1. West Bengal University Of Technology
Summer Project Work
“Emerging SME Sectors in India and their
future prospects
At
By
WBUT Registration No: 091360710078 OF 2009-2010
WBUT Roll No: 09136009106
ARMY INSTITUTE OF MANAGEMENT
KOLKATA
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2. AUTHORISATION
This project was undertaken at Bank of Baroda, SME Loan Factory, Kolkata from July 01,
2010 to August 31, 2010 as an Assignment for Summer Internship Project in management
for partial fulfillment of the PGDM Program at Army Institute of Management, Kolkata
Date: Aug,31st 2010
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3. ACKNOWLEDGEMENT
I would like to express my gratitude to Mr. Victor Vincent, General Manager, HRD, Bank of
Baroda, Kolkata, for giving me the permission to carry out my Summer Internship at Bank of
Baroda, SME Loan Factory, Kolkata.
My sincerest gratitude also goes to Mr. Swapan Chandra, Chief Manager, SME Loan
Factory, Kolkata, who took proactive steps granting requisite organizational facilities, He was
extremely kind and patient and his guidance and encouragement was of immense help
throughout my project.
I would like to thank Mr. Subir Sanyal, Senior Manager Credit, SME Loan Factory, Kolkata
who as my Project Guide has always encouraged me to do new things, to critically analyze
the cases and gave his inputs as and when it was necessary.
My gratitude goes to Prof. Moushmi Bhattacharya, Army Institute of Management,
Kolkata, who as my Faculty Guide has always motivated us to put our best foot forward by
setting high standards. I thank him for guiding us at every step of the project and motivating
us to do in-depth analysis.
My special thanks also go to the following individuals at SME Loan Factory, Kolkata. Their
cooperation has helped me immensely and made the experience of the internship program
at Bank of Baroda, SME Loan Factory an enriching one.
Mr. Arun Khandelwal, Manager Credit
Mr. Pankaj Biswas, Manager Credit
Mr. Jayanto Samadar, Manager Credit
Mr. Sunil Kumar Saha, Manager Credit
Mr. Ujjwal Roy, Manager Credit
Ms. Snehi More, Officer Credit
Last but not the least; I would like to thank all my family members for their care,
encouragement and support.
TABLE OF CONTENTS
CHAPTERS TOPICS PAGE NO.
SECTION- 0 Title 1
Authorisation 2
Acknowledgement 3
SECTION- 1.0 Industry Overview 7
1.1 Banking Industry 7
1.2 Indian Banking: A Paradigm Shift 10
3

4. 1.3 Types of Reform Measures for the Banking 13
Sector
1.4 Limitations of the Study 16
1.5 Impacts of Reforms upon the Banking Industry 20
1.6 Small And Medium Enterprises (SMEs) In India 21
1.7 Role of Small and Medium Enterprises (SMEs) 22
1.8 Financing the SMEs 22
SECTION- 2.0 Company Background 23
2.1 Bank’s Mission Statement 23
2.2 Brief History 24
2.3 Products And Services 24
2.4 Bank’s Logo 24
2.5 Business & Financial Performance. 24
SECTION -3.0 SME Policy 25
3.1 Objectives 25
3.2 Scope of Policy 26
3.3 Small & Medium Enterprise Sector. 26
3.4 Bank’s approach towards SME 27
3.5 Establishment of SME Loan Factory 27
3.6 Targets for Priority Sector / SME Sector 28
Lending
3.7 Guidelines for Takeover of Advance Accounts 28
3.8 SME Products 30
SECTION- 4.0 Food & Agro Based Industries 31
4.1 Executive Summary 32
4.2 Methodology 32
4.3 Data Collection & Analysis 33
4.4 Findings 42
4.5 Conclusion & Recommendations 48
SECTION- 5.0 Chemicals 51
5.1 Executive Summary 52
5.2 Methodology 53
5.3 Data Collection & Analysis 54
5.4 Findings 64
5.5 Conclusion & Recommendations 68
SECTION- 6.0 Textiles 70
6.1 Executive Summary 71
6.2 Methodology 71
6.3 Data Collection & Analysis 72
6.4 Findings 77
6.5 Conclusion & Recommendations 83
SECTION- 7.0 Automotive Components 86
7.1 Executive Summary 87
7.2 Methodology 87
7.3 Data Collection & Analysis 88
7.4 Findings 91
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5. 7.5 Conclusion & Recommendations 99
SECTION- 8.0 Pharmaceuticals 102
8.1 SME Model 103
8.2 Procedure of Processing 103
8.3 Data Collection & Analysis 104
8.4 Findings 110
8.5 Conclusion & Recommendations 114
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6. 1.0) INDUSTRY OVERVIEW
1.1 Banking Industry
A Banking sector performs three essential functions in an economy: the operation of the
payment system, the mobilization of savings and the allocation of savings to the investment
projects. By allocating capital to the highest value use while limiting the risks and the costs
involved the banking sector can exert a positive influence on the overall economy and thus
is of broad macroeconomic consequence (Roland, 2006; Jaffe and Levonian, 2001, Rajan
and Zingales, 1998).
Commercial banking has been one of the oldest businesses in India and the earliest
reference of commercial banking in India can be traced in the writings of Manu. Modern
banking in India can be dated as far back as in 1786 with the establishment of General Bank
of India (Kalita, 2008). In the early nineteenth century three Presidency Banks were
established in Bengal, Bombay and Madras and in 1921 they were merged in to newly form
Imperial Bank of India. In 1935, the Reserve Bank of India was established under the
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7. Reserve Bank of India Act as the central bank of India (Chakrabarti, 2005). The Imperial
Bank of India was converted in to State Bank of India under the State Bank of India Act,
1955.
In spite of all these developments, independent India inherited a rather weak banking and
financial system marked by a multitude of small and unstable private banks whose failures
frequently robbed their middle-class depositors of their life’s savings. After independence,
the Reserve Bank of India was nationalized in 1949 and given wide powers in the area of
bank supervision through the Banking Companies Act (later renamed Banking Regulations
Act). The nationalization of the Imperial bank through the formation of the State Bank of
India and the subsequent acquisition of the state owned banks in eight princely states by
the State Bank of India in 1959 made the government the dominant player in the banking
industry. In keeping with the increasingly socialistic leanings of the Indian government, 14
major private banks, each with deposits exceeding Rs. 50 crores, were nationalized in 1969.
This raised the proportion of scheduled bank branches in government control from 31% to
about 84%(Kalita, 2008 ) .In 1980, six more private banks each with deposits exceeding Rs
200 crores, were privatized further raising the proportion of government controlled bank
branches to about 90%(Chakrabarti, 2005).
While there are those who have emphasized the political importance of public control over
banking, most arguments for nationalizing banks are based on the premise that profit
maximizing lenders do not necessarily deliver credit where the social returns are the
highest. The Indian Government when nationalizing all the larger Indian banks in 1969
argued that banking was “inspired by a larger social purpose” and must “sub serve national
priorities and objectives such as rapid growth in agriculture, small industry and exports”
(Banerjee et.al, 2004, Das et. al., 2005).
There are essentially two views that justify Government’s ownership of financial markets.
The optimistic or „developmental‟ view is that of Alexander Gerschenkron who emphasized
on the necessity of financial development for economic growth (La Porta et.al. 2002;
Dobson 2006).Gerschenkron argued that privately owned commercial banks had been
crucial for channelising savings into industry in the second half of the 19th century in
industrialized nations such as Germany. However, in some countries, most conspicuously
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8. Russia, economic institutions were not sufficiently developed for private banks to play this
crucial development role. According to Gerschenkron “...no bank could have successfully
engaged in long term credit policies in an economy where fraudulent banking practices had
almost elevated to the rank of a general business practice…” (La Porta et. al., 2002).
Banking in India has grown at a rapid pace with the number of commercial banks increasing
from 89 in 1969 to 284 in 1995 (RBI Banking Statistics, 2009).
Prakash Tandon, former chairman of the Punjab National Bank (nationalized in 1969)
describes the rationale for nationalization as follows:
The two significant aspects of nationalization were rapid branch expansion and channeling of
credit according to Plan priorities (Mohan, 2002).
As in other areas of economic policy-making, the emphasis on government control began to
weaken and even reverse in the mid-80s and liberalization set in firmly in the early 90‟s.
The poor performance of the public sector banks, which accounted for about 90% of all
commercial banking, was rapidly becoming an area of concern. The continuous escalation in
Non-Performing Assets (NPAs) in the portfolio of banks posed a significant threat to the very
stability of the financial system. They were the „smoking gun threatening the very stability
of the Indian Banks‟ (Bidani, 2002). The lack of recognition of the importance of
transparency, accountability and prudential norms in the operations of the banking system
led also to a rising burden of non-performing assets (Ghosh and Prasad, 2007).
Banking reforms, therefore, became an integral part of the liberalization agenda which
provided the necessary platform for the banking sector to operate on the basis of
operational flexibility and functional autonomy enhancing productivity, efficiency and
profitability (Kalita, 2008).For good reason, India chose a „gradualistic‟ approach to the
reform over a „big-bang‟ approach (Bhinde, Prasad and Ghosh, 2002). As pointed out by
Bhide et.al., 2002, such gradualism was due to the fact that reforms were not introduced in
face of a prolonged economic crisis, and most importantly; gradualism was a result of
India’s democracy and highly pluralistic polity in which reforms could be undertaken only if
based on popular consensus. While expansion of credit was desirable to help the economy
grow, equally important was the need for proper credit appraisal.
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9. 1.2 Indian Banking: A Paradigm Shift
The decade gone by witnessed a series of financial reforms, with many of them still in the
process of implementation. The 1990s saw India implementing Macroeconomic Adjustment
Program of which the financial sector reform is a major component (Narayana, 2000).The
basic principle guiding financial sector reform was that the financial system has a crucial
role to play in the mobilization of savings and their allocation to the most productive uses.
Research studies have time and again proved that financial liberalization had a positive
effect on bank performance (Koeva, 2003). The ground for reform was the several
distortions which had crept into the financial system rendering it unable to meet the
challenges of a competitive environment. Joshi and Little (1996) had characterized the
Indian banking sector as „...unprofitable, inefficient and financially unsound…‟ The first
Narasimham Committee set the stage for financial and bank reforms in India. Interest
rates, previously fixed by the Reserve Bank of India, were liberalized in the 90‟s and
directed lending through the use of instruments of the Statutory Liquidity Ratio which was
reduced (Chakrabarti, 2008). While several committees have looked into the ailments of
commercial banking in India, three of them – the Narasimham committee I (1992) and II
(1998) and the Verma committee – have aimed at major changes in the banking system.
The financial reform process is often thought of as comprising two stages – the first phase
guided broadly by the Narasimham Committee I report while the second is based on the
Narasimham Committee II recommendations. The aim of the former was to bring about
“operational flexibility” and “functional autonomy” so as to enhance “efficiency, productivity
and profitability”. The latter focused on bringing about structural changes so as to
strengthen the foundations of the banking system to make it more stable (Chakrabarti,
2008).
The Narasimham Committee had acknowledged the success of public sector banks in
respect of branch expansion, deposit mobilization in household sector, priority sector
lending and removal of regional disparities in banking. But during the post nationalization
period, the banking sector suffered serious erosion in its efficiency and productivity (Dhar,
2003). Moreover, the sound banking system had been disturbed by the system of directed
credit operation in the form of subsidized credit flow in the under banked and priority areas,
IRDP lending, loan festival, etc. According to the committee the operational expenditure of
the public sector banks had tremendously increased due to rise in number of branches, poor
supervision, rising staff level and high unit cost of administering loan to the priority sector.
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10. The major recommendations made by the Narasimham I committee report are listed below
(Kalita, 2008).
1. The ban on setting new banks in private sector should be lifted and the licensing policy in
the branch expansion must be abolished.
2. The govt. has to be more liberal in the expansion of foreign bank branches and also
foreign operations of Indian banks should be rationalized.
3. The Statutory Liquidity Ratio (SLR) and Cash Reserve Ratio (CRR) should be
progressively brought down from 1991-92.
4. The directed credit program should be re-examined and the priority sector should be
redefined to comprise small and marginal farmers, the tiny industrial sector, small business
operators and weaker sections.
5. Banking industry should follow BIS/Basel norms for capital adequacy within three years.
6. Interest rates should be deregulated to suit the market conditions.
7. The govt. should tighten the prudential norms for the commercial banks.
8. The govt. share of public sector banks should be disinvested to a certain percentage like
in case of any other PSU.
In order to initiate the second generation of financial sector reforms a committee on
Banking Sector Reforms (BIS) was formed in 1998 under the chairmanship of M.
Narasimham. The committee submitted its report on 23rd April 1998 to the Finance Minister
of Govt. of India (Kalita, 2008). Narasimham committee report II observed that Central
Bank’s role should be separated from being monetary authority to that of regulator of the
banking sector.
The major recommendations of the second Narasimham II report were mentioned below
(Kalita, 2008).
1. The committee favoured the merger of strong public sector banks and closure of some
weaker banks if their rehabilitation was not possible.
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11. 2. Expressing concern over rising non-performing assets, the committee provided the idea
of setting up an asset reconstruction fund to tackle the problem of huge non-performing
assets (NPAs) of banks under public sector.
3. The report emphasized the need of enhancement of capital adequacy norms from the
present level of 8 percent but did not specify the amount to which it should be raised.
4. The Banking Sector Reform Committee further suggested that existence of a healthy
competition between public sector banks and private sector banks was essential.
5. The report envisaged flow of capital to meet higher and unspecified levels of capital
adequacy and reduction of targeted credit.
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12. 1.3 Types of Reform Measures for the Banking Sector
Since the general importance of a banking sector for an economy is widely accepted, the
questions arise under which coordination mechanism – state or market – it best performs its
functions, and, if necessary, how to manage the transition to this coordination mechanism
(Kaminsky and Schmukler, 2002).Currently, there are opposing views concerning the most
preferable coordination mechanism. According to the development and political view of state
involvement in banking, a government is through either direct ownership of banks or
restrictions on the operations of banks better suited than market forces alone to ensure that
the banking sector performs its functions. The argument is essentially that the government
can ensure a better economic outcome by for example channeling savings to strategic
projects that would otherwise not receive funding or by creating a branch infrastructure in
rural areas that would not be build by profit-maximizing private banks.
In the words of Lenin „...Without big banks, socialism would be impossible. The „big banks‟
are the state apparatus which we need to bring about socialism and which we take ready
made from capitalism…” (La Porta et. al., 2002). , Governments acquire control of
enterprises and banks in order to provide employment, subsidies and other benefits to
supporters, who return the favour in the form of votes and political contributions. The
attraction of such political control of banks is greatest in economies with underdeveloped
financial systems and poorly protected property rights, because the government does not
have to compete with the private sector. The view of state ownership is buttressed by
considerable evidence documenting the inefficiency of government enterprises, the political
motives behind the provision of services and the benefits of privatization The active
involvement of government thus ensures a better functioning of the banking sector, which
in turn has a growth enhancing effect (Denizer, Desai and Gueorguiev, 1998; La Porta,
Lopez de Silanes and Schleifer, 2002).
The proponents of financial liberalization take an opposite stance. In their view, repressive
policies such as artificially low real interest rates, directed credit programs and excessive
statutory pre-emption that are imposed on banks have negative effects on both the volume
and the productivity of investments. Removing these repressionist policies and giving more
importance to market forces will, in the view of the proponents of financial liberalization,
increase financial development and eventually lead to higher economic growth
(Demetriades and Luintel, 1997, p. 311; Denizer, Desai and Gueorguiev, 1998).However, a
majority of the empirical studies support the financial liberalization hypothesis supporting
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13. the fact that financial liberalization is essential for economic growth (King and Levine, 1993;
Watchel, 2001).
The banking sector reforms started in the early 1990s essentially followed a two pronged
approach; first, the level of competition was gradually increased within the banking system
while simultaneously introducing international best practices in prudential regulation
supervision tailored to Indian requirements (Kalita, 2008). In particular, special emphasis
was placed on building up the risk management capabilities of Indian banks while measures
were initiated to ensure flexibility, operational autonomy and competition in the banking
sector.
Secondly, active steps were initiated to improve the institutional arrangements like legal
and technological frameworks (Mohan, 2006). Some of the measures undertaken in this
regard are as follows (Kalita, 2008; Mohan, 2006; Roland, 2006; Singh, 2005).
Competition Enhancing Measures
 Allowing operational autonomy and reduction of public ownership in public sector
banks by raising capital from equity market up to 49 percent of paid up capital.
 Transparent norms for entry of Indian private sector banks, foreign banks and joint
venture banks.
 Permission for foreign investment in the financial sector through foreign direct
investment (FDI) as well as portfolio investment.
 The banks are allowed to diversify product portfolio and business activities.
 Roadmap for foreign banks and guidelines for mergers and amalgamation of private
sector banks with other banks and NBFCs.
 Instructions and guidelines on ownership and governance in private sector banks.
Measures enhancing role of market forces
 Reduction in pre-emption through reserve requirement, market determined pricing
for govt. securities, disbanding of administered interest rates and enhanced
transparency and disclosure norms to facilitate market discipline.
 Introduction of auction-based repos and reverse repos for short term liquidity
management, facilitation of improved payments and settlement mechanism.
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14.  Significant advancement in dematerialization and markets for securitized assets are
being developed.
Prudential measures
 Introduction of international best practices norms on capital to risk weighted asset
ratio (CRAR) requirement, accounting, income recognition, provisioning and
exposure. Following the Basel Accord of 1988, the capital to risk-weighted assets
ratio (CRAR), which took into account the element of risk involved in both balance
sheet as well as off-balance sheet business, emerged as a well recognized and
universally accepted measure of soundness of the banking system. Accordingly, as a
part of banking sector reforms, India adopted the Basel norms in a phased manner.
In fact, India went a step further and stipulated CRAR at nine per cent as against the
international norm of eight per cent from March 31, 2000. Furthermore, India also
prescribed the capital charge for market risk in June 2004, broadly in line with the
1996 amendment to Basel norms.
 Measures to strengthen risk management though recognition of different component
of risk, assignment of risk weights to various asset classes, norms of connected
lending, risk concentration,
 Introduction of capital charge for market risk, higher graded provisioning for NPAs,
guidelines for ownership and governance, securitization and debt restructuring
mechanism norms, etc.
 Introduction and roadmap for implementation of Basel II.
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15. 1.4 Impacts of Reforms upon the Banking Industry
The Indian banking industry had made sufficient progress during the reforms period. Before
the start of the 1991 reforms, there was little effective competition in the Indian banking
system for two reasons. First, the detailed prescriptions of the RBI concerning for example
the setting of interest rates left the banks with limited degrees of freedom to differentiate
themselves in the marketplace. Second, India had strict entry restrictions for new banks,
which effectively shielded the incumbents from competition (Roland, 2006; Joshi and Little,
1997) .Through the lowering of entry barriers; competition has significantly increased since
the beginning of the 1990s. Seven new private banks entered the market between 1994
and 2000. In addition, over 20 foreign banks started operations in India since 1994. By
March 2004, the new private sector banks and the foreign banks had a combined share of
almost 20% of total assets Deregulating entry requirements and setting up new bank
operations has benefited the Indian banking system from improved technology, specialized
skills, better risk management practices and greater portfolio diversification (RBI Report on
Trend and Progress of banking in India).
Kumar and Gulati (2008) have examined the issue of convergence of efficiency levels
among Indian public sector banks (PSBs) during the post-reforms period spanning from
1992/1993 to 2005/2006. Their empirical results indicate that the majority of PSBs have
observed an ascent in technical efficiency during the post-reforms years. Further, the
inefficient PSBs have been noted to be catching up with the efficient ones. That is, the
banks with low level of efficiency at the beginning of the period are growing more rapidly
than the highly efficient banks. In sum, the study confirms a presence of convergence
phenomenon in the Indian public sector banking industry.
Table 1.1: Progress of Scheduled Commercial Banks in India Pre and Post-Reforms
Progress of Scheduled Commercial Banks in India June March March March
Indicators 1980 1991 2000 2005
1. No. of SCBs 154 272 298 288
2.No. of bank offices 34594 60570 67868 68355
Of which Rural and Semi-urban 23227 46550 47693 47485
3. Population per Office („000) 16 14 15 16
4. Per capita Deposit (Rs.) 738 2368 8542 16091
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16. 5. Per capita Credit (Rs.) 457 1434 4555 10440
6. Deposit (% to national income) 36 48.1 53.5 68.3
Interest rate deregulation
Prior to the reforms, interest rates were a tool of cross-subsidization between different
sectors of the economy. To achieve this objective, the interest rate structure had grown
increasingly complex with both lending and deposit rates set by the RBI. One of the major
factors that affected the banks‟ profitability was the high pre-emptions in the form of Cash
Reserve Ratio (CRR) and Statutory Liquidity Ratio which had reached at the historically high
levels of 63.5% in early 1990s. The administered structure of interest rates did not allow
banks to charge the interest rates depending upon the credit worthiness of the borrower
and thus, impinged on the allocated efficiency of resources (Report on Currency and
Finance, RBI, 2006-2008). The deregulation of interest rates was a major component of the
banking sector reforms that aimed at promoting financial savings and growth of the
organized financial system (Singh, 2005, Roland, 2006). Deregulation of interest rates
implied that banks were able to fix the interest rates on deposits and loans depending upon
the overall liquidity position and their risk perceptions (for lending rates).
The Narasimham Committee having commended the Indian Banking system for its
impressive quantitative achievements during the two decades since nationalisation in 1969
noted the decline in productivity and efficiency of the system and the related erosion of
profitability (Narayana, 2000). In the Committee's view the major elements leading to low
productivity and profitability were-
 Constraints on operational flexibility owing to directed investment in terms of SLR
together with cash reserve ratios and directed credit programs.
 Decline in portfolio quality owing to political and administrative interference in credit
decision making.
 Concessional interest rate on directed investment and credit.
 Expansion of branch network into rural and semi-urban areas turning many offices
into primarily deposit centres without adequate credit business and income.
The above diagnosis of the maladies of banking led the Committee to recommend-
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17.  SLR requirements be related to prudential requirements and be brought down to
25% of net demand and time liabilities.
 The borrowing rates to be brought closer to market rates. CRR be turned into an
instrument of monetary policy.
 Directed credit program be phased out in the long run; redefine priority sector in the
short run, and review the concessional interest rate. Use fiscal instruments rather
than the credit system to help the weaker sections.
 Dismantle the administered interest rate structure and allow interest rates "to
perform their main function of allocating scarce loan-able funds to alternative use”.
The motive behind the liberalization of interest rates in the banking system was to allow the
banks more flexibility and encourage competition. Banks can charge rates according to their
cost of funds and to reflect the creditworthiness of different borrowers. Banks can vary
nominal rates offered on deposits in line with changes in inflation to maintain real returns
(Ahluwalia, 2002).
The most important and far reaching impact of banking liberalization in India has been the
deregulation of the interest rate (Kalita, 2008). The Indian banks are now adopting a
completely market driven interest rate structure which was in earlier a govt. driven interest
rate structure. The interest rate deregulation has resulted in the integration of the lending
rates across spectrum. The prime lending rate of each bank is now synchronized with the
bank rate. The bank rate was revived by the RBI to serve as the reference rate for the
banking sector.
Directed credit Policies: Directed credit policies have been an important part of India’s
financial sector reforms. Under the directed credit policy commercial banks are required to
provide 40% of their commercial loans to the priority sectors which include agriculture,
small-scale industry, small transport operators, artisans, etc. (Kalita,2008). Within the
aggregate ceiling there are various sub-ceilings for agriculture and also for loans to poverty
related target groups. The Narasimham committee had recommended reduction of the
directed credit to 10% from 40%. The committee had also suggested narrowing down the
definition of priority sector to focus on small farmers and low income target groups.
The policy of 40% of loans to the priority sectors has not been abolished by the govt.
However, the definition of the priority sector activities has been broadened with the new
inclusion and reclassifications. The Committee on Banking Reforms has suggested inclusion
17

18. of activities related to food processing, dairying and poultry in the priority sector list (Kalita,
2008).This will increase the list of activities under the priority sector credit and also improve
the quality of the portfolio.
The issue of priority sector lending, an important concern against privatization, is no longer
that crucial, since in 2003 the share of credit of private sector banks going to the priority
sector had surpassed that of public sector banks [In 2002-03, 42.5% of the total credit of
PSUs was given to the priority sector whereas 44.4% of the total bank credit was given by
Private Sector Banks to priority sector] (Source: Trend and Progress of Banking in India,
RBI). At present if a bank fails to fulfill the target for priority sector lending, it can invest the
shortfall amount in RBI securities dealing with flow of funds towards agriculture and small-
scale industries but it still desirable that banks adhere to the priority sector lending target
(RBI, 2008).The current arrangement shows how the banking sector reforms have provided
operational flexibility to the banks even while meeting social objectives. The priority sector
lending norms have been fulfilled by a good margin by both public and private sector banks
at present. While public sector banks, as a group, achieved the overall priority sector
targets 40%, they failed to achieve the various sub-targets for agriculture, tiny sector within
the SSI sector, advances to weaker sections, etc. Significant variation was also observed in
the performance of different banks within the public sector banks with regard to the
achievement of sub-targets (RBI, Annual Report, 2004-05).
One of the major objectives of the reform was to bring in greater efficiency in the Indian
Banking sector by permitting entry of private sector banks and increased operational
flexibility of the banks. Keeping this view several measures were initiated to instil
competitiveness in the banking sector where the lack of threat to the entry of new players
had led to inefficiency in the banking sector. In January 199, norms for the entry of Private
players were announced. In the context towards deregulation, it was decided in 1992 to
give greater freedom to banks in opening up branches. Following liberalization of entry of
new private sector banks, 10 new banks were set up by 1998. Besides, 22 foreign banks
were also set up. The number of foreign bank branches increased from 140 at end-March
1993 to 186 at end-March 1998. However, that the impact on competition remained muted
was evident from the limited number of mergers (four). Normally when competition
intensifies, it inevitably leads to increased mergers and acquisitions activity. The lack of
enough competition was also reflected in the net interest margins (NIM) of banks, which
increased during this phase from 2.51% in 1992-93 to 2.95 per cent in 1997-98 (RBI
Report on Currency and Finance 2006-08, Vol. 1).
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19. 3.5 Small And Medium Enterprises (SMEs) In India
The small and medium enterprises segment has been a topic of intense deliberation among banks, financial
institutions, industry and academicians. In India, ‘small and medium enterprises’ (SME) is a generic term used to
describe small scale industrial (SSI) units and medium-scale industrial units. As per the Micro, Small and Medium
Enterprises Development Act of 2006, any industrial unit with a total investment in its fixed assets or leased assets
or hire-purchase asset upto Rs10 million is considered as a SSI unit and investment up to Rs. 100 million is
considered as a medium unit. In addition, an SSI unit should neither be a subsidiary of any other industrial unit nor
can it be owned or controlled by any other industrial unit.
The SME sector produces a wide range of industrial products such as food products, beverage, tobacco and tobacco
products, cotton textiles, wool, silk, synthetic products, jute, hemp & jute products, wood & wood products,
furniture and fixtures, paper & paper products, printing publishing and allied industries, machinery, machines,
apparatus, appliances and electrical machinery. SME sector also has a large number of service industries.
 In India, SME is the biggest provider of employment next only to Agriculture. The SMEs constitute 95% of
total industrial units and constitute 40% of total industrial output.
 Formerly, both Government and RBI credit policy placed emphasis on manufacturing units from the Small
Scale Sector. However, in order to make the size of the unit and the technology employed by firms to be
globally competitive, the definition of “Small Scale Sector” was revisited. Keeping in view the same and
the global practices, it was decided to broaden the concept of SSI Sector by inclusion of services within its
ambit as also including the “Medium Enterprises” in a composite sector of “Small & Medium Enterprises”.
 Subsequently, MSMED Act was operationalised with effect from 2nd October 2006, which defines an
“enterprise” instead of an “industry” to give recognition to service sector and also defines a “medium
enterprise” to facilitate technology upgradation and graduation.
 Banks were interalia advised to formulate comprehensive and more liberal policies than the existing
policies in respect of loans to SME Sector.
3.6 Role of Small and Medium Enterprises (SMEs)
SMEs have been playing a pivotal role in country’s overall economic growth, and have
achieved steady progress over the last couple of years. From the perspective of industrial
development in India, and hence the growth of the overall economy, SMEs have to play a
prominent role, given that their labour intensiveness generates employment. The SME
19

20. segment also plays a major role in developing countries such as India in an effort to
alleviate poverty and propel sustainable growth. They also lead to an equitable distribution
of income due to the nature of business. Moreover, SMEs in countries such as India help in
efficient allocation of resources by implementing labour intensive production processes,
given the abundant supply of labour in these countries, wherein capital is scarce.
The enactment of the Micro, Small and Medium Enterprises Development (MSMED) Act,
2006 was a landmark initiative taken by the Government of India to enable the SMEs’
competitive strength, address the issues and challenges and reap the benefits of the global
market. SME policy initiatives at the national and state level are aimed at strengthening the
role of SMEs at the base as well as at the higher level.
With globalisation, all forms of production of goods and services are getting increasingly
fragmented across countries and enterprises. With large players adopting different models
of business that include involvement of the traditional partners, suppliers or distributors at a
different level, SMEs now are experiencing a new model of functioning in the value chain.
The past few years has seen the role of the SME segment evolve from a traditional
manufacturer in the domestic market to that of an international partner. The restructuring
of production at the international level through increased outsourcing is having significant
effects on small and medium entrepreneurs in a positive as well as negative manner.
Demand in terms of new niche products and services are providing more opportunities for
SMEs that are in a better position to take advantage of their flexible nature of operations.
However, at the same time they have realized their drawback in terms of inadequate
availability of managerial and financial resources, lack of working capital, personnel training
and inability to innovate on a faster pace.
The combined effect of market liberalisation and deregulation has forced the SME segment
to change their business strategies for survival and growth. Some of the changes that SMEs
are focusing on include acquiring quality certifications, increasing use of ICT, creating e-
business models and diversification to meet the increasing competition. Globalisation,
economic liberalisation and the WTO regime would undoubtedly open up a unique
opportunity for the largest business community, i.e. SMEs through effective involvement in
international trade by streamlining certain factors, such as, access to markets, access to
technology, access to skills, finance, development of necessary infrastructure, SME-tax
friendly environment, exchanges of best practices to name a few.
20

21. The SME sector has also registered a consistently higher growth rate than the overall
manufacturing sector. In fact, it plays a dual role since the output produced by SMEs is not
only about final consumption but also a source of capital goods in the form of inputs to
heavy industries.
3.7 Financing the SMEs
In Feb 2008, the Ministry of Micro, Small and Medium Enterprises (MSME), continued with
its dereservation policy by removing 79 items from the list of 114 items reserved specifically
for SSI (small scale industries) manufacturing. Only 35 items remain in the reserved
category from the total 836 selected in 1994 denoting the declining monopoly of the SSI
segment on the reserved products. However, the government has set up various schemes in
place such as the Credit Linked Capital Subsidy Scheme, MSME Cluster Development
Scheme and ISO 9000 Reimbursement Scheme to help SMEs for procuring timely funds.
Also the government has put in place the Credit Guarantee Scheme to encourage banks to
lend up to Rs 0.50 million without collateral. There has also been a recent budget
announcement of setting up of a Risk Capital Fund.
Though SMEs are being touted as the priority sector within the economy, they continue to
face problems pertaining to finance. When it comes to banks, they have a very traditional
way of lending to this segment against collateral and SMEs end up being under financed.
Evidently, the biggest challenge before the SMEs today is to have access to non debt based
and non-traditional financial products such as external commercial borrowings, private
equity, factoring etc.
Lately this segment has been witnessing winds of change in the new sources of capital- in
the form of private equity (PE) and foreign direct investments (FDI). In Jan 2008, The Soros
Economic Development Fund (SEDF), Omidyar Network and Google.org announced a Small
to Medium Enterprise Investment Company with an initial corpus of $17 million for providing
capital to SMEs in underserved markets. Mauritius-based Frontline Strategy launched a
$200 million India Industrial Growth Fund (IIGF) for investment in SMEs targeting
companies, primarily in the industrial space with revenues between Rs 200 – 1,000 million.
In 2007, Mauritius-based Horizon advisors launched Ambit Pragma Fund I, an India
dedicated PE fund, with a corpus of $100 million for providing equity capital and
professional management advice to SMEs.
21

22. Investments in the SME sector are not only by PE funds but this sector is also attracting
FDI. In this respect the government has removed the 24 per cent cap on FDI in the SME
sector. Foreign entities are also keen on promoting trade and cooperation between SMEs of
different countries. Genesis Initiative, an UK-based organization consisting of
entrepreneurs, policy makers and SMEs, is trying to forge mutual cooperation between
SMEs in India and UK for in terms of JVs and partnerships in sectors such as textiles, IT,
infrastructure etc.
CHAPTER 2 : COMPANY BACKGROUND
Bank of Baroda (BoB) is the 3rd largest bank in India, after State Bank of India and Punjab National Bank and
ahead of ICICI Bank. BoB has total assets in excess of Rs. 2.27 lakh crores, or Rs. 2,274 billion, a network of over
3000 branches and offices, and about 1100+ ATMs. It offers a wide range of banking products and financial services
to corporate and retail customers through a variety of delivery channels and through its specialised subsidiaries and
affiliates in the areas of investment banking, credit cards and asset management. [1]
2.1 Bank’s Mission Statement
2.2 Brief History
Bank of Baroda was incorporated in 1908 by Maharaj Sayajirao Gaekwad III. It launched its first branch in 1910 in
Ahmedabad. In 1953, its first branches in Kampala and Mombasa became operational. Its overseas branch in
Nairobi was opened in 1954.
2.3 Products And Services
Bank of Baroda provides it banking products and services in several categories like personal, international, business,
treasury, corporate and rural. In personal banking section Bank of Baroda offers products like deposits, debit cards,
Gen-Next, personal banking services, loans, lockers and credit cards.
22

23. In business banking sector, Bank of Baroda offers products and services such as deposits, business banking services,
loans and advances and lockers. In corporate banking section, Bank of Baroda offers products and services like
wholesale banking, loans and advances, deposits and corporate banking services.
2.4 Bank’s Logo
Bank’s new logo is a unique representation of a universal symbol. It comprises dual ‘B’ letterforms that hold the
rays of the rising sun. They call this the Baroda Sun.
The sun is an excellent representation of what our bank stands for. It is the single most powerful source of light and
energy – its far reaching rays dispel darkness to illuminate everything they touch. At Bank of Baroda, it seek to be
the source that will help all our stakeholders realise their goals. To our customers, we seek to be a one-stop, reliable
partner who will help them address different financial needs. To our employees, we offer rewarding careers and to
our investors and business partners, maximum return on their investment.
2.5 Business & Financial Performance
The Bank has reported a healthy growth in its business and profits with improvement in all key parameters during
FY10. [2]
 As stated earlier, its Global Business touched a new milestone of Rs 4,16,080 crore in FY10 reflecting a
growth of 24.0% (y-o-y).
 Both its domestic deposits and advances increased at the above-industry pace of 22.4% and 21.3%,
respectively.
 The Bank recorded a growth of 44.0% in SME credit, 27.0% in farm credit and 24.0% in retail credit
reflecting a well-diversified growth achievement.
 Total assets of the Bank’s overseas operations increased from Rs 51,165 crore to Rs 68,375 crore
registering a growth of 33.6% during the year under review.
 The Bank’s Net Profit at Rs 3,058.33 crore for FY10 reflected a robust year-on-year growth of 37.3%.
 As the Bank’s primary objective has been to grow with quality, the Bank focused on containing the
impaired assets to the minimum possible level. While the Gross NPA in domestic operations stood at
1.64% at end-March 2010, the same for Overseas Operations was at 0.47%. In spite of growing slippages
for Indian banking industry during FY10, our Bank succeeded in restricting its global Gross NPA level to
1.36% and Net NPA level to 0.34% by end-March, FY10.
23

24. CHAPTER 3 : SME POLICY
3.1 Objectives
The SME Loan Policy is framed with the following objectives:
 To improve flow of credit to SME Sector.
 To formulate norms of lending to SME sector, to ensure availability of adequate and timely credit to the
sector.
 To provide guidelines to the branches to dispense credit to SME Sector.
 To devise an organizational structure at all levels for handling SME credit portfolio in a more focused
manner.
 To comply with terms of Policy package announced by Hon’ble Union Finance Minister on 10.08.2005 and
further guidelines received from Reserve Bank of India from time to time for improving flow of credit to
SME Sector.
3.2 Scope of Policy
This Policy will form a part of Bank’s Domestic Loan Policy and will cover
following:
24

25.  Composition of SME Sector
 Broad guidelines on lending to SME Sector
 SME Loan Factory Model
 Credit Rating and Pricing Policy
 Identifying Thrust Industries
 Discretionary lending powers
 Training needs
 Reporting and Monitoring System
3.3 Small & Medium Enterprises Sector
The SME segment is broadly classified as under in MSMED ACT, 2006 :
Particulars Investment in Plant & Investment in Equipment
Machineries in case of in case of Service Sector
Manufacturing Enterprises *
Enterprises *
Micro Enterprises Upto Rs. 25/- lacs Upto Rs.10/- lacs
Small Enterprises Above Rs. 25/- lacs and Above Rs.10/- lacs and
upto Rs.500/- lacs upto Rs.200/- lacs
Medium Above Rs.500/- lacs and Above Rs.200/- lacs and up
Enterprises upto Rs.1000/- lacs to Rs.500/- lacs
* original cost excluding land and building and the items specified by the Ministry of Small Scale Industries
** original cost excluding land & Building and Furniture, Fittings and other items not directly related to the service
rendered or as may be notified under MSMED Act, 2006
3.4 Bank’s Approach Towards SME Sector
SMEs are growth engines for development of Economy. Bank has therefore for internal purposes given focused
attention to finance all Commercial enterprises i.e. enterprises which may be outside the purview of regulatory
definition of SME but having turnover upto Rs 150.00 crores and new infrastructure and real estate projects where
the project cost is upto Rs. 50/- crores by treating them as part of SME segment. SME Banking business will thus
include the following across the bank:
 Micro, Small and Medium Enterprises – as per regulatory definition irrespective geographical location, i.e.
rural, semiurban, urban, metro areas.
 All other entities with their annual sales turnover of Rs. 1/- crore to Rs. 150/- crores and new infrastructure
and real estate projects, where the project cost is upto Rs. 50/- crores.
 SMEs which are Associate/sister concerns of Wholesale Banking customers.
25

26.  Clubs, Trusts, etc.
 Financing under various Government schemes launched for MSME Sector.
However, such units, which are outside the purview of regulatory definition will not form part of Priority Sector
lending.
3.5 Establishment Of SME Loan Factories
Business Model which operates on assembly line principle is adopted by the bank for hassle free and faster
dispensing of credit to SME segment. This model titled SME Loan factory has separate Hub for Centralized
Processing of SME proposals.
SME LOAN FACTORY :
To grab vast business opportunities available and with an aim to extend focused attention to Industries & Service
Sector, Bank of Baroda has come out with an unique model in the form of SME LOAN FACTORY exclusively
for SMEs.
 It is a revolutionary step taken by Bank of Baroda amongst the Nationalised Banks. It envisages setting up
of Centralized Processing Hub to ensure speedy appraisal and sanctioning of proposal of SME Sector
within a time bound schedule.
 The model works on assembly line principles with simplified processes using latest technology and in-
house skilled men power to deliver focused services to SME customers.
 A team of Relationship Officers/Relationship Managers have been stationed at different key places spread
over the micro segment of the city who will reach out to SME customers.
 As of March, 2009, 34 SME Loan Factories have been operationalized across the country.
Attractive features of the model are as under :
 Team of officers having expertise in the area of credit with positive approach is selected.
 Instead of appointing DSAs(Direct Selling Agents), bank has appointed officers from existing dedicated
team only.
 The hub’s main role is ensuring speedy appraisal & sanctioning of proposals pertaining to SME sector in a
time bound program.
 The team members reach out to different market segments.
 Its important feature is working of the SME Loan Factory on assembly line principles with simplified
processes.
 We have two nodes to take care of the marketing /sales(SALES HUB) and credit processing
sanction(CREDIT HUB), under a single umbrella of the SME Loan Factory.
26

27. 3.6 Targets for Priority Sector / SME Sector Lending
As regards lending to SME Sector, Banks are advised to fix their own target in order to achieve a minimum 20%
YOY growth in credit to SME as per statutory guidelines so as to double flow of credit to SME sector by the year
2009-10. There is no sub-target fixed for lending to small enterprises sector. However in order to ensure that credit
is available to all segments of the Small Enterprises sector, banks are advised to ensure that 60% of the total
advances to small enterprises sector should go to Micro Enterprises as under:
 40% to Micro (manufacturing) enterprises with investment in plant and machinery upto Rs.5 lacs and
Micro(service) enterprises having investment in equipment upto Rs.2 lacs
 20% to Micro (manufacturing) enterprises with investment in plant and machinery above Rs.5 lacs and
upto Rs.25 lacs and Micro(service) enterprises having investment in equipment above Rs.2 lacs and upto
Rs.10 lacs.
3.7 Guidelines for Takeover of Advance Accounts:
There are two types of compliances:
Non-Financial norms to be complied in case of takeover of SME accounts as per regulatory guidelines or
SME as per expanded coverage:
Sr.N Norms Deviation allowed
o.
a. Various authorities have been
Profit-making (i.e. net profit before tax) concerns only as per authorized to permit deviations in
last audited Balance Sheet. respect of accounts.
b.
Accounts be rated as per the new credit rating model
(BOBRAM) subject to ‘minimum’ BOB 6.
Accounts, which are not covered under BOBRAM Credit
Rating System, may be considered under
permitted deviation as per extant guidelines issued from time
to time.
c. There should not have been any reschedulement /restructuring
in the account during last two years.
d. Satisfactory report from the existing bank/FI and/or Various authorities have been
satisfactory conduct of account as per latest statement of authorized to permit deviations in
accounts. respect of accounts.
e. Accounts with existing lenders should be under the category of
“Standard Assets”.
f. All other existing norms, guidelines as applicable to borrowal
accounts are to be scrupulously followed.
27

28. Financial norms in case of takeover of SME accounts as per regulatory guidelines or SME accounts as per
expanded coverage:
Ratio Norms Authority who can allow
Deviation
1 2 3 Proposed
Micro & Small Medium Units
Industries Enterpris outside the
under es under purview of
manufactu- manufact- regulatory
ring sector uring sector definition
and service and service but covered
Sector as per Sector as per under SME
regulatory regulatory Sector as
guidelines guidelines Per expanded
definition.
Current Minimum Minimum Minimum Various authorities have been authorized
Ratio 1.17 & 1.20 & 1.33 & to permit deviations in respect of
above above above accounts.
Debt Maximum Maximum Maximum Various authorities have been authorized
Equity 4:1 3:1 3:1 to permit deviations in respect of
Ratio accounts...
(TTL /
TNW)
Total Maximum Maximum Maximum Various authorities have been authorized
outside 4.5:1 4.5:1 4.5:1 to permit deviations in respect of
liability/ accounts..
TNW
Average Minimum Minimum Minimum Various authorities have been authorized
DSCR 1.75 with a 1.75 with 1.75 with a to permit deviations in respect of
for condition a condition accounts.
Term that in any condition that in any
Loan one year it that in one year it
should not any one should not
be below year it be below
1.25 should 1.25
not be
below
1.25
28

29. 3.8 SME Products
The following products are launched for SME sector across the country:
 Baroda SME Gold Card providing additional 10% facility over the assessed MPBF for meeting emergent
business requirements.
 Baroda SME Loan Pack providing single line of credit for meeting SME borrowers’ working capital as
well as long term requirements within the overall limit approved by the bank as per the eligibility, i.e. 4
times of borrower’s tangible net worth as per last audited Balance Sheet, or Rs. 2/- crores, whichever is
lower.
 Baroda Overdraft against Land & Building is a unique product for financing working capital
requirements, long term margin requirements of SME borrowers against the security of unencumbered land
and building belonging to the unit, or, promoters of the unit, upto a maximum limit of Rs. 2/- crores
depending on the location, viz. rural and semi-urban, urban and metro.
 Baroda Vidyasthali Loan providing finance to Educational Institutional upto a limit of Rs. 5/- crores on
liberalized terms. This scheme is implemented at select branches of the Bank depending on the business
potential.
 Baroda Arogyadham Loan for providing finance for setting up new Nursing Homes, Hospitals including
Pathological Laboratories, renovation of existing Nursing Homes/Hospitals, purchase of medical diagnostic
equipments as also office equipments etc. and to meet working capital requirement upto a maximum limit
of Rs.5/- crores, depending on the location, on liberalized terms. This scheme is also implemented at select
branches of the bank.
 Scheme for financing existing SME customers/Current Account holders for purchase of new vehicles
upto a limit of Rs. 50/- lacs with 10% margin.
29

30. 4.) FOOD & AGRO BASED INDUSTRIES
30

31. 4.1) EXECUTIVE SUMMARY
Emerging Food Processing SMEs of India attempts to provide a platform to the Food
Processing SMEs, so as to facilitate their interface with potential global partners and buyers.
The report has profiled 262 companies with a turnover of less than Rs 1,000 mn. Of these,
83% are small-scale firms and 17% are medium scale. There are 53 companies having
presence in more than one industry sub-segment. Of the balance 209 companies profiled,
around 33% are into grain processing & spices, 10% each in non-alcoholic beverages and
packaged/convenience food, 8% in fruits & vegetables, 7% each in bakery and milk & milk
products, 5% in sugar & confectionary, 4% each in meat & poultry and marine products,
3% in alcoholic beverages and 9% in the others sub-segment.
The regional representation of companies in the report suitably reflects the geographical
concentration of the Indian food processing industry. The profiled companies are from 17
states and 2 union territories. The list consists of 89 companies from West India (49%
registered in Mumbai-Navi Mumbai region, followed by 8% each from Ahmedabad and
Pune), 82 from the South (20% each from Chennai and Hyderabad) and 68 companies
from the North (50% registered in Delhi, followed by 21% from Rajasthan). These regions
are the major industrial clusters of food processing SMEs in the country.
Of the 262 companies profiled, as many as 245 companies provided us sufficient data
points to enable a statistical analysis. Some of the insights revealed include the following:
In terms of ownership patterns, 13% are proprietary firms, 17% partnership firms, 43%
private limited companies and the rest 27% are public limited companies. As many as 65%
of profiled companies are engaged solely in manufacturing, while 35% are engaged in
manufacturing as well as trading. Around 79% of the companies began operations during
the 1980s and 1990s, while 18% of the companies are relatively new and have begun
operations post-2000. 71% companies have a single manufacturing facility while 27%
operate with 2 or more plants. In terms of IT penetration, 42% companies have a website.
The food processing industry is expected to continue its high-growth trajectory in the near
future, and SMEs are expected to play a critical role. Emerging Food Processing SMEs of
India will provide the right platform for SMEs, enabling them to become globally
competitive.
4.2) METHODOLOGY
31

32. The Micro, Small and Medium Enterprises Development Act of 2006, which came into effect
from October 2, 2006 defines SMEs as entities that have an investment of above Rs 10 mn
and below Rs 100 mn in plant and machinery for firms engaged in production of goods.
Considering the challenges entailed in tapping financial information from a highly
fragmented sector, the analysis has formulated a correlation between investment and
turnover to arrive at a benchmark of Rs 1,000 mn turnover for the SMEs.
Emerging Food Processing SMEs of India focuses on processors of food and food
products across the value chain, from fruits & vegetables to meat & poultry, bakery, non-
alcoholic beverages, packaged/convenience food, milk & milk products, marine products,
alcoholic beverages and grain processing. Trading companies have been excluded. The
report also includes diversified companies operating in the food processing and allied
segments and having business interests in other industries. The report has excluded
subsidiaries of large Indian business houses, multinational companies and subsidiaries of
multinational companies, thus honouring the true Indian entrepreneurial spirit that the
SMEs represent.
The companies that qualified on the basis of turnover were further screened through
another set of parameters to arrive at a truly representative list of emerging SMEs.
Companies with negative net worth and those declared financially sick by the Board for
Industrial & Financial Reconstruction (BIFR) were eliminated. Other considerations included
financial growth performance over the past two years, growth prospects and production
efficiencies.
Every effort was made to ensure that the report covers food processors located across the
length and breadth of the country. Based upon the Annual Survey of Industries (ASI) and
National Sample Survey Organization (NSSO) And Centre for monitoring Indian economy
and Capitaline database. we identified a large universe of auto component manufacturers.
The sections titled Industry Report and SME Insights are special analyses on the food
processing industry which looks at current trends, competitive dynamics and the future
outlook for the segment. The SME Insights section presents analytical findings drawn from
the primary information collated by leading consulting firms across the world.
4.3) DATA COLLECTION AND ANALYSIS
Overview
The food processing industry in India is a sunrise sector that has gained prominence in
recent years. Availability of raw materials, changing lifestyles and relaxation in policies has
given a considerable push to the industry’s growth. This sector is among the few that
serves as a vital link between the agriculture and industrial segments of the economy.
Strengthening this link is of critical importance to improve the value of agricultural
produce; ensure remunerative prices to farmers and at the same time create favourable
demand for Indian agricultural products in the world market. A thrust to the food
processing sector implies significant development of the agriculture sector and ensures
value addition to it.
32

33. The Indian food processing industry holds tremendous potential to grow, considering the
still nascent levels of processing at present. Though India’s agricultural production base is
reasonably strong, wastage of agricultural produce is sizeable. Processing of fruits and
vegetables is a low 2%, around 35% in milk, 21% in meat and 6% in poultry products. By
international comparison, these levels are significantly low - processing of agriculture
produce is around 40% in China, 30% in Thailand, 70% in Brazil, 78% in the Philippines
and 80% in Malaysia. Value addition to agriculture produce in India is just 20%, wastage is
estimated to be valued at around US$ 13 bn (Rs 580 bn).
India, with an arable land of 184 mn hectares is, the highest producer of milk in the world
at 90 mn tonnes p.a., second largest producer of fruits & vegetables (150 mn tonnes), third
largest producer of foodgrains and fish and has the largest livestock population.
Considering the wide-ranging and large raw material base that the country offers, along
with a consumer base of over one billion people, the industry holds tremendous
opportunities for large investments.
Ministry of Food Processing Industries
The Ministry was set up in 1998 and the industry segments that come under its purview
are:
• Fruit & Vegetable processing (including freezing and dehydration)
• Grain Processing
• Processing of Fish (including canning and freezing)
• Processing and refrigeration of certain agricultural products, dairy products,
poultry and eggs, meat and meat products
• Industries related to bread, oilseeds, meals (edible), breakfast foods,
biscuits, confectionery, malt extract, protein isolate, high protein food, weaning food
and extruded food products (including other ready-to-eat foods)
• Beer, including non-alcoholic beer
• Alcoholic drinks from non-molasses base
• Aerated water and soft drinks
• Specialised packaging for food processing industries.
The Ministry of Food Processing Industries, GoI, has estimated the size of the Indian food
market at US$ 191 bn (Rs 8,600 bn). The processed food market is projected to be over
US$ 100 bn, of which the primarily processed food market accounts for 60%, while the
value-added processed food market is around 40%.
The average annual growth of the food processing industry has been around 8% between
FY01-FY08. The segments that have driven the growth are the beverages and meat & meat
products and processed fish sectors. The food processing industry in India has a share of
1.5% in the total GDP of the country, and as part of total manufacturing accounts for 9%.
India’s share in world trade in respect of processed food is about 1.6%.
An extensive and highly fragmented industry, the food processing sector largely comprises
of the following sub-segments: fruits & vegetables, milk and milk products, beer & alcoholic
beverages, meat and poultry, marine products, grain processing, packaged/convenience
food and packaged drinks. A large number of players in this industry are small sized
companies, and are largely concentrated in the unorganised segment. This segment
accounts for more than 70% of the output in volume terms and 50% in value terms.
33

34. However, though the organized sector is comparatively small, it is growing at a much faster
pace.
Food Processing Units in Organised Sector (numbers)
Source: Ministry of Food Processing Industries, Annual Report 2007-08.
Industry Sub-Segments
Fruits & Vegetables
The installed capacity of fruits and vegetables processing industry has increased from 1.1
mn tonnes in January 1993 to 2 mn tonnes in 2000 and further to 2.2 mn tonnes in 2008.
The processing of fruits and vegetables is estimated to be around 2.2% of the total
production in the country. The prominent processed items in this segment are fruit pulps
and juices, fruit based ready-to-serve beverages, canned fruits and vegetables, jams,
squashes, pickles, chutneys and dehydrated vegetables. Some recent products introduced
34

35. in this segment include vegetable curries in retortable pouches, canned mushroom and
mushroom products, dried fruits and vegetables and fruit juice concentrates.
The fruits and vegetable processing industry is highly decentralized, and a large number of
units are in the cottage / household and small scale sector, having small capacities of up to
250 tonnes/annum. Since 2000, the industry has seen significant growth in ready-to-serve
beverages, fruit juices and pulps, dehydrated and frozen fruits and vegetable products,
pickles, processed mushrooms and curried vegetables, and units engaged in these
segments are export oriented.
The domestic industry is yet to change its preference in favour of processed foods.
Consumption of value added fruits and vegetables is low compared to the primary
processed foods, and fresh fruits and vegetables. The inclination towards processed foods is
mostly visible in urban centers.
A significant thrust can be given to this sector by strengthening linkages between farmers
and processors. The weak linkage between farmers and markets, as well as, farmers and
processing companies has brought about inefficiencies in the supply chain and encouraged
the involvement of middlemen. The Government of India’s National Agriculture Policy
envisages the participation of the private sector through contract farming and land leasing
arrangements which not only assures supply of raw material for processing units, but also a
market for agriculture produce, accelerate technology transfer and capital inflow into the
agriculture sector.
Contract farming in wheat practiced in Madhya Pradesh by Hindustan Lever Ltd and by
Pepsi Foods Ltd in Punjab for tomatoes, foodgrains, spices and oilseeds are some successful
examples of contract farming in India, which changed the farming landscape and promoted
the cultivation of processable variety of farm produce. Such innovative practices will power
the fruits, vegetables and grain processing industry. Apart from such initiatives, fiscal
incentives and tax concessions will also give impetus to the sector. The five-year 100% tax
exemption announced by the Government in FY05 was one such incentive for upcoming
fruits and vegetable processing units.
Milk and Milk Products
India has one of the highest livestock population in the world, accounting for 50% of the
buffaloes and 20% of the world’s cattle population, most of which are milch cows and milch
buffaloes. India’s dairy industry is considered as one of the most successful development
programmes in the post-Independence era.
As of 2008-09 total milk production in the country was over 100 mn tonnes with a per
capita availability of 229 gms/day. The industry has been recording an annual growth of
4% during the period 1993-2007, which is almost 3 times the average growth rate of the
dairy industry in the world. Milk processing in India is around 35%, (with the organized
dairy industry accounting for 13% of the milk produced) while the rest of the milk is either
consumed at farm level, or sold as fresh, non-pasteurized milk through unorganised
channels.
Dairy Cooperatives account for the major share of processed liquid milk marketed in the
India. Milk is processed and marketed by 170 Milk Producers’ Cooperative Unions, which
federate into 15 State Cooperative Milk Marketing Federations. Over the years, several
35

36. brands have been created by cooperatives like Amul (GCMMF), Vijaya (AP), Verka (Punjab),
Saras (Rajasthan). Nandini (Karnataka), Milma (Kerala) and Gokul (Kolhapur).
The milk surplus states in India are Uttar Pradesh, Punjab, Haryana, Rajasthan, Gujarat,
Maharashtra, Andhra Pradesh, Karnataka and Tamil Nadu. The manufacturing of milk
products is concentrated in these milk surplus States.
As per data released by the Ministry of Food Processing Industries, exports of dairy
products have been growing at the rate of 25% p.a. in quantity terms and 28% in value
terms since 2001. Significant investment opportunities exist for the manufacturing of value-
added milk products like milk powder, packaged milk, butter, ghee, cheese and ready-to-
drink milk products.
Meat & Poultry
Since 1995, production of meat & meat products has been steadily growing at a rate of 4%
p.a.. Currently, the processing level of buffalo meat is estimated at 21%, poultry 6% and
marine products 8%. Only about 1% of the total meat is converted into value added
products like sausages, ham, bacon, kababs, meat balls, etc. Production of meat is
governed under local by-laws as slaughtering is a state subject. Processing of meat is
licensed under the Meat Food Products Order, 1973.
In 2003 India had a livestock population of 470 mn that included 205 mn cattle and 90 mn
buffaloes. The country produces about 450 mn broilers and 30 billion eggs annually. Cattle,
buffaloes, sheep and goat, pigs and poultry are the types of animals which are generally
used for production of meat. Slaughter rate for cattle as a whole is 20%, for buffaloes it is
41%, pigs 99%, sheep 30% and 40% for goats. The country has 3,600 slaughter houses, 9
modern abattoirs and 171 meat processing units licensed under the meat products order.
The poultry industry is among the faster growing sectors rising at a rate of 8% per year.
Vertical integration of poultry production and marketing has lowered costs of production,
marketing margins and consumer prices of poultry meat. There are eight integrated poultry
processing units in the country, which hold a significant share in the industry.
Marine Products
India is the third largest fish producer in the world and ranks second in inland fish
production. India’s vast potential for fishes, from both inland and marine resources, is
supplemented by the 8,000 km coastline, 3 mn hectares of reservoirs, 1.4 mn hectares of
brackish water, 50,600 sq km of continental shelf area and 2.2 mn sq km of exclusive
economic zone.
Processing of marine produce into canned and frozen forms is carried out almost entirely
for the export market. Infrastructure facilities for processing of marine products include 372
freezing units with a daily processing capacity of 10,320 tonnes and 504 frozen storage
facilities with a capacity of 138,229.10 tonnes. Apart from these, there are 11 surimi units,
473 pre-processing centres and 236 other storages.
Processed fish products for export include conventional block frozen products, individual
quick frozen products (IQF), minced fish products like fish sausage, cakes, cutlets, pastes,
surimi, texturised products and dry fish etc.
36

37. Exports of marine products have been erratic and on a declining trend which can be owed
to the adverse market conditions prevailing in the EU and US markets. The anti-dumping
procedure initiated by the US Government has affected India’s shrimp exports to the US.
Grain Processing
Grain processing includes milling of rice, wheat and pulses. As of 1999-00, there were over
91,000 rice hullers and 2,60,000 small flour mills engaged in primary milling. Also, there
are about 43,000 modernised rice mills/huller-cum-shellers. Around 820 large flour mills in
the country convert about 10.5 mn tonnes of wheat into wheat products. Also there are
10,000 pulse mills milling about 75% of pulse production of 14 mn tonnes in the country.
Primary milling of grains is the most important activity in the grain processing segment of
the industry. However, primary milling adds little to shelf life, wastage control and value
addition. Around 65% of rice production is milled, mostly in modern rice mills. However,
the sheller-cum-huller mills operating give low recovery. Wheat is processed for flour,
refined wheat flour, semolina and grits. Apart from the 820 large flour mills, there are over
3 lakh small units operating in this segment in the unorganised sector. Dal milling is the
third largest in the grain processing industry, and has approximately 11,000 mechanised
mills in the organised segment. Oilseed processing is another major segment, an activity
largely concentrated in the cottage industry. According to estimates, there are
approximately 2.5 lakh ghanis and kolus (animal operated oil expellers), 50,000 mechanical
oil expellers, 15,500 oil mills, 725 solvent extraction plants, 300 oil refineries and over 175
hydrogenated vegetable oil plants.
Indian rice, especially Basmati rice, has gained international recognition, and is a premium
export product. Branded grains as well as grain processing is now gaining popularity.
Beer & Alcoholic Beverages
India is the third largest market for alcoholic beverages in the world, and the domestic
market is largely dominated by United Breweries, Mohan Meakins and Radico Khaitan. The
demand for beer and spirits is estimated to be around 373 mn cases per year. There are 12
joint venture companies having a licensed capacity of 33,919 kilo-litres p.a. for production
of grain based alcoholic beverages. Around 56 units are manufacturing beer under license
from the Government of India.
The two segments in the liquor segment, country liquor and Indian Made Foreign Liquor,
both cater to different sections of society. The former is consumed in r ural areas and by
low-income groups, while the latter is consumed by the middle and high income groups.
There are approximately 23,000 licensed liquor outlets in India, with another 10,000
outlets in the form of bars and restaurants. Regulations in this sector differ state-wise. In
Tamil Nadu, Kerala and Andhra Pradesh, the distribution is controlled by the state
government, and any change XVIII in the ruling party has a direct impact on the availability
of alcohol. In Uttar Pradesh, liquor distribution licenses were earlier based on bidding, and
the highest bidder was given the license. This has not changed to the lottery allotment
system. Gujarat Government has banned the sale and distribution of liquor in the state.
The wine industry in India has come into prominence lately and has been receiving support
from the Government as well. The market for this industry has been estimated to be
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38. growing at around 25% annually. Maharashtra has emerged as an important state for the
manufacture of wines. There are more than 35 wineries in Maharashtra, and around 1,500
acres of grapes are under cultivation for wine production in the state. The Maharashtra
Government has declared wine-making business as small-scale industry and has also
offered excise concessions.
Consumer Foods
This segment includes packaged foods, aerated soft drinks, packaged drinking water and
alcoholic beverages.
Packaged / Convenience Foods
Consumer food industry mainly consists of ready-to-eat and ready-to-cook products, chips,
salted snacks, pasta products, cocoa based products, bakery products, biscuits, soft drinks,
etc.
There are around 60,000 bakeries, 20,000 traditional food units and several pasta food
units. The bakery industry is among the few processed food segments whose production
has been increasing steadily in the country in the last couple of years. Bakery products
include bread, biscuits, pastries, cakes, buns, rusk etc. This activity is mostly concentrated
in the unorganized sector. Bread and biscuits constitute the largest segment of consumer
foods with an annual production is around 4.00 mn tonnes. Bread manufacturing is
reserved for the small scale sector. Out of the total production of bread, 40% is produced in
the organized sector and the remaining 60% in the unorganised sector. Similarly, in the
production of biscuits, share of unorganized sector is about 80%.
Cocoa Products
There are 20 units engaged in the manufacture of cocoa products like chocolates, drinking
chocolate, cocoa butter substitutes, cocoa based malted milk foods with an annual
production of approximately 34,000 tonnes.
Soft drinks
This segment is the 3rd largest in the packaged foods industry, after packed tea and
packed biscuits. The aerated soft drinks industry in India comprises over 100 plants and
provides direct and indirect employment to over 125,000 employees. It has attracted one
of the highest foreign direct investments in the country. Its position is strengthened by
strong forward and backward linkages with glass, plastic, refrigeration, sugar and the
transportation industry.
Penetration levels of aerated soft drinks in India are quite low compared to other
developing and developed markets, which is indicative of the potential the segment holds
for further growth.
Constraints & Drivers of Growth
Growing urbanization, increasing disposable income, emergence of organised food retail,
changing lifestyles and food consumption patterns are the key factors driving growth for
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39. processed foods in India. These are post-liberalisation trends that have given an impetus to
the sector.
Consumption patterns in India have been undergoing a visible shift. Earlier, the share of
cereal products was the highest, followed by milk & milk products, vegetables, edible oil
and meat products. However, in recent years, the growth rates for fruits, vegetables, meat
and dairy products have been higher than cereals and pulses. This shift in turn implies that
there is also a need to diversify the food production base to match the changing
consumption preferences.
This shift in consumption follows the pattern observed in developed countries in the
evolution of the global food demand. There is a shift from carbohydrate staples to animal
sources and sugar. Going by this pattern, in future, there will be increasing demand for
prepared meals, snack foods and convenience foods and further on the demand would shift
towards functional, organic and diet foods.
Some of the key constraints identified by the industry include:
• Lack of suitable infrastructure in terms of cold storage, warehousing, etc
• Lack of adequate quality control and testing infrastructure
• Inefficient supply chain and involvement of middlemen
• High inventory carrying cost
• High taxation
• High packaging cost
• Affordability and cultural preference of fresh food
Highest priority has been accorded by the Government for the development of
infrastructure. The Government has already taken several initiatives on this front which
include developing of food parks, packaging centres, modernised abattoirs, integrated cold
chain facilities, irradiation facilities and value added centres.
The initiative to develop food parks was taken primarily in order to assist the small and
medium enterprises which are unable to invest in capital intensive activities. So far, 22 food
parks have come into operation which provide common facilities like cold storage, food
testing and analysis laboratories, packaging centres, etc
In terms of policy support, the ministry of food processing has taken the following
initiatives:
• Formulation of the National Food Processing Policy
• Complete de-licensing, except for alcoholic beverages
• Declared as priority sector for lending in 1999
• 100% FDI on automatic route
• Excise duty waived on fruits & vegetables processing from 2000 – 01
• Income tax holiday for fruits & vegetables processing from 2004 – 05
• Customs duty reduced on freezer van from 20% to 10% from 2005 – 06
• Implementation of Fruit Products Order
• Implementation of Meat Food Products Order
• Enactment of FSS Bill 2005
• Food Safety & Standards Bill, 2005
39

40. Apart from these initiatives, the Centre has requested state Governments to undertake the
following reforms:
• Amendment to the APMC Act
• Lowering of VAT rates
• Declaring the industry as seasonal
• Integrate the promotional structure
Investments
The total inflow of foreign direct investment in the food processing sector has been around
Rs 55 bn between 1991 to November 2008. During the last five years, FDI witnessed an
inflow of over Rs 24 bn of foreign investment. The highest investment in a single year was
in 2001-02 amounting to Rs 10 bn.
Maharashtra was among the front-runners to receive the highest share of FDI in food
processing during the last five years. The dairy and consumer industrise received FDI worth
Rs 2.7 bn each as foreign investment. Nearly 30 per cent of FDI in the food processing
sector comes from EU countries such as Netherlands, Germany, Italy and France. Perfetti,
Cadbury, Godrej-Pilsbury, Nutricia International, Manjini Comaco are some of the
successful ventures from EU countries.
Major Food Processing Companies in India
The entry of multinational companies has increased competition in the food processing
industry. At the same time, these companies are facing tough competition from strong
Indian brands. This level of competition has increased innovations, facilitating a sustained
growth of the sector and also improve global competitiveness. The emerging new growth
phase of the sector is just in its initial stages with the potential for India to emerge as a
leading food supplier to the world.
SWOT Analysis of Food–Processing Industry
Strengths
• Abundant availability of raw material
• Priority sector status for agro-processing given by the central Government
• Vast network of manufacturing facilities all over the country
• Vast domestic market
Weaknesses
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41. • Low availability of adequate infrastructural facilities
• Lack of adequate quality control & testing methods as per international standards
• Inefficient supply chain due to a large number of intermediaries
• High requirement of working capital.
• Inadequately developed linkages between R&D labs and industry.
• Seasonality of raw material
Opportunities
• Large crop and material base offering a vast potential for agro processing activities
• Setting of SEZ/AEZ and food parks for providing added incentive to develop
greenfield projects
• Rising income levels and changing consumption patterns
• Favourable demographic profile and changing lifestyles
• Integration of development in contemporary technologies such as electronics,
material science, bio-technology etc. offer vast scope for rapid improvement and
progress
• Opening of global markets
Threats
• Affordability and cultural preferences of fresh food
• High inventory carrying cost
• High taxation
• High packaging cost
4.4) FINDINGS
SME Insight
The attention that small and medium enterprises are lately commanding from banks,
institutions, industry and academicians, has encouraged this study on the SME segment.
The SMEs were relatively over-shadowed for long by other economic concerns. As a result,
there has been a deficit of authentic information on this segment and has limited the
estimation of value contributed by it to India’s economy. Through this primary research
undertaken by the leading consulting firms, we attempt to add value through insights that
have emerged from our study.
This study aims to draw a profile of how small and medium companies in the food
processing space function. We have attempted to chart their operational structure, business
practices, preferences, marketing, efficiency parameters, etc. For this quantitative exercise,
a sample of 245 companies was considered; the requirement being that at least 80% of the
information sought has been provided.
Some key characteristics of the sample of 245 companies are:
• Ownership pattern of companies include: proprietary firms 13.5%,
partnership firms 16.5%, private limited companies 43% and public limited
companies 27%
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42. • The sample covers over 98% of the food processing clusters, except a few in
Himachal Pradesh and Jammu & Kashmir
• The geographical spread of the sample companies mirrors the concentration
of food processing companies in the country. The West and South have maximum
representation. Around 33.5% companies are located in the West, 31% in the
South, 27.5% in the North and 8% in the East
• Reflecting the low capital intensive nature of the industry, around 77% of the
companies in the sample are small scale enterprises on the basis of investments in
plant and machinery. The rest are medium enterprises. (Refer Fig 01)
• The representation from the various sub-segments of the industry is as
follows: 34% in grain processing & spices segment, 14% into packaged /
convenience food, 8% in non-alcoholic beverages which includes soft drinks, tea,
coffee, fruit juices, water, etc, 7% each in milk & milk products and fruits &
vegetable processing, 6% into bakery, 5% into sugar & confectionary, 4% in meat &
poultry, 3% each into alcoholic beverages and marine products and 9% in the
others segment (Refer Fig. 2). The ‘others’ category include manufacturers of food
colours, flavours, additives, seeds, guar gum etc. (Refer Fig 02)
• Around 65% of the companies are solely into manufacturing, while 35% are
engaged in manufacturing as well as trading
• Around 78.5% of the companies in the sample began operations between
1980 and 2000; only 4% were present prior to 1980s. The rest are relatively new
having begun operations post-2000
• 71% of companies have a single manufacturing facility while 27% operate
with 2 or more plants.
• In terms of IT penetration, 42% of the companies have a website.
42

43. Turnover
Over 50% of the companies in the sample have a turnover of less than Rs 100 mn, and
most of them were private limited companies, followed by proprietary firms. Another 33%
were earning over Rs 100 mn but less than Rs 500 mn. Of the remaining 17% of the
companies which were in the turnover bracket of Rs 500 mn and Rs 1,000 mn, the public
limited and private limited companies dominated with a share of 60% and 33%
respectively.
In terms of the regional spread of these companies, a large number of small firms were
concentrated in the West. The northern and southern region showed a higher proportion of
companies falling in the Rs 500 mn and above turnover bracket.
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44. Figure 03
Top
Ownership Structure
The North-based companies once again showed a preference for proprietary form of
ownership, similar to that observed among textile SMEs. The companies in the South were
prominently private limited companies. The companies in the Western region were again
predominantly private limited companies. (Refer Fig. 04)
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45. Branding
Around 65% of the companies in the sample had branded products. The grain processing
and packaged/convenience foods segments were the most prominent among the brand
owning companies. Brand consciousness among companies was widespread irrespective of
their size. It was found that among the small scale companies with turnover less that Rs
100 mn, 62% of the companies had branded products. Correspondingly, 69% of the
companies in the turnover bracket of Rs 500-1,000 mn had developed brands for their
products.
Exports
Around 114 companies, or 47% of the sample, were exporting their products and 36%
were exporting more than 90% of their produce. Of the total exporting firms, 23 companies
were 100% exporters mainly in the grain processing, fruits & vegetables and meat &
poultry segments, with many of them exporting directly to foreign clients.
Of the exporting companies, 61% have branded products and almost 55% have quality
certifications. The average capacity utilization among exporting companies was relatively
higher (80%) compared with those selling only in the domestic market. Segment-wise, the
pre-dominant exporters were companies in the grain processing and the fruits & vegetables
segments having a share of 29% and 15% respectively.
In terms of the various sub-segments in the food processing industry and their exports, it
was found that companies exclusively into meat & poultry exported over 96% of their
output, followed by marine product manufacturers, which on an average exported 93% of
their produce.
Capacity Utilisation
The companies in the study were operating at an average capacity utilisation of 78%.
Approximately 44% of the companies were operating at 90% and above of installed
capacity. Of these companies operating at 90% and above capacity, 38% were operating in
the Grain Processing & Spices segment followed by companies in Fruits & Vegetable
Processing segment.
Regionally, the North-based companies reflected higher capacity utilisation and were on an
average operating at 82% of installed capacity. In terms of ownership, public limited
companies constituted a significant 36% of those operating at more then 90% capacity. On
the basis of size, the enterprises having turnover between Rs 250-500 mn showed higher
average capacity utilisation of an average 88%.
Average capacity utilisation across segments
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46. Table 2
Top
Future Plans
Of the total 245 companies in the sample, 61% have envisaged strategies for future
growth. The plans range from capacity expansion, modernisation, diversification to new
marketing initiatives and venturing into newer markets.
Out of the total companies with future plans for growth, 45% of the companies have plans
for expanding their capacity in order to meet the growing demand. A substantial 29% of
the companies have diversification plans into related or un-related fields.
Segment-wise, the grain processing companies showed highest dynamism with 65% of the
companies in this segment having divulged future growth plans. In terms of future plans, of
the companies having capacity expansion plans, 33% were from the grain processing
segment followed by packaged/convenience foods (15%). Bakeries accounted for 13% of
the companies having plans for diversifying their product segment, while 16% companies
looking for newer markets belonged to non-alcoholic beverages segment
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47. Figure 05
Hindrances to growth
Infrastructure and lack of institutional support were cited as the key hindrances to growth
by the SMEs. Nearly 52% of the companies in the sample responded to the query on
hindrances to growth. Of these, over 80% of the responses alluded to lack of institutional
support as an impediment. A large number of these companies were from the northern and
southern belt. Infrastructure as a barrier was cited by 37% of the companies. The West-
based companies were largely concerned with marketing issues.
Top
4.5) CONCLUSION AND RECOMMENDATIONS
FUTURE PROSPECTS
The decade-and-a-half of Indian economic reforms have now reached a stage where it is
bringing about changes in the the agriculture and food processing sectors. Reforms had
more or less bypassed the agriculture sector till recently. However, demographic factors,
changing lifestyles and consumer demand for greater variety has increased pressures on
the food processing sector to provide products at competitive prices. Experience of large
developed agricultural economies has proven that the integration of production and
processing stages are a universal feature of efficient food marketing systems in the
advanced stages of economic development.
Driving growth in the food processing sector holds the key to imparting changes in the
labour intensive agriculture sector in India. Inefficient marketing systems are already being
targeted. Policies are now promoting the participation of private investors that would
promote efficiency in food processing and agriculture marketing systems. These are just
the initial stages of development and further efficiencies in the agriculture sector, in terms
47