[Solved] Elaborate the policy taken by the Government of India to meet the challenges of the food processing sector (UPSC GS-3 Mains 2019)

Almost more than 60% of the India’s population is directly or indirectly dependent upon agriculture and allied activities, but contributes only for about 17% of the GDP. For a country like India which has a vast population to feed and maximum workforce is dependent on agriculture, it becomes imperative to increase /policy/

 productivity in this sector. Food Processing sector is one of the sectors which can increase the quality of the produce and increase its value. For it, government of India brought numerous initiatives.

 Scope of food processing industry in India:

  • As per an estimate, India’s current food processing industry is estimated at USD 130 Billion and expected to attract huge domestic and foreign investment.
  • Some of the key factors which are likely to increase the demand for processed food and consequently the food processing industry in the coming years are – India is a country of over 1.25 billion population.
  • With rising middle class having a considerable disposable income, the domestic market offers 1.25 billion opportunities for the sector./policy/
  • India ranks no 1 in the world in the production of milk, ghee, ginger, bananas, 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.
  • Due to rapid urbanization, food habits are changing rapidly towards value-added foods. The change is accentuated by the fact that over 65% of India’s population is 35 or under, who are inclined to have processed food.
  • Next to China, India is among the fastest growing economies in the world. The recent quantum jump in the ease of doing business ranking of the World Bank (from 130 to 100) indicates the conducive business climate in the country and expected to attract foreign investment into this sector.
  • As per an estimate, around 40 percent of total food production is wasted due to the inadequate facilities for transportation, storage, processing and marketing. If these deficiencies are addressed, there is a huge scope for the development of the sector./policy/
  • Government has initiated the following measures for the development of the food processing sector: Mega Food Parks: Under this scheme, government provides capital grants of 50% for all states and 75%to special status states. Since its inception, 42 mega parks were given in-principle approvals.
  • However, only five projects have started operations, including the North East Mega Food Park in Assam. Hence it can’t be called a proper success. Whereas, its predecessor Food park scheme was quite successful.
  • Pt. Deen Dayal Upadhayay Vigyan Gram Sankul Pariyojana: This scheme was launched specially for remote villages of Uttarakhand where transportation was difficult.
  • The areas selected under these clusters will process and add value to milk, honey, horticulture and local crops, herbal tea, mushroom, forest produce, medicinal & aromatic plants and traditional craft and handloom.
  • This project will also ensure, stringent product and process control interventions for energy and water conservation. Including all processing sector under one scheme
  • ‘SAMPADA’: Scheme for Agro-Marine Processing and Development of Agro-Processing Clusters (SAMPADA) is an umbrella scheme for processing industries for administrative convenience.
  • It aims to Integrate Cold Chain and Value Addition Infrastructure, Food Safety and Quality Assurance Infrastructure, etc. and also new schemes like Infrastructure for Agro-processing Clusters, Creation of Backward and Forward Linkages, Creation / Expansion of Food Processing & Preservation Capacities./policy/
  • Pradhan Mantri Kisan Sampada Yojana (PMKSY):It is an umbrella scheme that incorporates various ongoing schemes like Mega Food Parks, Integrated Cold Chain, Value Addition Infrastructure, Food Safety and Quality Assurance Infrastructure, Infrastructure for Agro-processing Clusters, Creation of Backward and Forward Linkages and Creation and Expansion of Food Processing and Preservation Capacities.
  • Mega Food Parks Scheme: It aims at providing a mechanism to link agricultural production to the market by bringing together farmers, processors and retailers to maximise value addition, minimising wastage, increasing farmers’ income and creating employment opportunities particularly in the rural sector. A Mega Food Park entails an area of a minimum of 50 acres and works in a cluster based approach based on a hub and spokes model.
  • Scheme of Cold Chain, Value Addition and Preservation Infrastructure: The objective of the scheme is to provide integrated cold chain and preservation infrastructure facilities, without any break, from the farm gate to the consumer. It covers pre-cooling facilities at production sites, reefer vans, mobile cooling units as well as value addition centres.
  • Modernisation of Abattoirs scheme: The main objective of the Scheme is a creation of processing and preservation capacities and modernisation and expansion of existing food processing units with a view to increasing the level of processing, value addition leading to reduction of wastage.
  • Make In India: As part of the Make In India campaign, food processing sector was identified as one of the 25 focus areas. Accordingly, the policy ecosystem has been revamped to attract financial, technological and human resources into the sector. Allowing 100% FDI through automatic route into this sector is also a significant step in this direction.
  • Food Processing Fund: A special fund in the NABARD worth Rs. 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. /policy/

 Challenges in Food Processing Sector:

  • Supply-side bottlenecks: Small and dispersed marketable surplus due to fragmented holdings, low farm productivity, high seasonality, perishability, and intermediation result in lack of distribution on supply and quality, and in turn, impede processing and exports.
  • Deficiencies in the regulatory environment: There is a lack of integration & clarity. Numerous laws, under the jurisdiction of different ministries and departments, govern food safety and packaging. The multiplicity of legislation leads to contradictions.
  • Lack of comprehensive policy: Lack of a comprehensive policy addressing the various needs of the food processing industry is obstructing its growth.
  • Lack of adequate infrastructure: Lack of cold storage facilities and road and rail connectivity to hinterlands is still a major concern.
  • Credit facilities: Despite the creation of the  Food Processing Fund over a couple of years ago, the sector has been facing a resource crunch. Though the foreign investment has picked up now, it still doesn’t match the requirements of the industry.
  • Lack of Holistic Approach: This can be credited to the absence of vital peripheral infrastructural linkages and legislation for contract and corporate farming, inadequate implementation of the APMC Act and cumbersome procedures to avail grants.
  • Measures that were taken by the Government:
  • PM Kisan SAMPADA Yojana is an Rs. 6000 crore umbrella scheme incorporating ongoing and new schemes of the Ministry of food processing and industry. Some important schemes under SAMPADA yojana: Mega food parks: consist of supply chain infrastructure including collection centers, primary processing centers, central processing centers, and food processing units.
  • Cold chain: the creation of the infrastructure facility along the entire supply chain ( pre-cooling, weighing, sorting, grading, waxing facilities, mobile cooler vans, etc.,) Scheme for Creation of Backward and Forward Linkages:  to perishable horticulture and non-horticulture produced by plugging the gaps in the supply chain in terms of availability of raw material and linkages with the market.

 Infrastructure for agro-processing based on cluster approach

  • The National Agricultural Market (eNam) which creates a pan India market facilitates removal of intermediaries, thereby streamlining the entire supply chain.
  • The new Contract Farming Act  further helps in improving the backward and forward  integration of the supply chain Electronic Negotiable Warehouse Receipt (e-NWR) System to facilitate an easy pledge financing by banks and other financial institutions Inclusion of food processing and agro-warehousing under priority sector lending by RBI
  • The Logistics challenge of the supply chain is being taken care of by leveraging the existing PM-Gram Sadak yojana, BHARATMALA, and SAGARMALA schemes Promotion of Agri Export Zones, one-time capital grants, etc.are being undertaken. 100% FDI in this sector.policyThe National Agricultural Market (eNam) which creates a pan India market facilitates removal of intermediaries, thereby streamlining the entire supply chain.
  • The new Contract Farming Act  further helps in improving the backward and forward  integration of the supply chain Electronic Negotiable Warehouse Receipt (e-NWR) System to facilitate an easy pledge financing by banks and other financial institutions Inclusion of food processing and agro-warehousing under priority sector lending by RBI
  • The Logistics challenge of the supply chain is being taken care of by leveraging the existing PM-Gram Sadak yojana, BHARATMALA, and SAGARMALA schemes Promotion of Agri Export Zones, one-time capital grants, etc.are being undertaken. 100% FDI in this sector./policy/

Conclusion:

 Apart from it there is constant urge of government to develop milk processing units through Dairy Development and Infrastructure fund. These steps are necessary to achieve the government’s aim of doubling the farmer’s income and agricultural export by 2022. Apart from it, this will help India to achieve food security and sustainable development goals related to Zero Hunger and No poverty

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