FOOD PROCESSING AND RELATED INDUSTRIES IN Student Notes:

INDIA – SCOPE AND SIGNIFICANCE, LOCATION,

UPSTREAM AND DOWNSTREAM REQUIREMENTS,
SUPPLY CHAIN MANAGEMENT
Contents
1. Food Processing Industry ........................................................................................................... 2
1.1. Why Food Processing Industry? .......................................................................................... 2
2. Evolution of the Food Processing Sector in India ....................................................................... 3
3. Location of food processing industries in India.......................................................................... 3
4. Supply Chain of the Food Processing Sector .............................................................................. 5
4.1. Upstream and Downstream Requirements ........................................................................ 6
4.2. Backward and Forward Linkages ......................................................................................... 7
5. Scope and Significance of the Food Processing Sector in India ................................................. 8
6. Potential of Processed Food Sector in India ............................................................................... 9
7. India’s Strengths in the Food Processing Sector ........................................................................ 9
8. Factors that can help in success of Food Processing Sector in India ........................................ 10
9. Challenges faced by Food Processing Industry in India............................................................ 12
10. Policy Initiatives and Measures Taken by the Government to Support the Food Processing
Sector ........................................................................................................................................... 13
10.1 Schemes related to Food Processing Industries ............................................................... 13
10.2. Challenges that still remain despite Government Initiatives .......................................... 18
10.3. Suggestions and Way Forward ........................................................................................ 19
11. A Brief SWOT Analysis of the Food Processing Industry in India ........................................... 20
12. Previous Year UPSC Mains Questions .................................................................................... 20
13. Previous Year Vision IAS GS Mains Test Series Questions ...................................................... 21

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1. Food Processing Industry Student Notes:

Food is a very important part of a civilization. It is characterized by any plant or animal product
which is consumed for nutrition and sustenance. Since the collection, preparation and
distribution of food has been the very basis of civilization, culture and home, humanity has
always recognized the value of preserving food.
This preservation of food ensures availability in times of need by means of pickling, salting,
drying, etc. Therefore, food processing is a multi-faceted endeavor and has increased
importance for an agriculture economy and society like ours. Food processing basically takes
harvested crops (or animal products) and adds value to them using different techniques to
produce long shelf-life food products.
What is Processed Food?
As defined by the inter-ministerial stakeholder meeting, processed food pertains to the
following two processes:
• Manufactured Processes: If any raw product of agriculture, animal husbandry or fisheries is
transformed through a process (involving employees, power, machines or money) in such a
way that its original physical properties undergo a change and if the transformed product is
edible and has commercial value, then it comes within the domain of processed food.
• Other Value-Added Processes: If there is significant value addition (increased shelf life,
shelled and ready for consumption etc.) such produce also comes under processed food,
even if it does not undergo manufacturing processes.

1.1. Why Food Processing Industry?

The Food Processing Industry all over the world provides vital linkages between the two
important pillars of the economy- agriculture and Industry. Thus, it has a direct impact on the
lives of the people as well as the environment. The significance of FPI can be understood
through the following points:
• Reducing food wastage: United Nations estimates that more than one-third of food is
wasted globally. Similarly, NITI Aayog estimated annual post-harvest losses of close to Rs.
90,000 crore. By diverting extra harvest to FPI, this wastage can be curbed.
• Reduce malnutrition: Fortification of processed foods with vitamins and minerals raises the
nutrition levels of the population.
• Preserve food quality and increase shelf life: By preventing the spoilage due to fungus,
bacteria and pests.
• Employment generation: The FPI sector provides direct and indirect employment
opportunities as it is labour as well as technology-intensive sector.
• Increasing farmer income: As the demand for processed food increases, so will the
demand for raw farm materials, and thus the income of the farmers will increase.
• Crop Diversification: With a growing market, farmers will be incentivised to grow a variety
of crops, practice mixed farming etc.
• Curbs Food Inflation: Since the shelf life is increased, the food is available throughout the
year and keep a check on food inflation.
• Gender Empowerment: As FPI is related to animal husbandry where 70% workers are
women workers.
• Increase exports: High-quality food products are valued all over the world, thus bringing in
much-needed forex. For eg: India's Basmati Rice.
• Enhances consumer choices: Today, food processing allows food from other parts of the
world to be transported to our local market and vice versa.
• Curbing Migration: Agricultural resources in India provides employment in rural areas,
hence reduces relocation from rural to urban and resolves issues of urbanization.

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2. Evolution of the Food Processing Sector in India Student Notes:

3. Location of food processing industries in India:

Food processing sector in India is a composite sector comprising two broad segments viz.
organized and unorganized segments.

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There are an estimated 25-lakh micro food processing enterprises in the country, which are Student Notes:
unorganized and unregistered. With 7% of investment in plant & machinery, the unorganized
enterprises contribute of 74.3% of employment (a third of which are women), 10% of output
and 27% of value addition in the food-processing sector. Nearly 66 per cent of these units are
located in rural areas and about 80 per cent of them are family-based enterprises.
The organized sector with nearly 40,000 units accounts for 93% of the plant & machinery in the
sector, in value terms. This segment accounts for 26% of employment and contributes around
90% of output and 72% GVA.
Most of the food processing factories are concentrated in the coastal states due to accessibility
to marine food processing. Major coastal states includes: Andhra Pradesh, Maharashtra,
Karnataka, Gujarat, West Bengal etc. Major non-coastal states includes: UP, Punjab, Haryana
etc.

Items under the purview of Food Processing Industries in India

Food processing is a large sector that covers activities such as agriculture, horticulture,
plantation, animal husbandry and fisheries. It also includes other industries that use agriculture

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inputs for manufacturing of edible products. Based on International Standard Industrial Student Notes:
Classification, it has been assumed that the factories listed in the following groups can be
summed up to constitute Food Processing Industries.

Source: Data Bank on Economic Parameters of the Food Processing Sector

*NIC – National Industries Classification

4. Supply Chain of the Food Processing Sector

A supply chain is a network between suppliers (farmers) of raw material, company (food
processor) and distribution network to market the finished products. Supply chain represents
the steps it takes to get the product or service to the customer.
The different stages of processing of manufactured food products are as follows:

Source: Data Bank on Economic Parameters of the Food Processing Sector

• Primary Processing: cleaning, grading, powdering and refining of agricultural produce, e.g.,
grinding wheat into flour.
• Secondary Processing: basic value addition, e.g., tomato-puree, ground coffee, processing
of meat products.
• Tertiary Processing: high value addition products like jams, sauces, biscuits and other
bakery products ready for consumption.
The generic value chain of the food processing industry from raw materials to retail to the consumer
is shown below in the figure:

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4.1. Upstream and Downstream Requirements: Student Notes:

Often, the different stages within the supply chain are referred to as upstream or downstream.
Upstream operations are those in which the materials flow into the organization. This process
includes searching for and extracting raw materials. The upstream part of the production
process does not do anything with the material itself, such as processing the material. This part
of the process simply finds and extracts the raw material. Therefore, any industry that relies on
the extraction of raw materials commonly has an upstream stage in its production process
Upstream requirements include:
• Accessibility to raw materials.
• Modern extraction techniques.
• Good linkages with farmers.
• Storage facilities for raw materials like Grains, Meat, and Fish.
• Quality testing facilities.
• Transport facilities.
• Work force
Downstream operations are those in which materials (mostly in the form of finished products)
flow away from the organization to the customers. This process involves processing the
materials collected during the upstream stage into an ended product. The downstream stage
further comprises of the genuine sale of that product to other businesses, governments or
private individuals. Downstream process has direct contact with customers through the finished
product.
Downstream requirements include:
• Latest processing techniques.
• Latest processing machinery.
• Quality testing facilities.
• Organized retail stores for faster distribution.
• Work force.

Similarly, the term logistics is used when talking about a business’s supply chain. Inbound
logistics are related to the upstream activities and include all of the movement of the product
before manufacturing. They involve receiving materials, storing them, and the manufacturing
processes required to produce the product. Of course, outbound logistics are related to the
downstream operations involving just about all of the movement of the product once it is a
finished good.

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Student Notes:

4.2. Backward and Forward Linkages

Linkages are a phenomenon which measures the capability of an industry to generate demand
for the products of/in the other industries. From the point of view of development strategy,
linkages are one of the essential features of an industry. Linkages are of three types: Forward,
Backward and sideways.
Backward Linkage: It means the connectivity of the FPIs with sources of raw material supply.
For example, supply of raw material like tomatoes to a ketchup manufacturer.
Forward Linkage: It means the connectivity of FPIs with the markets through distribution
network comprising of physical infra like storages, road and rail network etc.

Sideways Linkage: Sideways linkages are mostly derived from the use of by products and waste products
of the main base industrial activity. For example: many food processing industries using agricultural raw
materials produce waste that can be used further in production of fuel, bio-fuels, paper pulp and
fertilizer.

Significance of Linkages
• It encourages and enables farmers to grow products of appropriate quality.
• It helps the farmers fetch appropriate and remunerative return for their produce especially
the marginal and medium farmers.
• It helps to reduce the food wastage especially of perishable products with low shelf life like
fruits, vegetables, dairy products etc.
• It ensures timely delivery of food products to the consumer markets.
• High quality products and better infrastructure results in cost saving and enhanced
efficiency.
• These links provide a level playing field for all stakeholders and aid in facing competition.
• Helps to improve hygiene and food safety standards leading to greater acceptability of
processed food domestically and in international market.
Existing Challenges in Establishing Robust Linkages
• Small and dispersed marketable surplus due to fragmented holdings
• High seasonality of raw material production
• Large number of intermediaries
• Poor infrastructure facilities like cold storage, transport facilities, electricity etc.
• Industry is highly fragmented and is dominated by the unorganized sector
• Substandard levels of processing industries

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• Inadequacy of information with farmers and small processors. Student Notes:

• Multiplicity of legislation leads to contradictions in specifications, conflicting approach, lack
of co-ordination and administrative delays.
o For instance, manufacturers of packaged food products such as jams and squashes are
obligated to comply with quality standards and label declarations prescribed under
multiple legislations, such as The Standards of Weights & Measures (Packaged
Commodities) Rules, Prevention of Food Adulteration (PFA) and Fruit Products Order
(FPO)
• Anomalies in domestic food laws with international food safety standards
• Under developed food testing network.

5. Scope and Significance of the Food Processing Sector in

India
With India moving from a position of scarcity to surplus in terms of food production, the
opportunities for increasing food processing levels are innumerable.
The scope of Food Processing sector encompasses the existing scale of operations/size of
industry as well as the future potential to grow. The scope can be gauged from the following:
• According to the Annual Survey of Industries 2018-19 report, the Food Processing industry
constituted around 9% to India’s GVA through manufacturing.

• The Indian food and grocery market is the world’s sixth largest, with retail contributing 70
per cent of the sales.
• It is the fifth largest industry in our country in terms of production, consumption, export
and growth.
• The food processing market in India was valued at around US$ 350 billion in FY 2018 and is
expected to double by FY 2024, expanding at a CAGR of around 12.09% during the FY 2020-
FY 2024 period.
• India is a country with a population of over 1.3 billion. With rising middle class having a
considerable disposable income, the domestic market offers significant demand
opportunities.
• 100% FDI is allowed in the
sector. The Confederation of
Indian Industry (CII) estimates
that this sector has 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.

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• India ranks no. 1 in the world in the production of milk, spices, ghee, ginger, bananas, Student Notes:
guavas, papayas and mangoes. Further, India ranks no. 2 in the world in the production of
rice, wheat and several other vegetables & fruits. If the surplus production of cereals, fruits,
vegetables, milk, fish, meat and poultry, etc. are processed and marketed both inside and
outside the country, there will be greater opportunities for the growth of the sector.
• More than 70% of the FPI is spread in the unorganised sector in the form of the cottage and
small industries. So, there is a lot of scope of bringing them under the organised sector.

6. Potential of Processed Food Sector in India

The food processing market in India is a Sunrise Industry with high potential for growth which
can be witnessed through following:
• Demand: With a population of more than 1.3 billion individuals and food constituting a
major part of the consumer’s budget, this sector has a prominence next to no other
businesses in the country.
• Resilience: The importance of this sector to India’s economy becomes all the more relevant,
considering the fact that this sector continued to perform well, despite fall in GDP number
and poor performance by many other industries, during recession in 2008-09.
• Value Chain: The industry encompasses a gamut of activities involved in reaching the final
product to the consumer, starting with farming activity to produce inputs, processing of the
inputs to create products and the associated supply chain involved in delivering the
products.
• Forward-Backward Linkages: It has increasingly come to be seen as a potential source for
driving the rural economy as it brings about synergy between the consumer, industry and
agriculture. A well-developed food processing industry is expected to increase farm gate
prices, reduce wastages, ensure value addition, promote crop diversification, generate
employment opportunities as well as export earnings. This sector is also capable of
addressing critical issues of food security and providing wholesome, nutritious food to our
people.
• Scope for development: While the industry is large in terms of size, it is still at a nascent
stage in terms of development. Out of the country’s total agriculture and food produce,
only 2 per cent is processed. However, the contribution of food processing sector to GDP
has been growing faster than that of the agriculture sector.
• Raw material: Being an agrarian economy, there is sufficient supply of raw material in India.
• Export Competitiveness: We have a comparative advantage in exports because the cost of
raw materials is cheap in India as compared to other countries. But this is not being realised
due to barriers like safety and hygiene standards. The government is liberalizing and taking
up measures in this regard.
• Employment generation: It has the potential to generate non-farm employment, especially
in rural areas. It would reduce disguise unemployment by providing productive
employment opportunities.
Investments: With 100 per cent FDI allowed into the sector through the automatic route by
Government of India & ease of doing business, India's food processing sector attracted
global investors as it received FDI inflows worth US $904.70 million in the 2019-20 (up by 44
per cent over 2018-19). These investments serve as a catalyst to boost agricultural income
and employment.

7. India’s Strengths in the Food Processing Sector

India’s strengths in the food processing sector lie in the following:
• Favourable-Factor Conditions
India has access to several natural resources that provides it a competitive advantage in the
food processing sector. Due to its diverse agro-climatic conditions, it has a wide-ranging and

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large raw material base suitable for food processing industries. Presently a very small Student Notes:
percentage of these are processed into value added products. The semi-processed and
ready to eat packaged food segment is still evolving.
India’s comparatively cheaper workforce can be effectively utilized to set up large low cost
production bases for domestic and export markets. Cost of production in India is lower by
about 40 per cent over a comparable location in EU. Along with these factor conditions,
India has access to significant investments to facilitate food processing industry. There have
been increasing investments not only by domestic firms and Indian government, but also
foreign direct investment.
• Related and Supporting Industries
The Indian food processing industry has significant support from the well-developed R&D
and technical capabilities of Indian firms. India has a large number of research institutions
like Central Food Technological Research Institute, Central Institute of Fisheries Technology,
National Dairy Research Institute, National Research and Development Centre etc. to
support the technology and development in the food processing sector in India.
• Government Regulations and Support
The Government of India has taken several initiatives to develop the food processing
industry in India. The government has been developing agri-zones and mega food parks to
promote food processing industry in India. In order to promote investment in the food
processing sector, several policy initiatives have been taken during recent years, such as
allowing 100% FDI.
• Large Number of Players
There are a large number of players in the organized as well as unorganized sector. The
organized sector is small but growing - for example, it forms less than 15 per cent of the
dairy sector and around 48 per cent of the fruits and vegetable processing. The sector
offers potential for growth and a large number of Multi-National Corporations have entered
into India to leverage this opportunity.
Apart from above-mentioned strengths, the following areas have been identified by the
Ministry of Food Processing Industries where investments are required:
• Mega food parks,
• Agri-infrastructure and supply chain integration,
• Logistics and cold chain infrastructure,
• Fruit and vegetable products,
• Animal products, meat and dairy,
• Fisheries and sea food,
• Cereals, consumer foods and ready-to-eat foods.
• Wine and beer,
• Machinery and packaging etc.

8. Factors that can help in success of Food Processing

Sector in India
The Indian food processing industry’s growth potential cannot be disputed; however, it requires
certain competencies and success factors to fructify this potential. These include addressing the
current gaps in the value chain as well as leveraging on the various advantages the country
provides. Some of the key success factors are discussed below.

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• Integrated Supply Chain and Scale of Operations Student Notes:

While India ranks second in production of fruits & vegetables, nearly 20 to 25 per cent of
this production is lost in spoilage in various stages of harvesting. The key issues are poor
quality of seeds, planting material and lack of technology in improving yield. Ensuring good
quality produce entails investments in technology and ability to sustain a long gestation
period for the harvest. Good quality production also results in better quality of processed
fruits. Hence there is a need to establish backward linkages with the farmers with the help
of arrangements such as contract farming to improve the quality of the produce. Scale is a
key factor in the processing industry. Nearly 90 per cent of the food processing units are
small in scale and hence are unable to exploit the advantages of economies of scale. This is
also true with land holdings.
• Processing Technology
Currently, most of the processing in India is manual. There is limited use of technology like
pre-cooling facilities for vegetables, controlled atmospheric storage and irradiation
facilities. This technology is important for extended storage of fruits and vegetables in
making them conducive for further processing. In the case of meat processing, despite the
presence of over 3600 licensed slaughter-houses in India, the level of technology used in
most of them is limited, resulting in low exploitation of animal population. Bringing in
modern technology is an area that existing as well as new investors in the sector can focus
on, this will make a clear difference in both process efficiencies as well as quality of the end
product.
• Increasing Penetration in Domestic Markets
Most of the processing units are export oriented and hence their penetration levels in the
domestic market are low. For example:
o Penetration of processed fruits and vegetables overall is at 10 per cent
o The relative share of branded milk products especially ghee is still low at 2 per cent
o Penetration of culinary products is still 13.3 per cent and is largely tilted towards
metros
o Consumption of packaged biscuits for Indian consumers is still low at 0.48 per cent
while that for Americans is 4 per cent
However, there is increasing acceptance of these products amongst the urban population.
India has a large untapped customer base and even a small footprint in the domestic
market would enable the player to gain significant volumes.
• Competitive Pricing
Consumers of processed foods are extremely price sensitive. Even a small change in pricing
can have significant impact on consumption. For instance, the launch of PET bottles, new
price points and package sizes in non-carbonated drinks (such as by Coca Cola) increased in-
home consumption from 30 per cent to 80 per cent in a year’s time. Competitive pricing
also enables penetration in the rural markets.
• Brand Competitiveness
Share of branded products in purchases of Indian consumers has also increased
substantially. This is especially true for urban consumers. Branded products like Basmati
rice and KFC’s chicken have been very successful implying that there is a good demand for
hygienic branded products at reasonable prices.
• Product Innovation
Certain processed food categories such as snack foods are impulse purchase products
where consumers look for novelty and new flavours and hence these categories lack brand
loyalties. Visibility through attractive packaging boosts consumption. Increasing time
constraints amongst the working middle class has boosted consumption of products like
instant soups, noodles and ready-to-make products. Innovation in packaging and product
usage is an important success factor for processed foods.

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9. Challenges faced by Food Processing Industry in India Student Notes:

• Informalization in Food Processing Industry: The food processing industry has a high
concentration of unorganised segments, representing almost 75% across all product
categories. This causes the inefficiencies in the existing production system.
• Lack of efficient supply chain infrastructure: Inadequate expansion of processing and
storage capacity commensurate with agriculture production have been identified as the
main reasons for higher wastages, higher cost of production, lower value addition in food
processing sector.
• Lower Value addition: India despite being one of the major producer of agri-commodities,
the level of food processing and value addition continues to remain low affecting our
competitiveness & export performance and income of farmers.
• Significant gap in Cold Chain capacity is one of the important reasons for higher wastage of
agriculture produce particularly perishable segments. Cold Chain infrastructure involves
heavy investment with long payback period which is beyond the capacity of individual food
processors.
• Inadequate linkage of processors, exporters and bulk purchasers with farmers: Lack of
coordination results in mismatch between the requirements of industry and supply of agri-
produce by the farmers. This problem is often worsens if there are any legal provisions
relating to restrictions on that commodity storage and movement.
• Poor Credit Facility: Food processing units, largely operating in MSME segment, face
problem in their access to bank credit due to seasonal and perishable nature of the
commodities handled by these units. High cost and inadequate credit do not attract
prospective entrepreneurs choosing food processing sector for investment.
• Bureaucratic hurdles: Multiple clearances are required for setting up of food processing
units. The small processors are also required to go through the same processes as is
applicable to larger units. Availing permission for Change in Land Use (CLU), environmental
clearance, water and power connections are not only time consuming but also costly.
• Labour Laws: Food processing units are required to comply with labour laws in relation to
lay-off, retrenchment and closure even though these units run seasonally which adversely
affects the commercial viability of the processing units.
• Marketing of processed food: It is a major problem faced by food processors particularly
for the micro and small processors. Given the scale of operation, individual units are unable
to invest in marketing and branding impacting performance of the sector.
• Lack of awareness: Processors face difficulty in availing benefits under schemes being
implemented by different agencies of central and state governments in the absence of
exclusive supportive forum at the state level. Lack of awareness and absence of
appropriate knowledge sharing & guidance forum adds to their problem.
• Inadequate training: Sector specific Entrepreneurship Development training and
Incubation Services are weak areas inhibiting growth of the sector.
• Seasonality Of operations- These industries do not operate the entire year due to
seasonality of agriculture. But in developed countries, industries run all year round due to
technological advancement which enables storage of produce.
• Co-ordination in Research: A number of research institutes are undertaking R&D for
product, process, and technology improvement & development. There is a need for
coordinated action on research and dissemination of research output to the industry.
• Limited ability to control quality and safety: The sheer number of players, especially in the
large unorganized segment, involved in the food value-chain, makes implementation of
quality and safety norms difficult. This has led to practices such as milk adulteration and
use of carbide for fruit ripening becoming more widespread. Moreover, food testing,
quality certification and safety issues are other weak areas which needs priority attention.

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10. Policy Initiatives and Measures Taken by the Student Notes:

Government to Support the Food Processing Sector

In order to facilitate and harness the growth potential of this sector, the government has
initiated extensive reforms.
• Most of the processed food items have been exempted from the purview of licensing under
the Industries (Development and regulation) Act, 1951, except items reserved for small-
scale sector and alcoholic beverages.
• Food processing industries were included in the list of priority sector for bank lending in
1999.
• Automatic approval for foreign equity up to 100 per cent is available for most of the
processed food items except alcohol, beer and those reserved for small-scale sector subject
to certain conditions.
• Full repatriation of profits and capital has been allowed.
• Zero duty import of capital goods and raw material for 100 per cent export oriented units.
• Full duty exemption on all imports for units in export processing zones has been done.
• 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).
• The government in Union Budget 2020 has increased allocation for Food Processing Sector
to Rs. 1,232.94 crore for the next fiscal from the revised estimate of Rs. 1,042.79 crore.
• The Government of India has relaxed foreign direct investment (FDI) norms for the sector,
allowing up to 100 per cent FDI in food product e-commerce through automatic route.
• Food map of India has been uploaded on the website of the ministry of FPI to indicate
surplus and deficit areas. Further, Investor’s portal has been launched by the ministry to
promote investment in FPI to give information about potential areas.
• APMC Reforms have been brought for promotion of contract farming which subsequently
will boost supply of raw materials to the FPIs.
• Agriculture Export Zones are being established since 2001. They will function similar to
Special Economic Zones (SEZs) but only for agriculture products. 16 AEZs have been
established with an objective to export agri-products. Tax rebates are more in AEZs as
compared to in Mega Food Parks.
• The Food Safety and Standards Authority of India (FSSAI) is investing 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. FSSAI under the Ministry of Health and
Family Welfare has issued the Food Safety and Standards (Food Product Standards and
Food Additives) Regulations, 2011 and the Food Safety and Standards (Contaminants, Toxins
and Residues) Regulations, 2011 which prescribe the quality and safety standards
respectively for food products. Also, it 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 labelling guidelines.
• The Indian Council for Fertilizer and Nutrient Research (ICFNR) has adopted international
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.

10.1 Schemes related to Food Processing Industries:

PM Kisan SAMPADA Yojana
It is a comprehensive package which will result in creation of modern infrastructure with
efficient supply chain management from farm gate to retail outlet. It will not only provide a big
boost to the growth of food processing sector in the country but also help in providing better
returns to farmers and is a big step towards doubling of farmers income, creating huge
employment opportunities especially in the rural areas, reducing wastage of agricultural

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produce, increasing the processing level and enhancing the export of the processed foods. Student Notes:
The following schemes will be implemented under PM Kisan SAMPADA Yojana:
• Mega Food Parks
• Integrated Cold Chain and Value Addition Infrastructure
• Creation / Expansion of Food Processing & Preservation Capacities
• Infrastructure for Agro-processing Clusters
• Creation of Backward and Forward Linkages
• Food Safety and Quality Assurance Infrastructure
• Human Resources and Institutions
• Operation Greens
• Operation Greens seeks to stabilize the supply of Tomato, Onion and Potato (TOP) crops and to ensure
availability of TOP crops throughout the country round the year without price volatility.
Mega Food Park Scheme:
• Mega Food Parks Scheme was launched by the government in 2008. It provides financial
assistance up to 50 crores to setup modern infrastructure facilities for food processing
called Mega Food Parks. The primary objective of the Scheme is to provide modern
infrastructure facilities for the food processing along the value chain from the farm to the
market with a cluster based approach based on a hub and spokes model.
• It has 3 layers:
o At the centre, there is central processing centre (CPC) which is 80-100 acres. From here
the value-added product will either go to the domestic market or for exports.
o Around CPC, there are PPC (Primary Processing Centre) where works like sorting,
grading, pre-cooling, packaging etc. are done.
o Around PPC, CCs (Collection centres) are there working as aggregation and storage
centres which collect from farmers, middle-men, mandis etc.
• The Mega Food Park project is implemented by a Special Purpose Vehicle (SPV), which is a
Body Corporate, registered under the Companies Act. The government has sanctioned 37
food parks funded under the Mega Food Parks Scheme, 20 are operational and 17 are
under implementation as on 29th Oct 2020.

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Student Notes:

Scheme for formalization of Micro Food Processing Enterprises

The Union Cabinet has given its approval to a new Centrally Sponsored Scheme – “Scheme for
Formalization of Micro food processing Enterprises” for the Unorganized Sector on All India
basis. The Union Cabinet has sanctioned an outlay of Rs.10000 crore.
• Features of the scheme
o Expenditure to be shared by the Government of India and States at 60:40.
o 2 lakhs of micro-enterprises are to be assisted with credit linked subsidy.
o The scheme will be implemented over a 5 year period from 2020-21 to 2024-25.
o It will follow a cluster approach.
o It will have special focus on perishables.
• Support for Individual micro-units:
o Micro enterprises will get credit-linked subsidy @ 35% of the eligible project cost with a
ceiling of Rs.10 lakh.
o The beneficiary contribution will be a minimum of 10% and balance from the loan.
o On-site skill training & Handholding for DPR and technical up-gradation.
• Implementation strategy:
o Seed capital of Rs. 4 lakh per SHG will be given for the loan to members for working
capital and small tools.
o Grant will be provided to FPOs for backward/forward linkages, common infrastructure,
packaging, marketing & branding.
• Administrative and Implementation Mechanisms
o The Scheme would be monitored at Centre by an Inter-Ministerial Empowered
Committee (IMEC) under the Chairmanship of Minister, FPI.
o A State/ UT Level Committee (SLC) chaired by the Chief Secretary will monitor and
sanction/ recommend proposals for expansion of micro-units and setting up of new
units by the SHGs/ FPOs/ Cooperatives.
o The States/ UTs will prepare Annual Action Plans covering various activities for
implementation of the scheme, which will be approved by the Government of India.
o A third-party evaluation and mid-term review mechanism would be built in the
programme.
o The State/ UT Government will notify a Nodal Department and Agency for
implementation of the Scheme.

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• Establishment of a National Portal & MIS Student Notes:

o A National level portal would be set-up wherein the applicants/ individual enterprise
could apply to participate in the Scheme.
o All the scheme activities would be undertaken on the National portal.
• Benefits catered by the Scheme
o Nearly eight lakh micro-enterprises will benefit through access to information, better
exposure and formalization.
o Credit linked subsidy support and hand-holding will be extended to 2 lakh micro-
enterprises for expansion and up-gradation.
o It will enable them to formalize, grow and become competitive.
o The project is likely to generate nine lakh skilled and semi-skilled jobs.
o The scheme envisages increased access to credit by existing micro food processing
entrepreneurs, women entrepreneurs and entrepreneurs in the Aspirational Districts.
o Better integration with organized markets.
o Increased access to common services like sorting, grading, processing, packaging,
storage etc.
Gram Samriddhi Yojna:
• It aims to bolster the unorganised
food processing sector concentrated in
rural areas. About 66% of unorganised
food processing units are in rural areas
and of these, 80% were family run.
The Rs. 3,000 crore scheme funded by
the World Bank and the centre will
help cottage industry, farmer
producers’ organisation and individual
food processors to increase capacity,
upgrade technology besides skill
improvement, entrepreneurship
development and strengthening the
farm-to market supply chain.
Draft National Food Processing Policy -2019:
The Ministry of Food Processing Industries released the Draft National Food Processing Policy,
2019 for public comments. It aims for the development of the food processing sector and
addressing the critical gaps hampering its growth.
Strategy as suggested by the Policy includes
• Promotion of cluster approach with emphasis on strengthening and creation of integrated
supply chain infrastructure to minimize wastages,
• Incentivizing expansion of capacity and upgradation of technology for processing and
preservation particularly for perishables,
• Increasing access to institutional credit,
• Promoting employment by incentivizing,
• Supporting Research & Development activities,
• Strengthening of institution operating in food processing segment for advancement of
learning, dissemination of knowledge, entrepreneurship and skill training to meet the
growing demand of the sector;
• Creating awareness on food quality & safety,
• Training manpower for ensuring regulatory compliance,

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• Accelerating investment in food processing sector through collaboration with all stake Student Notes:
holders;
• Encouraging separate single window clearance desk at Department of Food Processing at
the state level to handle all matters related to food processing etc.
Scheme for Cold Chain, Value Addition and Preservation Infrastructure:
The objective of the scheme is to facilitate creation of integrated cold chain and preservation
infrastructure facilities without any break from farm to consumer. It intends to address the
shortage of cold storage capacity. The scheme mentions three types of facilities to be created
such as:
• Minimal processing centre at the farm gate level having facilities like weighing, sorting,
grading, pre-cooling, CA/MA storage, IQF and normal storage facilities
• Mobile pre- cooling vans and reefer trucks
• Distribution hubs having facilities such as multi-purpose cold stores, variable humidity
stores, Quick Freezing and blast freezing etc.
Modernization of Abattoirs:
The objective is modernize existing abattoirs or establish modern abattoirs promoting scientific
and hygienic slaughtering, application of modern technology for waste management, better by
product utilization, provision of chilling facility, retail cold chain management etc. under PPP
mode with the involvement of local bodies (panchayats or municipalities) on build-own-
operate/build-operate-transfer (BOT)/Joint venture(JV) basis.
Make In India:
As part of the Make in India campaign, food processing sector was identified as one of the 25
focus areas. Also, under Make in India campaign, 31 Sector Skill Councils (SSCs) were
established by the government along with FICCI of which 1 is for FPI.
TRIFOOD Project:
Ministry of Tribal Affairs, Ministry of FPI along with TRIFED have initiated the project with aim
to enhance the income of tribals through better utilization of and value addition to the Minor
Forest Produce (MFP) collected by the tribal forest gatherers.
Food Processing Fund:
A special fund in the NABARD worth INR 2,000 crore, designated as the Food Processing Fund,
was set up in the FY 2014-15 for providing affordable credit to food processing units in Mega &
Designated Food Parks.
One District One Product (ODOP):
The scheme was launched by the Government of Uttar Pradesh to encourage and revive
aboriginals’ arts and craft products. It would help Micro, Small and Medium Enterprises
(MSMEs) to produce and promote products that are unique in Uttar Pradesh. The programme
aims to encourage more visibility and sale of indigenous and specialized products/crafts of
Uttar Pradesh, generating employment at the district level.
The main objectives of the One District One Product Programme are as follows:
• Preservation and development of local crafts/skills and promotion of the art.
• Increase in the incomes and local employment (resulting in a decline in migration for
employment).
• Improvement in product quality and skill development.
• Transforming the products in an artistic way (through packaging, branding).
• To connect the production with tourism (Live demo and sales outlet – gifts and souvenir).

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• To resolve the issues of economic difference and regional imbalance. Student Notes:
• To take the concept of ODOP to national and international level after successful
implementation at the State level.
Under this project, one particular product is selected from every district of Uttar Pradesh. The
selected product under ODOP needs to be traditionally famous for its production and
manufacturing from that particular district. For instance: Lucknow is famous for zari-zardozi and
chikankari. Many of these products are GI-tagged, which means they are certified as being
specific to that region in Uttar Pradesh.
The manufacturing process of a lot of these products are also dying community traditions that
are being revived through modernization and publicization. Under the ODOP programme,
artisans, production units and associations which are related to the selected products are
promoted by lending loan, establishing Common Facility Centers, providing marketing
assistance so these products can be popularized and employment can be generated at the
district level.
Sub-schemes under the ODOP are:
• Common Facility Centre Scheme
• Marketing Development Assistance Scheme
• Finance Assistance Scheme (Margin Money Scheme)
• Skill Development Scheme.
Important Institutes related to technology improvement and R & D in Food Processing Sector
are as follows:

10.2. Challenges that still remain despite Government Initiatives

The challenges for the food processing sector are diverse and demanding, and need to be
addressed on several fronts to derive maximum market benefits. A combination of
uncontrollable and controllable factors has affected the growth of the sector and has acted as a
hindrance in achieving its potential.
The uncontrollable factors which are difficult to address and hence have to be discounted for
while accounting for the inadequate growth of the sector. It include fragmentation of land
holdings which has resulted in lack of scale and has made investments in automation unviable;
regional climatic variations which impact the production; and the constraints in land availability
due to competing pressure from urbanization, constructions and industrialization.
Controllable factors which can be addressed by intervention of Government and private
enterprises. It includes issues of quality and quantity of raw produce, low labor productivity
with slow adoption of technology. On the Infrastructure front, we have supply chain and
wastage related problems and low levels of value addition etc. The other issues of concern,
holding this sector back are impaired access to credit; inconsistency in state and central polices,
which requires both the Center and the State to work as one single cohesive unit.

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Indian food-processing industry is poised for explosive growth driven by changing Student Notes:
demographics, growing population and rapid urbanization along with increased government
support. These factors will increase the demand for value added products and thus improve the
prospects of food-processing industry in India.
The government’s focus towards food processing industry as a priority sector will ensure
policies to support investment in this sector and attract more FDI. India with its vast pool of
natural resources and growing technical knowledge base has strong comparative advantages
over other nations. According to CII estimates, food-processing sector has the potential of
attracting US $33 billion of investment in 10 years and generate employment of 9 million
person-days. The food processing sector in India is clearly an attractive sector for investment
and offers significant growth potential to investors.

10.3. Suggestions and Way Forward

The need of the hour is to adopt an integrated approach to address the above mentioned
tailbacks with a clear-cut focus on improving the quality and value of the output, reducing the
cost of raw material for the processors, while improving the farmers' income levels.
To promote this sector, attempts are required to be made to promote farmer–producer
interaction, provide appropriate tax incentives and holidays for setting up food processing
industries, taking care of expenses on market promotion and ancillary activities.
Policy initiatives to plug supply side and infrastructure bottlenecks
• Foster development of backward linkages by evolving conducive regulatory framework for
contract and corporate farming
• The North Eastern Region, the Hilly States (J&K, HP and Western UP), the Islands (A&N,
Lakshadweep) areas in the country should be given special consideration as they are
naturally conducive for FPIs. In this direction, Zoram Mega Food Park, Mizoram’s 1st such
park was set up by MoFPI.
• Encourage commodity clusters and intensive livestock rearing.
• Promote private sector participation with well-defined roles of the participants, risk sharing
mechanisms, fiscal incentives and partnership models for creation of infrastructure for
logistics, storage and processing.
• Encourage technology up gradation of existing facilities and investment in development of
ancillary industries like research and development, packaging, food processing equipment
manufacturing, food safety certifying agencies by extending fiscal incentives to investors.
• Enable better access to credit by augmenting current cap of Rs 10 crore investments in
plant and machinery to qualify as Priority Sector Credit to accommodate the high cost
technology adoption and scale enhancement.
Streamlining the regulatory structure
• Remove impediments of multiple departments and laws in seeking approvals by bringing
them under a single window.
• Ensure uniform implementation of the APMC act to encourage private sector investment in
infrastructure development.
Change in mindset - Orienting stakeholders towards ‘demand and profit driven production'
• Participants across the agri value- chain need to shift their focus from trying to market
‘what is produced' to producing ‘processable varieties and marketable products' meeting
global quality standards and traceability requirements, duly adopting need based viable
technologies and quality controls.

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Human resource development-to meet increasing demand for skilled manpower Student Notes:
• Stimulate industry, academia and government to put in combined efforts for development
of specialized institutes and courses for providing training on managerial, safety and
enforcements, technology and production, warehousing and distribution aspects.
• Encourage State Agricultural Universities to commence courses in food packaging,
processing, bio-technology, information technology in agriculture and such allied fields.

11. A Brief SWOT Analysis of the Food Processing Industry

in India
Strengths Weaknesses Opportunities Threats
Round the year High requirement of Large crop and material Competition from
availability of raw working capital. base in the country due to global players
materials. Low availability of new, agro-ecological variability Loss of trained
Social acceptability reliable and better offers vast potential for manpower to other
of food-processing accuracy instruments food processing activities. industries and other
as an important and equipments Integration of professions due to
area and support Inadequate developments in better working
from the central automation w.r.t. contemporary technologies conditions prevailing
government. information such as electronics, there may lead to
Vast network of management. material science, computer, further shortage of
manufacturing bio-technology etc. offer manpower.
Remuneration is less
facilities all over the vast scope for rapid Rapid developments in
attractive for talent in
country. improvement and progress. contemporary and
comparison to
Vast domestic contemporary Opening of global markets requirements of the
market. disciplines. may lead to export of our industry may lead to
developed technologies and fast obsolescence.
Inadequately
facilitate generation of
developed linkages
additional income and
between R&D labs and
employment opportunities.
industry.

12. Previous Year UPSC Mains Questions

1. Explain Mega Food Park Scheme of Government, of India. 15 marks (2007)
2. India needs to strengthen measures to promote the pink revolution in food industry for
ensuring better nutrition and health. Critically elucidate the statement. 10 marks (2013)
3. What are the impediments in marketing and supply chain management in developing the
food processing industry in India? Can e-commerce help in overcoming this bottleneck?
12.5 marks (2015)
4. What are the reasons for poor acceptance of cost effective small processing unit? How the
food processing unit will be helpful to uplift the socio-economic status of poor farmers? 10
marks (2017)
5. Examine the role of supermarkets in supply chain management of fruits, vegetables and
food items. How do they eliminate number of intermediaries? 10 marks (2018)
6. Discuss the factors for localization of agro-based food processing industries of North-West
India. 10 marks (2019)
7. Elaborate the policy taken by the government of India to meet the challenges of the food
processing sector. 15 marks (2019)

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13. Previous Year Vision IAS GS Mains Test Series Student Notes:

Questions
1. “Despite continuous efforts and initiatives of the Government to provide the required
stimulus to the food processing sector, processing activity is still at a nascent stage in
India with low penetration”. In the above context, examine the challenges ailing the
food processing sector in India.

Approach:
• First give some facts about food processing activities in India and government
initiatives.
• Then bring forward the challenges faced by this industry in India.
Answer:
India is one of the world’s largest producers as well as consumer of food products. In
order to facilitate and exploit the growth potential of the sector, the government on its
part has initiated extensive reforms. Some of the key measures: amendment of the
Agriculture Produce Marketing Committee Act, rationalization of food laws,
implementation of the National Horticulture mission etc. The government has also
outlined a plan to address the low scale of processing activity in the country by setting
up the mega food parks, with integrated facilities for procurement, processing, storage
and transport. 100% FDI in the food processing & cold chain infrastructure is also
allowed.
However, despite of continual efforts and initiatives of the Government to provide the
required stimulus to the sector, processing activity is still at a nascent stage in India with
low penetration. In terms of development of the country’s total agriculture and food
produce, only 2 % is processed.
Following are the major factors hampering the growth of food processing sector:
• Inadequate Infrastructure Facilities is the biggest bottleneck in expanding the food
processing sector: long and fragmented supply chain, inadequate cold storage and
warehousing facilities, rail, road and port infrastructure. Also, lack of modern
logistics infrastructure such as logistics parks, integrated cold chain solutions, last
mile connectivity, dependence on road over rail, customized transportation,
technology adoption (barcoding, RFIDs) and government support via incentivizing
private public partnerships are some of the lacunae that exist in supply chain &
logistics sector in India.
• Absence of Comprehensive national level policy on food processing sector: The
food processing sector is governed by statues rather than a single comprehensive
policy on food processing.
• Food Safety Laws & Inconsistency in State and Central policies: Though historically
various laws were introduced to complement and supplement each other in
achieving total food sufficiency, safety and quality the result is that the food sector
in India is governed by a number of different statutes rather than a single
comprehensive enactment.
• Lack of adequate trained manpower: Many positive developments in the food
processing sector have also resulted in the apprehension about the emerging skill
shortages due to mismatch between the demand for specific skills and available
supply.
• Uncontrollable and controllable factors which affected the growth of the sector:
The uncontrollable factors include fragmentation of land holdings which has
resulted in lack of scale and has made investments in automation unviable, regional

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climatic variations which impact the production and constraints in land availability Student Notes:
due to competing pressure from urbanisation, constructions and industrialization.
While, controllable factors includes issues of quality of raw materials, low labour
productivity, with slow adoption of technology etc.
Apart from the above major challenges hampering the growth of sector, the other
identified constraints are in raw material production, taxation, access to credit,
processing plants with obsolete technologies, lack of applied research etc.

2. Explain the backward and forward linkages across the supply chain in the Food
Processing Sector. Also discuss their importance in ensuring the success of Supply
Chain Management in the Food Processing Industry of India.
Approach:
Students should focus on explaining the meaning of backward and forward linkages.
Any examples given should add to the weight of the answer. Additionally, the second
part should focus on how FPI in India lacks in proper backward and forward linkages
and improvement in this aspect would lead to overall growth of the FPI in India.
Answer:
• Forward and backward linkages mean the connectivity of the Food Processing
Industry with the market and source of raw materials respectively.
• One important linkage falling under the backward linkages is the raw material
linkage to the extent the FPI procures the raw material from the agro sector of the
country. Other important backward linkages include the demand for the capital
goods and machinery used in production, packing of the finished material.
• Some of the products of forward linkages are directly consumed by the people
whereas some products may be used as input in other industries for production of
more refined agro based products.
• For example, if one makes jams on a small scale, his backward linkage is the
infrastructure, which connects him with his source of raw fruits, and his forward
linkage is the infrastructure which connects him with the market
• The backward linkages of the production process involves searching for and
extracting raw materials. This part of the production process does not do anything
with the material itself, such as processing the material. This part of the process
simply finds and extracts the raw material. Thus, any industry that relies on the
extraction of raw materials commonly has an upstream stage in its production
process.
• The forward linkage in the production process involves processing the materials
collected into a finished product. The forward linkages further includes the actual
sale of that product to other businesses, governments or private individuals.
Forward linkages have direct contact with customers through the finished product.
Importance of forward and backward linkages
• The extent to which the FPI will generate the needed impetus for the overall
industrial development of the state will depend upon their various linkage effects.
• Companies in the processed food manufacturing space face problems on the
inbound supply chain side in terms of inconsistency of inputs quality, high level of
wastages as the product reaches the manufacturing base and unwanted cost
additions with minimal value additions.
• This is due to the long and fragmented supply chain which results in these wastages
and price escalations. This generates requirement for companies to invest in

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creating backward linkages through contract farming, which would enable the Student Notes:
company to control the inputs at an assured quality level with minimal wastages.
• Both backward and forward linkages are important for the uninterrupted
temperature and climate controlled agricultural supply chain from the farm gate to
the market. Majority of the processed foods require controlled temperature at the
point of sale.
• Coming of food processing industries with strong forward and backward linkages
will push farmers to cultivate crops as per the demand in market. With other
benefits, this will cut our heavy import of oilseeds and pulses.
• As per some estimates, strengthening of backward and forward linkages will help in
controlling the food wastage, which is estimated at over Rs 40,000 crore, and also
aids in curbing inflation.

3. Food processing industry needs a fillip in the form of better logistics, access to credit,
technology indigenisation and implementation of food safety laws. Discuss.
Approach:
• Briefly introduce the potential of food processing industry in India.
• Explain the need for the development of better logistics, access to credit,
technology indigenisation and implementation of food safety laws in order to
exploit the complete potential of food processing industry.
• The given issues can be discussed under separate headings along with the
suggestions.
Answer:
Food and food products are the biggest consumption category in India, with spending
on food accounting for nearly 21% of India’s GDP. But the overall processing level is just
10% in India whereas it has reached nearly 80% in some developed countries. Its share
in exports of processed food in world trade is just 1.5%.
Some of the major constraints to food processing industry are: inadequate logistics,
access to credit, technology indigenisation and implementation of food safety laws.
Need for better logistics
• The national highways are highly strained by low capacity and high traffic volumes,
leading to delays in transit.
• Rail freight network suffers due to lack of last mile connectivity, inefficiency, low
availability of wagons, lack of private participation etc.
• The dependence on manual labour and low technology usage affects turnaround
times at ports, including cost.
• There is an urgent need to develop dedicated freight corridors in rail, supplemented
by concretised dual carriageways for the State and national highways.
• There is a need to support development of organised strategic logistics hubs and
incentivise operators in setting up end-to-end logistics and warehousing.
Access to credit
• The Government should establish a national bank, on the lines of NABARD, or
extend the scope of NABARD, to lend credit to food processing industries.
• This will ensure speedy disbursal of funds to the food processing sector, which is
always grappling with the issue of lack of access to credit from banks.
• State governments should play a catalytic role in partnership with banks, financial
institutions, technical and management institutions and farmers’ groups, so that
small and unorganised players become globally competitive.

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Technology Indigenisation Student Notes:

• Most R&D institutions have not been able to develop innovative products,
processes and machinery of a global stature. The key reasons for this are
segregation of academics from applied research, inadequate industry interface, low
commercial orientation and lack of collaborative efforts with global peers.
• Technology is still being imported for the establishment of large-scale, exported-
oriented units for production of items such as even banana paste, concentrates of
various fruit juices, sorting, cleaning, washing, waxing and packaging of raw fruits
and vegetables.
• In order to achieve global standards and self-sufficiency there is an urgent need for
technology indigenisation in food processing industry.
Implementation of Food Safety Laws
• The Government should ensure enforcement of the Food Safety and Standards Act
(FSSA) in spirit, including increasing radically the number of trained inspectors and
state-of-the-art lab facilities.
• Given the objective of the FSSA and the mandated transparency, it is important
that: food authorities, scientific panels and scientific committees must be given
defined tasks with specified objective of rule-making; public and industry
participation at an early date.
• In order to increase the exports of processed foods, there is a need for enforcing
strict safety standards as per the global requirements. There have been many
incidents of rejection of Indian food products due to safety concerns.
The National Mission on Food Processing is an important initiative of the government,
which aims to overcome the above constraints and reap the potential of food
processing sector in India.

4. Despite numerous schemes and programmes the growth of food processing industry
has been very slow in India. In this context examine the problems with respect to
various government initiatives to boost the food processing sector in India.
Approach:
• Briefly mention the growth attained by the food processing sector.
• Mention few of the government schemes in this regard.
• Explain how it is yet performing below its potential.
• Bring out the factors that have led to limited success of these schemes.
Answer:
Accounting for about 32% of India’s total food market, the Food Processing Industry
(FPI) is ranked 5th in terms of consumption, export and expected growth. Government
has taken following initiatives for the growth of the sector:
• Till 2005, there were about 13 laws regarding FPI. Government passed Food Safety
and Standard Act, 2006 to act as a single reference point for regulation.
• Government has allowed 100% FDI in industry.
• Infrastructure Facilities: Mega Food Parks, Packaging centers, Integrated clod chain
facility, Value Added Centre, Irradiation Facilities, Modernization of Abattoir
• National Mission on Food Processing for all round development of industry.
• Reforms in APMC Act and rationalization of Food Laws.

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Because, of these efforts by the government, the industry is growing at a satisfactory Student Notes:
rate. However, it’s still well below the potential as the processing activity is still at a
nascent stage with low penetration.
Government schemes have not been adequately able to address the following
problems that arise due to inadequacy and poor implementation of reforms.
• The inadequate support infrastructure is the biggest bottleneck in expanding the
sector, in terms of both investment and exports. Long and fragmented supply chain,
inadequate cold storage and warehousing facilities, road, rail and port
infrastructure, lack of modern logistics infrastructure such as logistics parks,
integrated cold chain solutions, last mile connectivity, dependence on road over
rail, customized transportation, technology adoption (barcoding, RFIDs) are still not
addressed.
• Inconsistency in State and Central policies. In a survey done by FICCI, absence of
comprehensive national level policy on food processing sector has been identified
as the second most critical factor hampering Industry’s growth.
• Shortage of skilled, semi-skilled and unskilled workers has harmed the
competitiveness sector.
• Declining support to R&D.
• Constraints in raw material availability because of inconsistent and insufficient
supply of raw material due to seasonality of crops, poor quality of raw material
supply and high losses during transport from farm to factory.
• Lack of enthusiastic private sector participation in important schemes like Mega
Food Parks which still prefers to outsource and as a result about 50% processed
food sold by FMCGs in India is outsourced.
• Still credit is a big problem to the industry which includes farmers and micro and
small enterprises on a large scale.
• Failure to integrate land holdings and promote contract farming, which are key to
the success of industry.

5. Discuss the potential of Food Processing Industry with regards to employment

generation in India. What are the key impediments which need to be overcome before
the sector can become internationally competitive and achieve high growth?
Approach:
• Discuss the opportunities that the Food Processing Industry can offer for raising
employment.
• Key impediments that the industry is facing.
• How can it become internationally competitive and achieve high growth.
Answer:
Potential of Food Processing industry for employment generation
• The industry involves gamut of activites involved in reaching the final product to
the consumer, starting with farm activity to supply chain.
• 42 mega food parks being set up with an allocated investment of INR 98 Billion.
• The cost of skilled manpower is relatively low as compared to other countries.
• Food Processing Industry is one of the major employment intensive segments
contributing 13.04% of employment generated in all Registered Factory sector in
2012-13.

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• Food is the biggest expense for an urban and rural Indian household constituting Student Notes:
share of 38.5% and 48.6% of the total consumption expenditure of households in
2011-12 respectively.
• Favourable economic & cultural transformation, shift in attitudes & lifestyles,
consumers are experimenting with different cuisines, tastes and new brands. There
is an increase in awareness and concern for wellness and health, high protein, low
fat, wholegrain and organic food.
Impediments faced by Food Processing industry
• Fragmentation of land holdings which has made investments in automation
unviable;
• Regional climatic variations which impact the production ; and the constraints in
land availability due to competing pressure from urbanization.
• Slow adoption of technology, waste related problems, low levels of value addition.
• High requirement for working capital.
• Low availability of new, reliable and better accuracy instruments and equipments.
• Inadequate automation w.r.t. information management.
• Remuneration is less attractive for talent in comparison to contemporary
disciplines.
• Inadequately developed linkages between R&D labs and industry.
Food Processing industry can reach its potential with both Government and Private
Sector initiative. The industry can create millions of jobs, ensure food security and
reduce wastage.

6. Food safety laws are a critical factor hampering the growth of food processing
industry in India. Analyse.
Approach:
• Highlight the issues with the Food Safety Laws and rules.
• Discuss how it has negatively impacted the industry.
• Suggest some remedial measures.
Answer:
In 2006, Food Safety and Standards Act (FSSA) was passed with twin objectives of
introducing a single statutory body relating to food and providing for a scientific
development of food processing industry. It replaced multiple laws existing for the
sector. However, a recent survey by FICCI has identified implementation bottlenecks in
food safety laws as the third critical area of concern for food processing sector.
Some of the important limitations are:
• Slack implementation of Act.
• Ill trained and understaffed FSSAI personnel.
• Majority of laboratories in India do not have accreditation, and only few
laboratories are fully equipped to cater domestic and export regulatory testing
needs of food industry.
• Act extends its jurisdiction to all persons by whom food business is carried or
owned under the definition of Food Business Operators, which is a huge base to
cover.
• Onus of contamination lies with the manufacturer. However, most of the times they
don’t have control over raw food which is bought from outside and may be
contaminated.

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 As a result, checks are not done or done with much delay and red tape. The regulations Student Notes:
have resulted in arbitrary rulings, discouraging industry investors. Lack of uniform and
accurate food security apparatus in place puts industry in the line of litigations. The
recent controversy related to standards in Maggi and different results from different
labs for the same product does not augur well for the industry.
Hence, the need of the hour is to strengthen the implementation of the Act and ensure:
• Manpower development and up gradation of laboratories in terms of infrastructure
and sophisticated equipment.
• Setting up of state-of-the-art advanced centers of excellence to undertake
analytical research work to cater to requirements of industries, policy makers,
regulators and consumers.
• Residue-monitoring plans for determining presence of toxic contaminants.
• Collaborative effort between Centre, states and private sector along with effective
consumer awareness.
• Encouraging contract farming so that industry can maintain its own raw material
standards without blame shifting.
All this will help in attaining global standards in food safety and make the sector an
attractive destination for entrepreneurs.

7. Discuss the significance of food processing industry in the economic development of

the country and the challenges which need to be tackled for sustained growth of the
industry. Also elaborate on the salient features of National Mission on Food
Processing.
Approach:
• Discuss the significance and the underlying challenges related to food processing
industry in India.
• Mention the highlights of the NMFP.
Answer:
The Food Processing Industry (FPI) in India is significant due to abundance of food
production, presence of diverse agro-climatic regions, large proportion of manpower
engaged in agriculture, low cost of processing, labour intensive nature and Its potential
to boost exports.
At the same time Government’s initiative to make India a Global Food Factory and
Global Food Market brings immense opportunities for food processing sector. Other
factors include:
• It contributes around 14 per cent of manufacturing GDP, 13 per cent of India’s
exports and six per cent of total industrial investment. It is a sunrise industry, with
double-digit growth rate globally. It has more than 10% growth rate in India.
• A developed FPI can help in achieving favourable terms of trade for Indian
agriculture both in the domestic and international markets.
• Enhance nation's food security.
• It will help farmers get better prices for their produce, thus improving their income
levels. It will stabilise prices by creating an assured demand for agricultural
produce. It will also eliminate undue advantage currently accruing to middlemen at
the cost of farmer’s remuneration.
• It will lead to efficient utilization of food resources of the country. India witnesses
nearly 4-18% wastage in fruits and vegetables annually, due to lack of modern

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 harvesting technologies and cold chain infrastructure. The wastage levels in other Student Notes:
perishables are also significantly high.
• It will help develop vital linkages between the two pillars of our economy- industry
and agriculture.
• Huge potential for skilled and semi skilled employment generation.
However the sector faces a number of challenges:
• Supply side bottlenecks:
o Small and dispersed marketable surplus due to fragmented holdings
o Low farm productivity
o Low level of linkage between the industry and the farmers for the raw materials
o High seasonality
o Indian agriculture focuses on traditional crops rather commercial crops desired
by the market
• Infrastructure bottlenecks:
o Inadequate cold chain infrastructure and inadequate logistics
• Deficiencies in the regulatory environment:
o Multiplicity of laws and rules which leads to contradictions and delays
o Absence of a comprehensive National Policy on food processing for a long time
o Delays in Commissioning of Food Processing Projects, obtaining Licenses/
Statutory Clearances, pending reforms in APMC act by State governments etc.
• Low Research & Development
The National Mission on Food Processing
“National Mission on Food Processing” was launched during the 12th five year plan to
cater the different aspects of food processing industry viz. modernization of food
processing industries, establishing of mega food parks, integrated cold chains and
preservation and modernization of abattoirs. It addresses both institutional and
infrastructural gaps along the value chains. It also has provision for promoting skill
development, training and entrepreneurship in post-harvest management. Broadly, it
aims to:
• enhance the capacity of food processing through new technologies
• improve the quality of food products as per international standards
• reduce wastage of agricultural produce
• infuse new technologies
• upgrade human resource capacities
Recently, the Government of India has provided flexibility to state governments to set
their own physical targets and identify focus areas to harness the potential of value
addition by using locally grown raw material.

8. To harness the full potential of the food sector, the Ministry of Food Processing
Industries has launched various schemes in the last few years. Mention some of them
and evaluate how successfully they have been able to create modern infrastructure to
facilitate food processing and cold chain systems.
Approach:
Straight forward question. Mention and evaluate the schemes launched by the Ministry
of Food Processing Industries to modernize the infrastructure in the food processing
sector.

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Answer: Student Notes:
To harness the full potential of the food sector, the Ministry of Food Processing
Industries has launched various schemes over the last few years. The focus of these
schemes has been on creation of modern infrastructure to facilitate growth of food
processing and cold chain system for handling perishable produce. More specifically,
these schemes relate to the setting up of mega food parks; integrated cold chains, value
addition and preservation infrastructure; and modernization of abattoirs.
• Mega Food Parks Scheme
The Mega Food Parks Scheme (MFPS), a flagship programme in the food processing
sector, facilitates establishment of a strong infrastructure backed by an efficient supply
chain. The Mega Food Parks have farm proximate facilities such as primary processing
centers, collection centers and a central processing center. The food processing units
within a Mega Food Park use common infrastructure required for processing,
packaging, quality control labs, trade facilitation center etc. This cluster approach
makes food processing more economically viable. The state-of-the art processing
infrastructure gives them the required technical edge. Mega Food parks have the
potential to revive the agriculture in the surrounding areas by increasing returns for
farmers, besides creating large employment opportunities in rural areas.
• Scheme for Cold Chain, Value Addition and Preservation Infrastructure
The objective of the scheme is to facilitate creation of integrated cold chain and
preservation infrastructure facilities without any break from farm to consumer. It
intends to address the shortage of cold storage capacity.
• Modernization of Abattoirs
The objective is modernize existing abattoirs or establish modern abattoirs promoting
scientific and hygienic slaughtering, application of modern technology for waste
management, better by product utilization, provision of chilling facility, retail cold chain
management etc.
These three schemes, which were launched with the objectives of value addition and
reduction in wastages in the 11th FYP are in different stages of implementation. They
are expected to lead to substantive value addition, reduction in wastage and
enhancement in farmer’s income. They also envisage taking due care of smaller states
and left out regions. However their achievement in the long run depends upon a
number of actions that are required to be performed by various other
departments/agencies.
A number of other initiatives, like the Food Safety and Standard Act 2006, FDI in food
processing sector, Schemes for Technology Upgradation/Establishment/Modernization
of Food processing Industries, Quality Assurance, Codex Standards and R&D and
Development and Promotional Activities and sector specific schemes, among others
have also been launched in the past few years. The food processing sector has
responded well to these and other schemes. The average growth doubled from 7% in
2004 to 14% in 2010. The Vision 2015 Document has set the goal of tripling the size of
the processed food sector. Apart from the schemes that are already under operation in
the sector, some more are in the pipeline. These schemes, coupled with other flagship
programmes in agriculture and allied sectors, are expected to change the face of rural
India and add prosperity to the life of the common man.

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9. What are Mega Food Parks? Explain the ‘Hub and Spoke’ model associated with it. Student Notes:
Approach:
Write down what are Mega Food Parks and how they will be established using Hub and
Spoke model.
Answer:
The primary objective of Mega Food Parks Scheme (MFPS) is to provide excellent
infrastructure for food processing sector along the value chain, especially for
perishables like fruits and vegetables. This is aimed at making food processing
economically more viable and generate large employment opportunities, particularly in
rural areas. The Scheme is designed to bring farmers, processors and retailers (market)
together so as to ensure maximization of value addition, minimize wastages and
improve farmers’ income.
The Scheme envisages a cluster-based approach and “Hub and Spoke” Model
comprising farm proximate facilities such as Collection Centres, Primary Processing
Centers (PPC) and a Central Processing Centre (CPC). The food processing units are to
be located at CPC with need based Core Processing facilities (modern storage,
processing, packaging, safety standards etc.) and Basic Enabling Infrastructure (captive
power plant, effluent treatment facilities etc.). However, as the Mega Food Parks are
demand driven and are based on cluster approach, the size, structure and facilities
within the Parks may vary depending on region, product-mix and overall business plan
of the promoters.

10. What is the role of forward and backward integration in ensuring success of Supply
Chain Management in the Indian Food Processing industry?
Approach:
First explain what is forward (FWD) linkage and backward (BWD) linkage w.r.t. supply
chain in Indian Food Processing industry. Illustrate how an efficient FWD and BWD
linkages are necessary for an effective supply chain management.
Answer:
The success of Food processing industry depends on an efficient supply management
system which tries to optimize supply chain system by getting right things to right place
at right time in a cost effective manner. To achieve these efficiencies the role of forward

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 and backward integration is most important. The different stages in supply chain system Student Notes:
of food processing are as following:

The existing institutions like local bodies, cooperatives and self- help groups as well as
new concept such as contact farming and cooperative farming can be utilized to
strengthen the backward linkages. For example, the experience of Pepsi foods for its
tomato processing plant in Hoshiarpur in Punjab.
On the other hand, Forward integration is a part of supply chain in which the food
processing company expands its activities in downstream areas i.e. marketing for fresh
and processed products to get more control over sales, consumer contacts and
eliminate any middleman if any to provide maximum benefit to the customer. For
example, Rythu Bazar in Andhra Pradesh is one of the most successful models of direct
agricultural marketing in the country. Rythu Bazars provide facilities to farmers for
selling their produce directly to consumers under a proper administrative system and
government protection.

11. What do you mean by Upstream and Downstream requirements in the Food
Processing industry? Also, explain the importance of Supply Chain Management in the
Food Processing Industry.
Approach:
• Define upstream and downstream in food processing industry.
• Elaborate on the upstream and downstream requirements.
• Define Supply Chain Management and explain its importance.
Answer:
The complete framework from storage of raw materials, inventory and finished goods
from point of origin to point of consumption process of movement of material consists
of two stages, namely upstream and downstream.

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 Requirements of Upstream in Food processing industry: Student Notes:
• Accessibility to raw materials is the first upstream requirement for any industry.
• The food processing industry also requires modern extraction techniques.
• To make the food processing industry sustainable, it is important to ensure good
linkages with farmers.
• The storage facilities for raw materials like Grains, Meat, Fish etc. are important
part of food processing upstream requirements.
• Food processing industry also requires good quality testing facilities.
• Transport facilities are essential part of upstream requirements of food processing
industry in India.
• The food industry also requires a sizable amount of work force.
Requirements of Downstream in Food processing industry:
• The downstream stage in the production process involves processing of the
materials collected during the upstream stage into a finished product.
• The downstream stage also includes the actual sale of product to customers like
businesses, governments or individuals. Since, downstream processing has direct
contact with customers through the finished product; it requires a large work force.
Importance of Supply chain Management-:
Supply chain management spans all movement and storage of raw materials, work-in-
process inventory, and finished goods from point of origin to point of consumption.
Good supply chain links helps farmers, manufactures, wholesalers, retailers and
consumers. Importance for different stakeholders is:
For Farmers:
• Makes it easier for farmers to sell their goods at better prices
• Facilitates investment in agriculture
• Results in use of new technologies to increase productivity
• Results in creation of rural infrastructure
For Consumers:
• Availability of healthy, nutritious food material
• Avoidance from inflationary pressures
• Access to varieties of processed food
For Industries:
• Easy access to raw materials
• Quality controls and regulations
• Healthy competition
India can become the food supplier of the world. The food processing industry has an
important role to play in linking farmers to the final consumers in the domestic as well
as the international markets. Supply chain management is critical in achieving that goal.

12. What is a sunrise industry? Elaborate on the potential of these industries in India with
a special focus on the food processing industry.
Approach:
• Explain the term sunrise industry and give a few examples of such industries in
India

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 • Discuss the potential of these industries in India. Student Notes:
• Elaborate on the food processing in India, its contribution and its growth prospects
• List a few initiatives taken by the government to give impetus to the food
processing industry.
Answer:
A sunrise industry is an emerging industry that is looked upon as a favourable
investment venture by investors. Sunrise industries are deemed as engines of future
economic growth due to their steadily rising generation of employment and profit
prospects. Proliferation of these industries will lead to product diversification and
reduced costs due to backward and forward linkages
India is expected to continue on a path of economic expansion and these industries in
several sectors such as food processing, fisheries, tourism will benefit from increased
investment and liberalization of government policies.
Food Processing Industry in India:
• Food processing industry accounts for 32 per cent of India’s total food market, one
of the largest industries in India and is ranked fifth in terms of production,
consumption, export and expected growth.
• It contributes around 14% of manufacturing GDP, 13% India’s exports and 6% of
total industrial investment.
• The high potential of food processing industry in India is due to following factors:
o Provides linkages between agriculture and manufacturing
o Packaged food in busy life
o Reduce food wastage
o To promote crop diversification
o Increased export earnings
o Will curb food inflation
• Even with such high potential issues like supply side limitations, infrastructure
bottlenecks, issues associated with regulatory environment remains. To tackle
these issues government has taken various initiatives. For example:
o National Mission for food processing
o Allocation of Rs 1,500 crore and announcement of 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
o Setting up mega food parks
o 100% FDI in trading of food products, including through e-commerce, among
others.
o Modernization of abattoir
o Integrated cold chain

13. Enumerating the features of Pradhan Mantri Kisan Sampada Yojana, discuss its
potential for the growth of food processing sector in the country.
Approach:
• Highlight the importance of food processing sector.
• Enumerate the features of Pradhan Mantri Kisan Sampada Yojana.
• Discuss its potential for the growth of food processing sector in the country.

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Answer: Student Notes:
Food Processing Sector has emerged as an important segment of the Indian economy in
terms of its contribution to GDP, employment and investment. During 2015-16, the
sector constituted as much as 9.1 and 8.6 per cent of GVA in Manufacturing and
Agriculture sector respectively.
Recognizing its importance, Ministry of Food Processing Industries launched Pradhan
Mantri Kisan SAMPADA Yojana (Scheme for Agro-Marine Processing and Development
of Agro-Processing Clusters) for the period 2016-20. It is is expected to leverage huge
investment, benefit 20 lakh farmers and generate 5 lakh direct/ indirect employment in
the country by the year 2019-20. The whole objective is to supplement agriculture,
modernize processing and decrease agri-waste.
Components of PMKSY:
• Mega Food Parks: Create modern infrastructure facilities for food processing along
the value chain from farm to market with strong forward and backward linkages
through a cluster-based approach.
• Integrated Cold Chain and Value Addition Infrastructure: Provide integrated cold
chain, preservation and value addition infrastructure facilities without any break in
order to reduce post-harvest losses of horticulture and non-horticulture agri-
produce.
• Creation / Expansion of Food Processing & Preservation Capacities:
Modernisation/ expansion of existing food processing units with a view to
increasing the level of processing, value addition
• Infrastructure for Agro-processing Clusters: Development of modern infrastructure
and common facilities to encourage group of entrepreneurs to set up food
processing units based on cluster approach.
• Creation of Backward and Forward Linkages: Plugging the gaps in supply chain in
terms of availability of raw material and linkages with the market
• Food Safety and Quality Assurance Infrastructure: Adhering to Total Quality
Management (TQM); meeting the stringent parameters prescribed by the food
safety regulator etc.
• Human Resources and Institutions: Improving research & development,
undertaking promotional Activities, skill development, strengthening of Institutions
etc.
Potential for growth of food processing sector
The major challenges in food processing sector lie in poor linkages and supply chain as
well as technological applications. Also, sanitary and phytosanitary regulations hamper
the access to export market. The PM Kisan Sampada Yojana addresses these crucial
bottlenecks, because of which the potential is far from being realized.
Moreover, in the event of people leaving farming as a livelihood activity, food
processing sector has the potential to create those jobs where such released
agricultural labour can be gainfully employed.
Thus, it is a comprehensive package which will result in creation of modern
infrastructure with efficient supply chain management from farm gate to retail outlet. It
will not only provide a big boost to the growth of food processing sector in the country
but also help in providing better returns to farmers and is a big step towards doubling
of farmers income. It will create huge employment opportunities especially in the rural
areas, reducing wastage of agricultural produce, increasing the processing level and
enhancing the export of the processed foods.

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14. Contract farming can help in the expansion of organized food processing industry in Student Notes:
India by strengthening backward linkages. Comment. What changes are required in
the existing regulatory structure to address issues related to contract farming in
India?
Approach:
• Briefly define contract farming.
• Discuss the significance of contract farming for food processing industry.
• Discuss the existing regulatory structure.
• Suggest the changes required to facilitate contract farming.
Answer:
Under contract farming, agricultural production is effectuated on the basis of a pre-
harvest agreement between buyers, such as food processing units and exporters, and
producers, such as farmers or farmer producer organizations (FPOs). The contracts
minimize market risk for the producer as he has the agreement to sell the required
quantity at a pre-determined price. The buyer benefits as it is ensured of the raw
material of desired quality and required quantity. .
Significance of contract farming for food processing
• India is endowed with wide variety of agro-climatic conditions producing diverse
crops in different seasons. Contract farming harnesses this advantage by linking
farms to food processing sector in regular and planned manner. It links Indian
farmers to global supply chains.
• It makes farming an organised activity and help in improving quality and quantity of
production.
• It ensures a fix source of income for majority of Indian farmers who are small and
marginalized.
• It reduces the risk for the producer against risk of fluctuating market price and
demand, while buyer can reduce the risk of non-availability of quality produce.
Issues with current regulatory structure
Since contracts are typically made between large multinationals as buyers and small
farmers as producers, there is an inherent inequality. Also, violation of contracts has
relatively little cost to the company but may be catastrophic for the farmer. Situations
like these arise because of weak regulatory and enforcement mechanism.
• Discrediting role of Agricultural Produce Market Committees (APMCs) as
registration and dispute settlement authorities, in most states.
• Provisions of stockholding limits under Essential Commodities Act that restrict
buyers from entering into contracts.
• Placement of “contract” in the Concurrent List, and ‘agriculture’ in the State List of
the Constitution that complicates enforcement.
• Inadequate mechanisms for quick disposal of contract-related disputes.
Measures needed
Considering the above issues, the government has come up with draft Model Contract
Farming Act, 2018 which contains the following provisions:
• Contract farming to be outside APMCs’ supervision.
• Dedicated dispute settlement mechanism for quick disposal of disputes.
• Price protection to farmers, and penalizing provisions for breach of contract from
either side.

DELHI JAIPUR PUNE HYDERABAD AHMEDABAD LUCKNOW CHANDIGARH

35 www.visionias.in # 8468022022 ©Vision IAS
 • Bar on transfer of ownership of farmer’s land to the contracting companies to Student Notes:
protect farmers.
• Non-application of stockholding limits on agricultural produce purchased under
contract farming.
Though the new draft Act tries to overcome many shortcomings, it is important to
realize that the core problem of Indian agriculture is the nature of its marketing
structure. Thus, the Act should be complimented by marketing reforms, which will
generate a huge amount of backward integration.

15. Highlighting the potential of micro and small enterprises in the food processing
sector, enumerate the challenges that they face. In this regard, discuss the
importance of the Scheme for Formalisation of Micro Food Processing Enterprises
(FME).
Approach:
• State the potential of micro and small enterprises in the food processing sector.
• List the challenges faced by the micro and small enterprises in the food processing
sector.
• Explain the significance of the Scheme for Formalisation of Micro Food Processing
Enterprises (FME) in this regard.
• Conclude accordingly.
Answer:
Micro and small enterprises constitute an important component of the food processing
sector. They constitute almost 98% of the sector and 66 per cent amongst them are
based in rural areas.
These units account for 74% of employment in the food processing sector. Moreover,
the micro food processing sector has the potential to generate an additional 9 lakh
skilled and semi-skilled jobs. The importance of micro food enterprises also lies in its
contribution to increase in exports and GDP, and inclusive growth. Strengthening
micro and small food enterprises will lead to reduction in food wastage, creation of off-
farm job opportunities, and aid in achieving the overarching objective of doubling
farmers' income.
Challenges faced by micro and small food processing sector:
• Credit related issues: Due to high cost of institutional credit, the sector is largely
dependent on informal sources for funding. Lack of sufficient collateral and high
working capital needs hinder the expansion plans.
• Lack of access to modern technology: Due to their unorganised nature, the micro
and small food enterprises lack access to new technology and innovation.
• Lack of forward linkages: It leads to low outreach and non-availability of newer
markets.
• Compliance with health and safety standards: The need for such compliance
results in rising costs for the small enterprises. On the other hand, low quality
products impact export competitiveness.
• Inadequate infrastructure: A lot of produce from the farm gate is lost due to
inadequate cold chain infrastructure as well as logistics infrastructure, which
predominantly rely on traditional modes.
• Ease of Doing Business: Government procedures and rules for establishing new
units often lead to delays in getting clearances.

DELHI JAIPUR PUNE HYDERABAD AHMEDABAD LUCKNOW CHANDIGARH

36 www.visionias.in # 8468022022 ©Vision IAS
 Keeping in mind the above identified issues and at the same time promote the vision of Student Notes:
‘Vocal for Local’, Scheme for Formalisation of Micro Food Enterprises has been
launched by the government. This will help micro food processing enterprises become
more competitive and enable economies of scale across the production value chain.
The scheme is important in the following ways:
• One District One Product (ODOP) Approach: It adopts a cluster-based approach
across states to reap benefits of scale in terms of procurement of inputs, availing
common services and marketing of products.
• Strengthening capacities of support systems: It will leverage the collective strength
of FPOs, SHGs, Cooperatives and existing FP enterprises in the unorganized sector
by:
o Skill training, seed capital to SHGs for loan to members for working capital and
small tools,
o Grant for backward/forward linkages, common infrastructure, packaging,
marketing and branding.
• Increase in access to credit: It envisages increased access to credit by existing micro
food processing entrepreneurs, women entrepreneurs and entrepreneurs in the
Aspirational Districts.
• Infrastructural development: Support will be provided through credit linked capital
subsidy for development of common infrastructure including common processing
facility, lab, warehouse, etc.
• Enhanced compliance with food quality and safety standards: The scheme aims to
help nearly two lakh unorganised micro-food enterprises achieve technical
upgradation in line with FSSAI's standards as well give them marketing and
branding support.
• Focus on perishables: It extends Operation Greens Scheme to include all fruits and
vegetables for better price realisation for farmers and reduction in wastage.
By adopting a convergence framework, this scheme makes an attempt to fill in the
gaps, where support is not available from other sources, especially for capital
investment, handholding support, training and common infrastructure.

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