Q) What are the challenges and opportunities of the food processing sector in the country? How can the income of the farmers be substantially increased by encouraging food processing? (250 Words)
Source: UPSC Civil Services Main examination 2020, GS 3
GS 3: Food Processing
Approach Answer:
Introduction: Around 40% food is wasted in India. According to M/o Food Processing Industries(FPI), Indian farmers bear around ?92,000Cr annual post harvest loss. India currently processes only 10% of its food material, compared to US at 65% and China at 23%. This prevents us from gaining the gains of value addition, as well as a major source of employment.
Challenges for Food Processing industry
1. Poor supply chain linkage: To have secured source for raw materials as well as an established market. But In India there are legal bottlenecks such as Mandi system and Essential commodities act.
2. Infrastructure bottlenecks: FPIs need world class infrastructural and logistics support in order to reduce wastage. This would require a support from Railways as well as Airways.
3. Unskilled manpower: The existing manpower in the farming industry needs to be trained in order to employable in FPI sector.
4. Quality adherence low: neither the crops nor the finished food is graded according to the quality. This poses a challenge to high quality processed food to compete with low quality one.
5. Protection of IPR issues: Laws like Protection of Plant Varieties and Farmers' Rights Act, 2001 limits investment in intellectual property in India
6. Low level of processing in certain sectors: Sectors like Fisheries(8%), Poultry(6%), Horticulture food(2%), Consumer foods & Grains(N/A) have low processing infrastructure
Opportunities for Food Processing industry
1. Quantity of raw material available: India has 52% cultivable land, compared to 11% world average. It is 2nd Largest arable land in the world, Largest livestock population, 17% of Global milk share(largest) and 2nd largest producer of Fisheries, Fruits & Vegetables, Cereals respectively.
2. Variety of raw material available: 20 Agro-Climatic zones, 46 of the 60 soil types exist in India. 15 of 26 major world climates in the world. India has a great diversity in culture, customs and cuisine and Traditional knowledge.
3. Export Potential: Non-vegetarian processed food acts as a forward linkage to Agriculture.
4. Expansion potential: Only 10% food processing happens in India. Therefore, a long way to go.
5. Large Consumption Economy: Consumer spending on food is higher in proportion total spending.
6. Cheap workforce: potential for cheap production and export.
7. Share of Grocery in Retail market: India's retail market's 48% is grocery which is $600bn. It is a big market for any industry.
8. High value addition: The 10% of processed food in India is 1/3 of total food market by value.
Increasing farm income through food processing:
1. Employment generation: Food processing industry is a labour intensive sector. It would help in employment creation.
2. Infrastructure creation: FPI infrastructure in the country would mean forward linkage for the agriculture industry.
3. Creation of Supply Chains: with regular demand for raw material as well as processed goods, a stable supply chain is expected.
4. Private investment: Agriculture have negligible private investment in India, Food processing industry can act as an avenue for private investment.
5. Establishing skilled manpower: It would lead to on job skilling of thousands of workers in India, helping in creating a vibrant labour market for the sector.
6. Export competitiveness: Cheaper production would give a competitive advantage in terms of exports.
7. Creation of new markets: With incentive led low prices, expansion of domestic market for the processed food would happen.
8. Economies of Scale: Finally, with large scale production economies of scale would set in, benefitting in the long run
Conclusion: Government has taken various steps for the promotion of FPIs such as up to 100% FDI under the automatic route, incentives under PM Krishi Sampada Youjana, and recent announcement of PLI in the FPI sector in India. Further there is a lan for Production linke incentive too.
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