Challenge to Generate Agro Business Opportunities in Rural Areas

Since ancient times, India is said to be the Country of Villages. We have been reading that 80 percent of India resides in villages. The main occupation in these villages is generally “Agricultural Activities”. Even if there is some amount of trade or business in nearby towns or in a village itself, it would be based on through agriculture only. If our villages don’t improve, how we can imagine progress of India? Our industry is generally centralised at few places. For getting jobs, migration becomes a must for these villagers. There is lot of talent hidden in these villages, which needs to be exposed for the growth of the country. Keeping this in view, our new government has focused on “Skill Development” in various sectors. In such scenarios, how can agriculture be neglected?

Agriculture provides base for our food industry, which has possibilities of enormous growth. The Indian food industry is poised for huge growth, increasing its contribution to world food trade every year. In India, the food sector has emerged as a high-growth and high-profit sector due to its immense potential for value addition, particularly within the food processing industry.

Accounting for about 32 percent of the country’s total food market, the food processing industry is one of the largest industries in India and is ranked fifth in terms of production, consumption, export and expected growth. Total food production in India is likely to double in the next 10 years with the country’s domestic food market estimated to reach $258 billion by 2015.

The Government of India has been instrumental in the growth and development of the food processing industry. The government through the Ministry of Food Processing Industries (MoFPI) is making all efforts to encourage investments in the business. It has approved proposals for joint ventures (JV), foreign collaborations, industrial licences and 100 percent export oriented units. The food processing industry is one of the 25 sectors identified to advance the ‘Make in India’ campaign. This was announced in a recently concluded workshop on ‘Sectoral Perspectives and Initiatives’ which included participation by ministers and industries and state chief secretaries. The ‘Make in India’ campaign will focus on the manufacturing sector to generate employment. Through this campaign the food processing sector will aim to raise their growth level from 10 percent to 25 percent as this is one of the focus industries of the ‘Make in India’ Campaign. Through this campaign the food processing industry is set to develop 42 Mega Food Parks. Entrepreneurs will be able to rent out developed plots along with basic infrastructure in these Mega Food Parks, for establishing a food processing units or an ancillary unit. An investment of Rs. 98 billion is being raised for this purpose through public and private partnerships. ‘Essar Infraprojects’ is all set to place Rs.50,000crores in the food industry whereas Adani is looking to invest about Rs.20,000 crores and the Future Group has vowed to invest Rs. 2,000 crores in this very important sector. Other companies and multinationals like ITC, Keventer Agro Ltd, Reliance and Future Group have also shown a keen interest to make their investments in the food processing industry. In the North East a Mega Food Park is likely to come up in Tihu and will work to fulfil the demand for organic food production as that has a huge market in India and abroad.

The meeting also highlighted the fact that first time investors in the food parks will be given full support from teams that have been set up for this purpose. NABARD will be lending capital at lower interest rates and the capital fund set up by NABARD for the food processing industry borrowing is Rs. 2,000 crores. Incentives that will make the food processing industry a viable option have also been introduced to give the sector a boost. Some of the incentives include

• Capital subsidies;
• Tax rebates;
• Depreciation benefits;
• Reduced custom and excise duties for processed food and machinery.

Market Size

The Indian food and grocery market is the world’s sixth largest, with retail contributing 70 percent of the sales. It is projected to grow at the rate of 104 percent, touching $482 billion by 2020.

The Indian food processing industry accounts for 32 percent of the country’s total food market, 14 percent of manufacturing GDP, 13 percent of India’s exports and 6 percent of total industrial investment. Indian food service industry is expected to reach $78 billion by 2018.The Indian gourmet food market is currently valued at $1.3 billion and is growing at a CAGR of 20 percent. It is expected to cross $2.8 billion by the end of 2016.

The online food ordering business in India is in its nascent stage, but witnessing exponential growth. The organised food business in India is worth $48 billion, of which food delivery is valued at $15 billion. With online food delivery players like Food Panda, TinyOwl, Zomato and Swiggy building scale through partnerships, the organised food business has a huge potential and a promising future.

Way Forward

• Liberalisation and the growth of organised retail has made the Indian market more attractive for global players; with a large agricultural resource base, abundant livestock and cost competitiveness, India is fast emerging as a sourcing hub of processed foods;

• With a population size of 1.22 billion of which 604 million were under the age of 24 in 2011, this rising youth population is likely to increase India’s overall food consumption;

• Rising income levels, affluence and a growing middle-class;

• One-third of the population will be living in urban areas by 2020;

• Increasing desire for branded food as well as increased spending power;

• Large distinct consumer segments to support customised offerings/new categories and brands within each segment;

• Consumption in India is driven towards packaged and ready-to-eat foods;

• Favourable economic and 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;

• Exports of food items have been rising steadily, the main export destinations being Middle East and South East Asia;

• Food processing is recognised as a priority sector in the new manufacturing policy in 2011;

• Government had announced setting up of special fund of INR 2,000 crore in the financial year 2014-15 in NABARD for extending affordable credit to designated food parks and the individual processing units in the designated food parks at concessional rates. The fund is being continued in 2015-16;

• Reserve Bank of India has classified loans to food & agro-based processing units and Cold Chain under Agriculture activities for Priority Sector Lending (PSL) subject to aggregate sanctioned limit of Rs 100 crore per borrower. It will ensure greater flow of credit to entrepreneurs for setting up of food processing units and attract investment in the sector;

• Fruits and vegetables: preserved, candied, glased and crystallised fruits and vegetables, juices, jams, jellies, purees, soups, powders, dehydrated vegetables, flakes, shreds and ready-to-eat curries;

• Food preservation by fermentation: wine, beer, vinegar, yeast preparation, alcoholic beverages;

• Beverages: fruit-based, cereal-based;

• Dairy: liquid milk, curd, flavoured yoghurt, processed cheese, cottage cheese, Swiss cheese, blue cheese, ice cream, milk-based sweets;

• Food additives and nutraceuticals;

• Confectionery and bakery: cookies and crackers, biscuits, breads, cakes and frozen dough;

• Meat and poultry: eggs, egg powder, cut meats, sausages and other value added products;

• Fish, seafood and fish processing – processing and freezing units;

• Grain processing – oil milling sector, rice, pulse milling and flour milling sectors;

• Food preservation and packaging: metal cans, aseptic packs;

• Food processing equipment: canning, dairy and food processing, specialty processing, packaging, frozen food/refrigeration and thermo-processing;

• Consumer food: packaged food, aerated soft drinks and packaged drinking water;

• Spice pastes;

• Supply chain infrastructure – this niche has investment potential in food processing infrastructure; the government’s main focus is on supply chain related infrastructure like cold storage, abattoirs and food parks;

• The establishment of food parks – a unique opportunity for entrepreneurs, including foreign investors to enter into the Indian food processing sector;

• A rich agriculture resource base – India was ranked No.1 in the world in 2013 in terms of production of bananas, mangoes, papayas, chick peas, ginger, lemons & limes, whole fresh buffalo milk, goat milk and buffalo meat;

• India ranks second in the world in the production of sugarcane, dry beans, lentils and safflower oil. Further, India is at third position in the production of cabbages, cashew nuts, cauliflower, coconuts, garlic, onions, green peas, potatoes, rice paddy, tea, wheat and tomatoes;

• The country’s gross cropped area amounts to 195.25 million hectares, with cropping intensity of 139 percent. The net irrigated area is 65.26 million hectare;

• A total of 127 agro-climatic zones have been identified in India;

• Strategic geographic location and proximity to food-importing nations makes India favourable for the export of processed foods;

• Extensive network of food processing training, academic and research institutes;

• The cost of skilled manpower is relatively low as compared to other countries;

• Attractive fiscal incentives have been instated by central and state governments and these include capital subsidies, tax rebates, depreciation benefits, as well as reduced custom and excise duties for processed food and machinery;

• Major global players in the food domain are already present in India;

• 138 cold chain projects are being set up to develop supply chain infrastructure.

To Conclude

If we want progress of India; the same is possible through its villages. Skill development has discovered this field of Food Processing as potential sector. This will help in skill development without migration of workforce from one place to another. With a lot of government initiatives, this sector will boom in the near future and will provide employment to our youth located in remote locations of India. This can also become a good source for entire family occupation. Hence, this is really a good initiative to develop our skilled/talented workforce, which will never want to migrate from their native place. But, now government has ensured that they will get opportunities at their own place of residence.


* Raju Foujdar is a general manager at IPCA Laboratories Limited. He has a total experience of 25 years. He may be reached at raju_foujdar@yahoo.com.