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Food Processing Notes for UPSC

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Food processing Industry is the product of agriculture and Industry

Why food processing

• The level of processing in India is extremely low at around 6% compared to 60-80% in

developed countries and over 30% even in most other Asian and Latin American
developing
countries.

• Wastage
o 15% by economic survey
o Fruits- vegetables - 40%

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• India

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o 2nd largest fruit producer, largest milk , pulse, teas bufflao meat producer

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o But India's share in world food trade is less than 2%.

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• Employment intensive

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o As per ASI 2010 survey, food processing provides the most employment out of any

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industrial stream (employs about 17 lakh people)

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o Per capita terms

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o I mega food park - 10k

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• Sunrise Industry

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o With a good growth potential - Worthy of investment
o Growing at a rate of 8% even during th low growth period of 2008 - 13
o Other sunrise industries - Tourism, BioTech, Healthcare, Renewable Energy

• Backward Linkage
o Indirectly also helps in crop diversification; if there aren’t food processing industries
close by, it is in the interest of farmers to grow something that can endure distance and
time, and hence cereals are preferred over horticultural products
o Correlation with high growth in horticulture and livestock
o Can make supply Elastic - Engels Curve

• Hunger, Nutrition, Quality

• Reduces Price Dispersion
• Outlet for SHGs

INDUSTRY
• More than 35,000 registered units
o Need to avail economies of scale
• Contributes about 10% to the agricultural GDP (which is quite low as compared to many
developed economies)
• 5th largest in the world

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• Growth
o Since 2003, growing at a rate of >10%, compared to about 3.3% in Agriculture

Food Processing (after 1991)

Trends
1. Issues: FPI has been plagued by factors such as low public investment, poor
infrastructure, inadequate credit availability and high levels of fragmentation.
2. Higher growth: The Indian food processing sector’s higher rate of growth (>10% since
2004-05) as compared to the agriculture growth rate (3.3% since 2004) is indicative of its
low base, changing life styles, tastes and higher disposable income with consumers.
3. Requirements: The sector needs huge investments in logistics. It is largely a private
sector activity but government should provide needed incentives for faster investments.

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a. Current policy framework: Most food processing enterprises have been exempted from

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industrial licensing with the exception of beer and alcoholic drinks and items reserved for the

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small scale sector. For foreign investment and technology, automatic approval is given even up

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to 100% for a majority of processed food

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General challenges in the industry

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Reforming Investments, Institutions, Incentives

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Problem Government Steps Way forward

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Input • APMC law • Contract
• APMC restrictions on raw amendment farming for
material procurement. • NAM is a right step ensuring
• Agri production is biased for eliminating input
in favour of grains due to middlemen in supply quality and
MSP regime, leading to chains. quality.
shortage of HVCs. • AGMARK was • Model Land
• Agri- productivity developed. Leasing Bill
remains poor in • Multi Brand
comparison of global Retail
standards. • Second
• Wastage Green
• MSP Revolution
for raising
productivity
of HVCs
using
climate
Smart
technology.

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Cold storage and warehousing • Integrated Cold • Need to

facilities Chain and Value develop
• Shortage of 10 million Addition Food
tonnes of capacity in cold Infrastructure . Irradiation
storage • FDI in multi brand centres
• Only 10% food under retail. • Village level
cold chain godown
• 80% of that for potato
o Non perishable
• Warehousing sector:70%
of it is in unorganised
sector.
• Inadequate
REFRIGERATED VEHICLES

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Logistics • Dedicated Freight • Develop

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• most of rural roads are Corridors will allow third party

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not all weather roads. efficient transport. logistics as
• According to WB 2007 • Sagarmala Projects is a separate

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Study on value chains of launched for multi industry to

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mango and litchi in Bihar, modal transport provide end

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a significant amount is development. to end

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• GST logistics.

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lost in transport and
• PMGSY

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wastage and farmers
receive 30-40% of price • Highways - 17km a

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paid by consumers. day

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• Congestion on highways • Dry Ports
along with night • Multi Modal
movement of cargo lead Terminals
to transit delays.
• Poor connectivity to
ports and turn around
times for ships is much
greater due to manual
operations. This affects
export potential.
• Lack of multi modal
connectivity
• Inadequate
REFRIGERATED VEHICLES

Access to credit • Food processing is • MUDRA

• Procedural hurdles and considered a priority scheme sho
high transaction costs sector for lending. uld
• Separate fund is specifically
created under target this
NABARD. sector due

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to its role in
rural
developmen
t.
Food Safety harmonize Indian food
• Lack of accredited • FSSAI Act standards with Codex.
testing laboratories consolidated a
hamper implementation number of laws and World class food testing
of Food Safety and provided for a single laboratories should be
Standards Act 2006 regulatory body.
established in the country
• Litigations under the act • Rules and regulations
in both the public and
are mostly related to under FSSAI has been
small technical streamlined/ private
sector

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violations.

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Government policy • Exemption form

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• Lack of comprehensive industrial licensing
National Food Processing has been provided.

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policy.

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•

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Multiplicity of schemes

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under various ministries

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of centre and state,

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without any

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coordination.

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• Structural Issues • Skill development
• Shortage
of Skilled
man
power
and
technical
know
how
• Lack of
industry-
academic
collabora
tion
leads to
depende
nce on
foreign
technolo
gy
• Obsolete
technolo

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gy leads
to poor
efficienc
y in
processin
g.
• Low scale of • Cluster based
production since development
MSMEs through Mega food
dominate the parks will allow
sector.- 35k firms reaping benefits of
economies of scale. It
will also provide

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support for

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advertisement,

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marketing and R&D.

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• 100% FDI is

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allowed in Food

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processing

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Complex taxation regime with
• SAMPADA -

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variation across states with

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Multiple levies Umbrella Scheme

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• Draft National Food

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Even though Primary food Processing Policy,
2017

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sector is not taxed
• Infra
o Clust
er
Appr
oach
o e-
NAM
platf
orm
o Land
ceilin
g
limit
s be
raise
d -
Coun
ter to
Draft
Land
Refor

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ms
Bill
o Tech
like
RFID
tags
• Focus on Self
Certification
• Sustainable
Environment
practises
• Each state -
Independent
Food

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Processing

c
department

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• Promote

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Entrepreneur

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ship

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Govt schemes
•

•
SAMPADA - Umbrella Scheme
Draft National Food Processing Policy, 2017
• Ministry of Food Processing since 1988
• National Mission on Food Processing
• Mega food park
• 100% FDI in most Food Processing sectors
o Except those which are reserved
o Some require license like wine
o Proposal
o Allow FDI in selling of food products Made in India
o Would help Amazon, Walmart

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o Boost to Agri, Food Processing, Indigenous, Consumers

• Integrated Cold Chain

• Income tax, custom duties exemption

• PSL for upto 100 crore project
• Most food processing enterprises have been exempted from industrial licensing with the
exception of beer and alcoholic drinks and items reserved for the small scale sector. For
foreign investment and technology, automatic approval is given even up to 100% for a majority
of processed foo

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Mega Food Parks

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• total 42 Mega Food Parks (MFPs) have been sanctioned

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o

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Review - 8 operational

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• bringing together farmers, processors and retailers

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What these food parks provide?

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• Particular focus on perishables

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• hub and spokes model.

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o Primary Processing Centres (PPCs)
o and Collection Centres (CCs)
o and common facilities and enabling infrastructure at Central Processing Centre (CPC).

• The PPCs are meant for functioning as a link between the producers and processors for supply of
raw material to the Central Processing Centres.
• CPC has need based core processing facilities and basic enabling infrastructure to be used by the
food processing units setup at the CPC. The minimum area required for a CPC is 50 acres.
• The scheme is demand-driven and would facilitate food processing units to meet
environmental, safety and social standards.

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Implementation and financial assistance:

• Mega Food Park project is implemented by a Special Purpose Vehicle (SPV) under companies
act.
• One time capital grant for Mega Food Park is provided in the form of grant-in-aid at 50% of
eligible project cost in general areas and at 75% of eligible project cost in NE Region and difficult
areas (Hilly States and ITDP areas) subject to maximum of Rs. 50 crore per project.
• Similar support is for Slaughterhouses - 50% capital support, NE - 75%, Max of 10 crore
Benefits:
• Reducing post harvest losses (currently over 15% as per Economic Survey )
• Maintenance of the supply chain in sustainable manner.
• Additional income generation for the farmers.
• Shifting the farmers to more market driven and profitable farming activities.
• It will be a one stop shop where everything will be available at a single location.

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• As per experts, it will directly employ 10,000 people.

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• This integrated food park will help reduce supply chain costs.

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•

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It will also reduce wastage across the food value chain in India and improve quality and hygiene

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to create food products in the country.

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Difficulties in implementation:

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• aquiring contiguous land of 50 acres or more in the name of SPV,

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•

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PSL lending only till 100 crore

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• One size fir all approach

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• obtaining term loan from the Banks, difficulties in obtaining various statutory clearances from

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the State

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• Government Departments/Agencies, timely contribution of equity by the promoters, lack of

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cohesiveness amongst the promoters etc.

National Mission on Food Processing

12th FYP
Objectives :
i. setting up of food processing industries.
ii. To undertake decentralization of the schemes
iii. To augment the capacity of food processors working to upscale their operations through
capital infusion, technology transfer, skill Upgradation and handholding support.
iv. to support established SHGs working in food processing sector to facilitate them to achieve
SME status.
v. Capacity development and skill upgradation through institutional training
vi. To raise the standards of food safety and hygiene in order to meet the norms set up by
FSSAI.
vii. To facilitate food processing industries to adopt HACCP and ISO certification norms.

Food Wastage
• Issues

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o Supply Demand Mismatch and Food Inflation

o Food Insecurity
o Leads to more Farming - And brings all the related issues like Deforestation, Water
Export,
• How to reduce food wastage
o All points on Food Processing
o Right agri practises to reduce food wastage during harvesting
o Solid Waste Management rules
o Wastage in FCI - Shanta Ram recommendations and Open sale scheme
o Also Deccentralised Procurement
o Sensitising people
o PM Man Ki Bat
o Similar innovative campaigns like Darwaaza Band Campaign

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FPO

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Farmer Producer Organisation (FPO)

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• Or cooperatives

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• It is a type of Produce Organisation where the members are farmers

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• PPP of another sort - people to people partnership

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• Need

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o Economies of scale

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o Credit, Collateral, Resources - Collectivisation

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o Even though inflation high, and yet farmers make little is because real money is in the

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processing

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o Inclusive Development- Money to the very poor
o Virtuous circle - Promotes agriculture
o Societal building
• Successful Examples
o Amul-
▪ 3 billion $
▪ 60% women or from backward communities
o Lijjat Papad
▪ By Shri Mahila Griha Udyog Lijjat Papad
o US- cooperatives worth 500 billion $
• Why not successful in India ?
o Capital constraint
o Rules forbid to raise money from share market
▪ Argument- That it will effectively privatise a cooperative
o Dearth of managerial capability in the FPOs
o Takes up 4-5 years to stand up on its feet
o FPOs require working capital for the members who usually take farming loans
o Issues of SHG - Caste, Require handholding , Bank Linkage missing

• Steps Taken
o Tax Free
o Right to form cooperatives is now a Fundamental Right (Article 19)

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o Operation Flood - 60k formed

o SHG- Bank Linkage
o NABARD - Producer Organisation Development Fund
▪ And has set up 3k since 2011
▪ Plans to set up 5k more
o General Schemes on Food Processing - Sampada, Policy, Ministry, Mega, Multi Brand
• Steps required
o Categorising FPOs as priority sector
o Tax exemption for FPOs (although farmers are exempted even now from Income tax)
o Need to reduce interest rate for FPOs
o SHG Bank Linkage
o MFI - Grameen Bank
o Kudambashree- 40 million - state support

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• FDA - Food & Drug Authority

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• Indian version of FDA - FSSAI - Food Safety & Standard Authority of India

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o Enacted under the Food Safety & Standards Act, 2006
o Function

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▪ Lays standards for food industry

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▪ Responsible for enforcement

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▪ Accredits

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▪ certifying agencies

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▪ laboratories
▪ Advices central and state govt

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▪ Promotes awareness
▪ Training program for those who want to join/invest in the industry

Maggi Case
• Lead and a chemical MSG found which is not permitted for infants under 12 months
• MSG- Mono Sodium Glutamate
• This is used as an artificial flavouring agent
• Also, higher leels than required lead found
• Although, US FDA has a different take on MSG
• It does not find MSG as being bad for health

Potassium Bromate and Potassium Iodate in Bread

• Found by CSE
• K Bromate is banned in EU, UK, ...
• As it is carcinogenic
• Not banned in India
• FSSAI also removing it from the permitted preservatives list

International

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• International Standards Organization (ISO)

ISO is international independent organization, engaged in formulation and setting
up of standards for different products including processed food products. It has
overtime become a brand and products marked with ISO enjoys premium in
markets. It should be noted that ISO standards are not something which is enforced
by government, WTO, WHO etc. It is purely voluntary on part of manufacturer.
ISO doesn’t certify itself; there are other entities which certify. ISO just set
standards.
‘ISO 22000’ deals with ‘food safety management’ and ‘ISO 14000’ deals with
environmental impact

• SPS

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