenues of collaboration between these two countries. Some of the leading companies of the US have expressed their keenness to invest in India and make it a hub for regional operations as they look beyond their saturated, ageing Western markets.

What are the areas in the food-processing sector you see as most promising for collaboration between India and US and what specific opportunities would you like you highlight?

The US is big market for organic and non-genetically modified food. Hence, there are ample opportunities for collaboration between India and US in this area. India has some of its area as organic by default like many northeastern states where hardly any fertilizer or pesticide is used in growing of crops. We may convert this into an opportunity to tap the US market. Special facilities for processing organic agri-produce may also be set up.