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Contents
- The food processing industry has great potential for value addition, leading to high growth and profits. In this context, discuss ‘Production Linked Incentive Scheme for Food Processing Industry (PLISFPI).
- Discuss the measures undertaken to promote and support the growth of the Food Processing Industry (FPI) in the country. To what extent have government initiatives effectively addressed the challenges faced by the FPI in India?
01-07-2023
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Answer :
Food processing industry (FPI) refers to the sector involved in transforming raw agricultural products into processed food items through various techniques such as cooking, preserving, packaging, etc. The food processing industry (FPI) has the potential to enhance the value of farm output, generate employment, boost exports, and strengthen the domestic supply chain.
India’s FPI currently accounts for 32% of the country’s total food market; contributes more than 8% of Gross Value Added (GVA) in both manufacturing and agriculture; and 13% of India’s exports. But the country still processes less than 10% of its agricultural output. According to NITI Aayog, India loses more than 30% of the produce from farm gate due to inadequate cold chain and processing infrastructure.
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Opportunities in the Food Processing Sector in India: |
- Strong domestic demand: Increased disposable income, changing lifestyle, varying nutritional needs and food habits.
- Supply side advantages: High level of agricultural production – large livestock base, wide variety of crops, inland water bodies and a long coastline for fishing – gives a variety of inputs.
- Export opportunities: Proximity to key export destinations, greater integration with the global economy.
- Employment Generation: It provides direct and indirect employment opportunities because it acts as a bridge between Agriculture and Manufacturing.
- Reduce malnutrition: Processed foods when fortified with vitamins and minerals can reduce the nutritional gap in the population.
At present, as majority of food processing takes place in unorganized sector, Indian brands are seen as unhygienic and there is predominance of primary processing. Therefore, a much-needed thrust is required to boost the food processing sector.
To utilize the opportunities, present both at domestic and international markets, the Government came up with a ‘Production Linked Incentive Scheme for Food Processing Industry (PLISFPI).’
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Benefits of the PLISFPI Scheme for the Food Processing Industries: |
- Supports food manufacturing entities with expansion of processing capacities and their emergence as strong Indian brands.
- Looking for creation of global food manufacturing champions.
- Promotes visibility and acceptance of selected brands in international markets.
- Will increase employment opportunities of off-farm jobs.
- Ensure remunerative prices of farm produce and higher income for farmers.
Addressing bureaucratic hurdles, improving laws, upgrading hygiene practices, and increasing awareness about the benefits of processed food items are necessary for the food processing industry’s growth. The government also came up with Pradhan Mantri Kisan Sampada Yojana to create and upgrade food processing infrastructure.
30-06-2023
Answer :
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Approach to the answer: Decode the Question: This question expects the student to discuss the measures implemented to promote and support the growth of the Food Processing Industry (FPI) in India. The student should also evaluate the effectiveness of government initiatives in addressing the challenges faced by the FPI. Introduction: Introduce a brief background to the Food Processing Industry (FPI). Body: Highlight the measures undertaken to promote and support the growth of FPIs; To what extent these initiatives help in promoting and boosting FPI sector; highlight the challenges faced by FPI sector. Conclusion: Either summarize the topic and conclude on a positive note or else conclude with a way forward. |
Answer: Food processing industries involved in the transformation of raw agricultural produce into processed food products through activities, including cleaning, grading, packaging, cooking, preserving, and value addition to agricultural commodities.
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Measures undertaken to promote and support the growth of FPIs: |
- Pradhan Mantri Kisan SAMPADA Yojana: It aims to develop Argo-Marine processing and Development of Agro-processing clusters. Setting up Supply-chain infrastructure for efficient movement of farm produce.
- Establishing mega food clusters and Mega Food Park
- Production Linked Incentive Scheme for Food Processing Sector: Support the manufacturing entities in expanding their capacities to become global food manufacturing giants.
- Pradhan Mantri Formalization of Micro Food Processing Enterprise (PM FME) provides credit linked subsidies to individuals/SHGs/FPOs etc. for food processing infra development.
- Strengthening of Food testing Infrastructure in India by upgradation of FSSAI labs and setting up of new labs in the country.
- Scheme for Human Resources and Institution – Skill Development (SHRISD)
- Operation Green – ensuring subsidized transportation and storage for fruits and vegetables.
- 100% FDI is permitted under the automatic route for the food processing sector.
- MoFPI, GoI have signed MoU with Japan, Italy, Vietnam, and Taiwan for promotion of investment in the Food Processing Sector.
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To what extent these initiatives helping in promoting and boosting FPI sector: |
- Encouraged Private player participation – as government allowed 100% FDI in FPI sector.
- Boost Export: India created history in agriculture and processed food exports by exporting products worth US$ 25.6 billion in FY22.
- Increased focused on perishable commodities: exports of processed fruits and vegetables grew by 59.1%.
- Integrated development of Tomato, Potato and Onion (TOP) crop in value chain because of Operation Green.
- A total of 22 perishable commodities were added in the list by FY2022.
- FPIs constitute around 10.7% and 8.8% of gross value added in the agricultural and manufacturing sectors.
- Active branding and marketing of local products in international Markets.
- Increased FDI: Rs 11,096 crores invested in FPI sector by FY2022.
- Generated direct/indirect employment for around 5 lakh employees.
- The FPI sector has been growing at an average annual growth rate of around 9.99%.
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FPI sector still facing some challenges: |
- Entry Barriers – Capital Intensive nature of the sector becomes an entry barrier and prevents small players to enter the sector.
- Small Size of Indian Companies -> less R&D and marketing compared to Nestle, PepsiCo etc. -> Difficult to compete.
- Lack of skilled human resource -> hampers growth of the sector
- Poor Market Reforms (for e.g., in APMCs) in the Agri Sector -> Hinder availability of raw material
- Slow pace of growth in contract farming and land leasing reforms
- Infrastructure Deficiencies in transportation, storage etc. also led to lots of losses and made our food processing sector less competitive.
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Way forward: |
- Strengthening Trade Receivables Discounting System (TReDS), a platform for facilitating the financing/discounting of trade receivables of MSMEs through multiple financiers.
- Financial assistance and incentives to promote the entry of small players into the food processing sector.
- Government-sponsored R&D and marketing support for small Indian companies to enhance competitiveness.
- Skill development programs and vocational training to address the shortage of skilled human resources.
- Comprehensive market reforms in the agricultural sector to improve the availability of raw materials.
- Accelerated implementation of contract farming and land leasing reforms to boost growth.
- Investments in infrastructure development for transportation and storage to reduce losses and enhance competitiveness.
Keeping this in mind, government has taken various initiatives to promote FPIs in India. Now, the focus should be on ensuring the effective implementation of these schemes through proper investment, clear focus, and strong political will.