“food processing & agribusiness- transforming india” Plenary session: -The indian share of the global food market
Ground reality – a study in contrast
Second highest producer of milk
Organized dairy accounts for only 13% of milk produced
Only 70,000 Ton cold storage capacity for 90 million Tones produced
Poor yield per cow
Second largest cattle population
5500 registered & 25770 unregistered slaughter house with no chilling, freezing & cold storage facility as hot meat market prevails
Ground reality
Fifth largest producer of eggs
Poultry meat sold as hot in retail market
Sixth largest producer of fish
20 – 30% damage and no cold storage facility in WB, AP, Goa
Low processing
2.20 % in fruits
35 % in milk
6 % in poultry
Value addition – 20%
India’s current share in world trade of processed foods – 1.60 %
Poor lab to land transfer of technology and adoption of new varieties. example of pineapple
Ground reality
Market surplus of fruits & vegetables – 88%
Farmer sells immediately due to perishability & absence of proper infrastructure to keep it for longer period
Post Harvest wastage of fruits & vegetables – 25 to 35% valued at over Rs 45,000 crore
Losses as above in India is more than consumption of same in UK
Market surplus of food grains– 60%
Farmer keeps some for own consumption, seed purpose and to give to labour as wages
Loss in above equal to annual food grain production in Australia
Cost of wastage 6 times amount spent on food subsidy
Farm gate price 25% of domestic consumer retail price against 50% in developed countries
Story of Fyffee PLc - in Banana Handling and Processing on the ships before final destination of selling.
Key Drivers – To be a Global Agri Super Power
Role of Key Drivers
Is India Ready to be a Global Power?
Challenges And Strategy For Future …. Food processing
Utilisation of scarce resources – MORE CROP PER DROP, power etc
Varying taste preference within the country
Increasing International Competition
Non tariff barriers
Integrated Food law to remove multiplicity of food laws & regulatory agencies
Challenges
Low level of value addition
Bottle necks in cold storage including during transit
Seasonality – capacity utilization issues e.g. Himachal apples 2006-07 prod was half of 2005-06
Non Efficient storage/warehousing, processing & marketing techniques
Non adoption of efficient technology
Infrastructure and others
Shortage of power
High electricity tariff
Low area under Irrigation
High capital cost -Inadequate institutional finance at low rates
High insurance premium in risk coverage
Farm connectivity by road yet to take off
Challenges
Quality and consistency at grass root levels
Inputs delivery not in time
Innumerable varieties
Poor procurement and logistics
Lack of cheap and timely credit
Weak and ineffective supply chain
Non professional management
Low revenue rentals
Non Efficient and competitive retailing
High wastage
Agri supply chain – a comparison with Developed countries
Challenges - Hurdles towards Value addition
Wide disparity between peak & lean period arrivals usually ranging from 100 – 150%
Long revenue cycle as products to be purchased in bulk during peak season
Control of markets by few traders and agents who command large storage capacity
Discouragement of farmer – lower returns act as disincentive
Crashing of prices during peak season
Larger intermediaries exerts negative pressure on farmer margin, and deteriorates quality due to multiple handling
Bottle-necks in Cold storage & Processing industry
Higher Tax duties including on packaging material
Lower capacity utilisation
Role of cold storage etc – current utilisation 48% of capacity
5100 units with 216 lakh MT capacity
Non adoptive of cost effective technology
High working capital requirement
High cost of finance
Infrastructural constraints
Dependence on intermediaries – inadequate farmer – processor linkages
India A land of opportunities
52% cultivable land as against 11% world wide
Unsurpassed Natural Advantages
All the 15 major climates of the world
46 out of the 60 soil types
17% animal, 12% plant and 10% fish genetic resource of the world Food processing sector ranks fifth in terms of contribution to GDP
Indian urban food market estimated at 350,000 crore
Estimated investment in Food processing sector during 11th plan – 1 lakh crore
Road to Evergreen revolution …….
Horticulture crops – Fruits vegetables and flowers cover 7% of cropped area of the country
India ranks First in production of mango (65% of world) Bananas (11% of world) and papayas
India ranks Second in production of Lime and lemon
Exports quantity increased 4 times & value 10 times in last 15 years
Move to invest in 10 mega food parks in the country
Indian food processing industry averaging a growth of 10%
Can India be a sourcing hub for food products?
Good governance
Strong, Stable and reform oriented government
WTO signatory
Strong economy comparatively resilient to the current economic crisis
Focus on improving the Road connectivity
Vision to solve the power situation – Nuclear energy
Improving relationship with neighboring countries and a more important role in the WORLD ORDER
Focus on agriculture & rural sector
Has a Strong agriculture base
Increased out lay for rural spend
Rural economy to be give the next big push to GDP
Annual rural income to increase from 2.8% to 3.6% over next 2 years
Indian growth story …….
Strong Corporate leadership
Indian is already …….
IT Hub of the world
Auto and auto ancillary hub to the world
Telecom hub
Acquiring global companies
India managers at the Helm of many Fortune 500 companies
Impetus by Govt
Included in the list of Priority sector lending by banks since 1999
Most of processed food Exempted from purview of licensing under the industries (Development & regulation) Act, 1951, except items reserved for small scale sector & alcoholic beverages
Excise duty for processed fruits & vegetables, food mixes etc. – NIL
Excise duty on reefer vans reduced from 16 to 8%
Reduction in customs duty on food processing machinery
Tax breaks
Move towards GST
Towards being the 5th largest consumer market by 2025
Large young earning population
50% of population under 25 years of age
Ready to experiment and try out new products
Increase in number of upper middle class & middle class by 159 % & 63 % respectively
Urban population projected at 40% by 2020
Middle class of 200 – 250 million spread across the country to increase to 580 million by 2025
Dual income households
Higher disposable incomes
Ready to try out value added products
Reduction of wastage /spoilage to be tackled on a war footing
Accelerated establishment of cold chain networks
Irradiation facilities and pest free warehouses
Encourage SSI units and corporate to set up food processing units
Improvement of productivity – both land and manpower
Example the case of Rubber where India has the highest land productivity in the world
Change in cultivation practices such as irrigation for paddy rather than method of flooding the fields
Price stability
Make farming remunerative to attract talent and retain farmer interest
Incentives to Corporate to enter core farming – land ceiling restrictions