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Invisible Injustice - 64

Invisible Injustice - 64

Food processing sector has emerged in India as the high-growth and high-profit sector due to its immense potential for value addition.

In my previous write up I had highlighted the nature and scope of agro-business in India along with its tremendous potential for doubling its net income. In this write up I shall highlight the prospects of quadrupling the income of food processing sector and the Indian Government’s initiatives to invite both foreign and Indian investors into the same sector. Unlike many other countries in the world, all the crops in the world can be grown in India and there is a tremendous potential for augmenting the agriculture production which when processed for export oriented market by the food processing industries there are greater possibilities of quadrupling their net income and also doubling the national income instead of doubling the farmers income as Modi and Jaitley promised. In my write up on “Doubling or Minimizing Farmers Income” (Invisible Injustices 62, 24-30 July 17) I had already highlighted the dynamics of negative income at the farmers level unlike the tall claims made often by Modi and Jaitley in their speeches. The food processing industries are posed for a quadrupled increase of their income. Simultaneously we shall see the amount of money allotted by the government to various food processing and marketing companies. The readers also can compare the amount of money allotted to the small, marginal and semi-medium farmers who form 95% per cent of the farm holdings with the money allotted to few dozen food processing companies. The readers also will remember that farmers in India form about 65% of the population.

The Govt of India is making all out efforts to encourage investments in food processing and already approved proposals for joint ventures, foreign collaborations, industrial licenses, and 100 per cent export oriented units. Food processing sector has emerged in India as the high-growth and high-profit sector due to its immense potential for value addition. Hence large a number of multinational companies are drawn towards establishing their food processing industries here and the present government is lending an all-out encouragement to them in allocation of copious funds and streamlining the policy guidelines most favourable to them. The food industry in India is currently valued at US$ 39.71 billion (2,552,519,090,000 Rs) and is expected to grow at a compounded annual growth Rate of 11 per cent and to US$ 65.4 billion (4,203,846,600,000 Rs) by 2018 (at exchange rate as on 16th July ‘17).

As per Govt’s report ( https://www.ibef.org/industry/indian-food-industry.aspx) the Indian food and grocery market is the world’s sixth largest, with 70% retail sale contribution which is expected to reach Rs 61 lakh crore by 2020. The Indian food processing industry accounts for 32 per cent of the country’s total food market ranked fifth in terms of production, consumption, export and expected growth. It contributes around 14 per cent of manufactured Gross Domestic Product, 13 per cent of India’s exports and six per cent of total industrial investment. Indian food industry is expected to reach US$ 78 billion by 2018. The gourmet food market is currently valued at US$ 1.3 billion and is growing at 20 per cent rate. The organized food business in India is worth US$ 48 billion, of which food delivery is valued at US$ 15 billion. Online food delivery players like Food Panda, Zomato, Tiny Owl, Swiggy and several other companies have grown at 150% with an estimated gross merchandize value of US$ 300 million in 2016.

According to the data provided by the Department of Industrial Policies and Promotion, the food processing sector in India has received around US$ 7.47 billion worth of Foreign Direct Investment during the period April 2000-December 2016. The Confederation of Indian Industry estimates that the food processing sectors have the potential to attract as much as US$ 33 billion of investment over the next 10 years and also to generate employment of nine million person-days. Some of the recent major foreign companies investing in this sector are the following ( https://www.ibef.org/industry/indian-food-industry.aspx) . Due to shortage of space here I am mentioning only ten companies out of seven dozen foreign companies already entered into Indian Food processing sector. Many more are expected to join the same.

1.    US-based multi-million food company Cargill Inc, aims to double its branded consumer business in India by 2020, by doubling its retail reach to about 8,00,000 outlets and increase market share to become national leader in the sunflower oil category which will help the company to be among the top three leading brands in India.

2.    Di Bella, the Australia-based coffee chain, plans to invest Rs 67 crore (US$ 10 million) for setting up around 20 new outlets in Mumbai, besides entering Delhi and Bangalore by 2017.

3.    KKR & Co LP, the US-based private equity firm, plans to invest about Rs 520 crore (US$ 77.38 million) in dairy company Kwality Ltd, which will be used to strengthen its milk procurement infrastructure and increase processing capacity.

4.    Mondelez International, the US-based confectionery, food, and beverage major, inaugurated its new manufacturing plant in Andhra Pradesh set up for Rs 1,265 crore (US$ 190 million), with an annual production capacity of 2,50,000 tonnes.

5.    Pure Circle, a Malaysia-based natural sweetener producer, plans to invest around Rs 1,300 crore (US$ 200 million) in India to set up a manufacturing plant and make the country its regional production and export hub in the next five years.

6.    Swiggy, a food delivery start-up owned by Bundl Technologies Private Limited, has raised Rs 230.34 crore (US$ 33.80 million) in a Series C funding round, with its existing investors SAIF Partners, Accel Partners, Norwest Venture Partners and Apoletto Asia Ltd contributing 79 per cent of the new funds raised.

7.    Gujarat Cooperative Milk Marketing Federation (GCMMF), popularly known as 'Amul', plans to invest Rs 5,000 crore (US$ 733.6 million) to establish ten new processing plants as well as expand the current capacity to touch 32 million litres per day (MLPD) capacity by 2020.

8.    Private Equity (PE) firm India Value Fund Advisors (IVFA) plans to invest around US$ 100-150 million in the food business in India over the next two years.

9.    Zomato, a restaurant search and discovery platform, has raised US$ 60 million from Singapore government-owned investment company Temasek, along with existing investor Vy Capital, in order to explore new business verticals.

10. ITC Limited plans to invest Rs 800 crore (US$ 117.4 million) to set up a world-class food processing facility in Medak, a district located in Telangana. The company has also formulated plans to enter the dairy market.

There are already 56 major Indian companies in food processing business; many more are in the pipeline ( https://www.ibef.org/industry/indian-food-industry.aspx) . For samples some of the major Government initiatives are listed as follows.

1.    In Union Budget 2017-18, the Government of India has set up a dairy processing infra fund worth Rs 8,000 crore (US$ 1.2 billion).

2.    Union Budget 2016-17 proposed 100 per cent FDI through FIPB (Foreign Investment Promotion Board) route in marketing of food products produced and manufactured in India.

3.    The Government of India has relaxed foreign direct investment (FDI) norms for the food processing sector, allowing up to 100 per cent FDI in food product e-commerce through automatic route.

4.    The Food Safety and Standards Authority of India (FSSAI) plans to invest around Rs 482 crore (US$ 72.3 million) to strengthen the food testing infrastructure in India, by upgrading 59 existing food testing laboratories and setting up 62 new mobile testing labs across the country.

5.    The Indian Council for Fertilizer and Nutrient Research (ICFNR) will adopt internationally best practices for research in fertilizer sector, which will enable farmers to get good quality fertilizers at affordable rates and thereby achieve food security for the common man. (As usual it is done through subsidies (in prices) which will go directly to the companies in the farmer’s name)

6.    The Government of India allocated Rs 1,500 crore (US$ 225.7 million) and announced various measures under the Merchandise Exports from India Scheme (MEIS), including setting up of agencies for aquaculture and fisheries in coastal states and export incentives for marine products.

7.    Government of India plans to allow two Indian dairy companies, Parag Milk Foods and Schreiber Dynamix Dairies, to export milk products to Russia for six months, after these companies got approval for their products by Russian inspection authorities.

8.    Ms Harsimrat Kaur Badal, Union Minister for Food Processing Industries, Government of India inaugurated the first of its kind Rs 136 crore (US$ 20 million) mega international food park at Dabwala Kalan, Punjab.

9.    FSSAI has issued new rules for importing products, to address concerns over the entry of sub-standard items and simplify the process by setting shelf-life norms and relaxing labeling guidelines.

10. The Ministry of Food Processing Industries announced a scheme for Human Resource Development (HRD) in the food processing sector. The scheme has the following four components:

o             Creation of infrastructure facilities for degree/diploma courses in food processing sector

o             Entrepreneurship Development Programme (EDP)

o             Food Processing Training Centres (FPTC)

o             Training at recognized institutions at State/National level

11. The Ministry of Health and Family Welfare has issued the Food Safety and Standards, 2011, which prescribe the quality and safety standards.

12. Spices Board, set up by the Ministry of Commerce to develop and promote Indian spices worldwide, aims spice exports of US$ 3 billion by 2017.

13. The Government of India has approved the setting up of five numbers of Mega Food Parks in the states of Bihar, Maharashtra, Himachal Pradesh and Chhattisgarh. The Government plans to set up 42 such mega food parks across the country in next three to four years.

To sum up the last two write ups along with this one, we can say that the agricultural policy of the Govt of India is highly favourable to all types of agri-businesses especially to food processing and marketing industries and subtly against all the small, marginal and semi-medium farmers who are at present working as virtual slaves in the Global Food Market. Eventually these multinational companies will gobble up all the land resources of these farmers and start huge land based but highly automated mega-production technology. The readers are advised to watch on youtube the “ New Modern Agriculture Machines 2017-Harvesting Bananas, NEW heavy technology machine-Best agricultural farming: Pomegranate Harvest, and World’s Strangest Fruits-That Look Like Aliens, Soil-less farming: 25 kg of tomatoes per plant World Amazing Modern Agriculture Technology: Rose Flowers Cultivation” and similar other video clips on various types of farming to get some ideas about the high capital, high-tech agricultural production methods. Already huge agri-business companies have entered into contract farming in several parts of the country. Contract farming can be two types: product contract and land contract. In product contract only the agri-products are contracted whereas in land contract the land is leased in for a number of years and the company will cultivate any crop paying a nominal rent to the owner. Thus they will have not only control on the products but also the land the main means of production: Invisible injustices galore. Watch also the youtube on “ Walmart Supply Chain” on T-shirts; such ruthless production and supply chain are maintained in all contract production, transport, storage and marketing strategies for all the agriculture products also. The small and marginal farmers are only unlabelled slaves of present global agriculture business: Invisible Injustices.

(The writer is Retired Professor, Agriculture Economics at XIM, Bhubaneswar.  Email: ktchandysj@gmail.com)

(Published on 14th August 2017, Volume XXIX, Issue 33)