[Solved] What are the challenges and opportunities of food processing sector in the country? How can income of the farmers be substantially increased by encouraging food processing? (UPSC GS-3 Mains 2020)

The food processing industry in India is frequently seen as a potential source for driving the rural economy as it brings about the synergy between the consumer, industry, and the farmer. The food processing industry in India is frequently seen as a potential source for driving the rural economy as it brings about the synergy between the consumer, industry, and the farmer. Food processing is the change of raw ingredients into food, or of food into other forms (i.e. food processing may denote direct manufacturing of food or value addition on existing food).

Key Challenges Faced by Food Processing Industry In India

Supply Side Bottlenecks: Fragmented holdings result in low farm productivity, due to this farmers are left with a small and dispersed marketable surplus.

Demand Side Bottlenecks: The demand for processed food is mainly restricted to urban areas of India.

Infrastructure Bottlenecks: Lack of mechanization, high seasonality, perishability, and lack of proper intermediation (supply chain) results in a lack of availability of raw material.

Further, the lack of all-weather roads and connectivity make supply erratic.

Due to inadequate infrastructure, more than 30% of the produce from the farm gate is lost.

Informalization in Food Processing Industry: The food processing industry has a high concentration of unorganized segments, representing almost 75% across all product categories. Thus, causes inefficiencies in the existing production system.

These factors, in turn, impedes food processing and its exports.

Deficiencies in the Regulatory Environment: There are numerous laws, under the jurisdiction of different ministries and departments, which govern food safety and packaging.

The multiplicity of legislation and administrative delays leads to contradictions in food safety specifications and guidelines.

Sanitary and Phytosanitary (SPS) Measure: The stringent (SPS) measures applied by developed countries also impedes the exports of processed foods.

Opportunities Associated with Food Processing Industries

Employment Generating Sector: The Food Processing Industry (FPI) is of enormous significance as it provides vital linkages and synergies that it promotes between the two pillars of the economy, i.e. agriculture and industry. Therefore, it provides direct and indirect employment opportunities.

Ensuring Nutritional Security: Processed foods when fortified with vitamins and minerals can reduce the nutritional gap in the population.

Boosts Trade and Earns Foreign exchange: It is an important source of foreign exchange. For e.g. Indian Basmati rice is in great demand in Middle Eastern countries.

Curbing Food Inflation: Processing increases the shelf life of the food thus keeping supplies in tune with the demand thereby controlling food-inflation. For e.g. Frozen Safal peas are available throughout the year.

Other challenges faced by the food processing sector are gaps in supply chain infrastructure which means

  • Inadequate primary processing,
  • Storage and distribution facilities
  • The insufficient connection between production and processing
  • Seasonality of operations and low capacity utilisations
  • Institutional gaps in the supply chain, for instance, there is dependence on APMC markets
  • lack of focus on quality and safety standards and not having enough of product development and innovation.
  • Demand from retail, demand for items immediately available to eat or cook and safe processed food, and discontinuation of overdependence on cereals are some big opportunities for this sector.

Food Processing Industry & Farmers’ Income Correlation

High-yield Varieties (HYV) of Food:

  • Indian agriculture is presently dominated by cereals oriented production, but the next phase of income boost for farmers will come from switching to high-yield varieties (HYV) of food like horticulture, dairy, etc.
  • However, the issue associated with HYV is low shelf life. This is where FPI can come into play and subsequently increase farmers’ income.

Increasing Demand For Agro-Products:

  • Urbanization is increasing at a rapid pace in India, which subsequently, increases the demand for processed food.
  • Moreover, India is one of the largest producers of food in the world but processes less than 10% of what it produces. Given this, there is a scope of the rise in demand for processed food, which in turn will lead to rising in farmers’ income.

Curbing Rural Unemployment:

  • As FPI links agriculture and industry, it will help in addressing the problem of disguised unemployment that affects the productivity of Indian agriculture.
  • This sector being a labour-intensive industry will provide localized employment opportunities and thus will reduce the push factor in source regions of migration.

Government of India is now encouraging food processing industries by providing :

  • 100% FDI in this sector.
  • Agri Export Zones.
  • National Mission on Agriculture.

Major Schemes by Government include :

  • Vision 2015 for food processing: The Ministry of Food Processing Industries (FPI) has sponsored a study to suggest a roadmap for the growth of the food sector
  • National Mission on food processing: Ministry of Food Processing Industries (MOFPI) launched a new Centrally Sponsored Scheme(CSS) – National Mission- on Food Processing (NMFP) on 1st April 2012 for implementation through States/UTs.
  • Mega food parks: The Scheme of Mega Food Park aims at providing a mechanism to link agricultural production to the market by bringing together farmers, processors and retailers so as to ensure maximizing value addition, minimizing wastages, increasing farmers’ income and creating employment opportunities particularly in the rural sector
  • Modernization of abattoirs: The scheme aims at providing facilities for scientific and less painful slaughtering, chilling, effluent treatment plant, by-product utilization, water and power with required sanitary/phytosanitary conditions for modernization of abattoirs.
  • Cold Chain Infrastructure: Scheme for Integrated Cold Chain, Value Addition and Preservation Infrastructure aim to encourage setting up of cold chain facilities to provide integrated cold chain and preservation infrastructure facilities without break from the farm gate to the consumer.
  • R&D, QA, Codex and Promotion: Scheme for Quality Assurance, Codex, R&D and Other Promotional Activities is being implemented to create an infrastructure of food testing laboratories in the country to establish a quality monitoring system for food processing, implement HACCP/ISO22000, ISO14000/GHP/GMP and other quality management systems and to promote research and development for innovative products and process etc.

Food processing enhances an opportunity to utilize excess production efficiently, ensuring food & nutritional security and supporting farmers. Thus, food processing has become an integral part of the food supply chain in the global economy.

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