Kpmg assocham - india food processing - 2009

KPMG IN INDIA
CONSUMER MARKETS
Food processing and Agri business

01
About the study
This is a briefing paper that was presented by KPMG at the “International
Summit on Food Processing and Agribusiness” organized by
ASSOCHAM. The document analyses the potential of the Indian Food
Processing sector in two dimensions - India as a Sourcing hub and India
as a huge potential market in itself.
The study starts with the market landscape of food processing sector in
India, the key trends in the value chain, growth drivers and the export
scenario. It then identifies the key opportunities for players across the
value chain.
The paper then focuses on key hurdles in the path to growth, and
explains by means of cases how to overcome the hurdles. The document
concludes with the expectations of the industry and recommendations.
© 2009 KPMG, an Indian registered partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International,
a Swiss cooperative. All rights reserved.

02
India's strong agricultural base and accelerating economic growth holds a significant
potential for the Food Processing Industry that provides a strong link between agriculture
and consumers. Government also has accorded a high priority to the sector and has
provided many fiscal incentives. An enviable share of the world's agri-produce and diverse
agro-climatic regions coupled with changing demographic patterns, food habits and rise in
income levels opens up numerous opportunities in the sector – India as a large consumer
market and India as a potential sourcing hub to the world.
Yet India's share in the global food trade is just around 1.5 percent. What are the key
constraints that are slowing the growth of the sector and how are they being addressed?
What are the various opportunities that the Indian Food Processing Industry provides? What
are the trends in the food trade? How are the consumer food habits changing and how does
it affect the industry? What are the support initiatives taken by the government and what
opportunities do they provide in the value chain beyond just Processing? What is the
industry expecting from the government to further the growth? What further can be done to
help India reach the very deserving lead position in the global trade?
The report aims to answer all these questions on the Indian Food Processing Industry.
KPMG conducted extensive research based on information from both primary and
secondary sources – various proprietary databases, our experience with various food
companies and interviews with players across the value chain – to understand the sector,
the potential and various immediate and long term steps required. A summary of the key
findings of our analysis is outlined below.
Executive Summary

03
Food is the largest consumption category in india
India's Food Processing Industry is estimated to be around USD 67 billion of the USD 180
billion Food Industry and creates more employment opportunities per unit investment than
any other sector.
India has a diverse agro-climatic regions and soil types with optimum amount of sunshine
hours and day length suited for cultivating both food and commercial crops round the year.
Naturally, India is a leading producer of many agricultural products like fruits and vegetables,
cereals, pulses etc. India offers a huge potential in terms of rising consumption and as a
sourcing hub for the world due to its supply strength.
– Introduction: India - Global Food processing Hub, explains the contribution of
Food Processing to GDP, India's supply strengths and rising consumption-led
demand, hurdles in terms of wastage and highlights the opportunities in the
sector for players and the government.
Common features across segments –
Largely unorganised – Though the unorganised segment varies across categories
mentioned above, approximately 75 percent of the market is still in the unorganised
segment.
CHAPTER
!
Significant opportunities exist across each segment
Food Consumption in India will grow at a CAGR of 5.32 percent
Source: BMI, Q1 2009 & CSO
151.7 157.7
168.6
180.1 184.4 191.4 198
50
100
150
200
250
USDBn
0
2005 2006 2007 2008e 2009f 2010f 2011f 2012f 2013f
210.3
229.7
CAGR: 5.32%
Food Processing Segments
Food Processing
Fruits &
Vegetables
Meat &
Poultry
Dairy Marine
Products
Grains Consumer
Food
1
Source: KPMG Analysis

04
Level of Processing across Segments
Segment
Fruits and Vegetables
Fisheries
Poultry
Buffalo Meat
Milk
Level of Processing
2.2%
26%
6%
20%
35%
Comments
USA (65 %), Philippines (78%) and China (23%)
60-70% in developed countries
Source: UN COMTRADE
Export of processed food growing faster than exports of Food overall
18.75%
21.84%
24.63% 25.44%
23.63%
28.96%
31.25%
28.78%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
2005 2006 2007 2008
Export of Food and Beverages Export of Processed Food and Beverages
2
! The organised sector is relatively bigger in the secondary processing segment than the
primary processing segment. Also, the primary processing segment is highly
fragmented.
The level of processing in each segment is low relative to many other countries and India
accounts for just around 1.5 percent of the global processed food trade.
If India was to lift its share of global processed food trade to just 3 percent, the Ministry of
Food Processing estimates that some USD 24.7 billion worth of investment would be
needed to restructure the industry. Taking a cue from the global examples, India also should
invest in infrastructure and policy development that helps reduce waste across the supply
chain and increase the level of processing and overall value of output.
– Food Processing Segments – details each segment of the Food Processing
covering the supply, processing, bottlenecks, and opportunities and explains
the need for improved focus and investment in the sector.
According to Business Monitor International, India’s Food exports are expected to increase
by 72.8 percent over 2008 to USD 24.25 billion in 2013. However, in spite of vast natural
resources, import growth of food products in India is also expected to be strong over the
forecast period, to reach USD 12.3 billion
by 2013. At an overall Food and Beverage
level, the export of processed segments is
growing much faster.
During the period 1980-2007 India’s share
of the global food exports has increased
from 1.1 percent to 1.4 percent, with
majority of the increase coming during the
current decade. Countries like Germany,
which had large number of SMEs similar to
that of India, have focused significantly on
R&D and Innovations in the sector apart
CHAPTER
Export of processed foods is growing faster than food segment
Source: MoFPI Annual Report 2007-08

05
Source: UN COMTRADE; CEPII
India's exports are predominantly to the nearby countries
0
South Asia 34%
Middle East 29%
East Asia 17%
Western Europe 10%
Rest of the world 7%
Africa 1%
ShareofTrade
0%
5%
10%
15%
20%
25%
30%
35%
40%
2000 4000 6000 8000 10000 12000 14000
Distance (Kms)
US and Canada 1%
from investing in infrastructure and supportive policy and legal framework that helped the
country to the top league of the exporters table. Joint research initiatives that helps SMEs
invest in a federal R&D lab promoted multiple product innovations in the country.
India’s trade in various segments in the Food Processing Sector has seen a good growth
driven by the Mango Pulp, Dried and Preserved vegetables, Pickles and Chutney in F&V,
Buffalo Meat in the Meat and Poultry, Basmati Rice in Grains and Shrimp in the Fisheries
segments. India’s exports, as is the case globally, are to the proximate geographies led by
South Asia at 34 percent and USA & Canada a poor 1 percent of total exports.
However, significant impediments exist hindering the export growth:
Poor quality and grading mechanisms for raw material leading to loss of consistency in
variety of raw material
High level of wastage across the value chain
Presence of too many intermediaries implying a high cost of raw material
High costs of packaging
Low technology equipment and knowledge
High costs and poor quality of distribution
Stringent Food Safety and Traceability norms from importing (developed) countries
India needs to take strong measures to promote growth:
Map demand with production capabilities – Himachal Pradesh, is manufacturing
commercial crop in Kiwi, instead of Apples, due to the falling demand for Apples
Move towards non-traditional items – A herbal beverage made from Sea-buckthorn
developed with DRDO technology opens up a huge market opportunity
Improve promotional activities for Indian food and market India as a food sourcing hub
Promote investment for increasing the level of processing in the sector
Upgrade agri-infrastructure to have a sustainable supply chain for consistent high
quality raw material
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06
3
4
•
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CHAPTER
CHAPTER
Provision for Training and Education on the safety and health regulations in export
markets
Market Diversification – Move over the geographical distance barriers and initiate joint
efforts with potential partners in identifying the focus of trade and creation of
conducive regulatory policies. Chile has successfully overcome the distance barrier and
exports to far off geographies due to its focus on quality, exports promotion by regional
trade agreements and joint initiatives.
– India’s Food Processing Trade – details the trade statistics of India, India’s
position in global trade, segment level and geography-based trade, the
impediments to growth and key export promotion strategies.
Increasing urbanisation, consciousness on health and nutrition and changing lifestyle are
changing the consumption habits of India. The number of working women, single
students/professionals and nuclear families is increasing creating a demand for processed
Ready-to-eat foods. Growth of organised retail, which makes the processed food readily
available, is also driving growth of Food Processing.
Government has initiated several steps like setting up Mega Food Parks, Integrated Cold
Chains, Modernisation of Abattoirs, fiscal incentives for technology upgradation, R&D,
Training and Educational institutes etc to reduce wastage and boost the growth of the
sector.
Budget 2009 provides a fillip to agriculture in terms of cheaper finance, increased allocation
to irrigation, harmonisation of taxes by implementing GST and fiscal incentives for
investments in Cold Chain facilities.
– Key Growth Drivers of Food Processing Sector in India – details the demand-
side and policy-level drivers of the sector, including a section on Budget 2009
measures for Food Processing Sector.
The Food Processing sector offers many opportunities across the value chain right from the
farm equipment players to the retail/food services segment.
Urbanisation and supportive policy is driving growth
Significant opportunities exist across the food value chain

India's Forex Reserves: 2001-2008 (till March 2008)
07
CHAPTER – Opportunities in the Food Processing Value Chain – details the food value
chain and provides an analysis of various opportunities that exist across the
value chain.
Farms
Inputs
Farming Marketing/
Aggregator
Processing Logistics
(Food)
Retail/Food
Services
Consumer
Financial & Business
Services
Transport
Services/Infrastructure
Quality Control Market Intelligence
Product Design
Distribution
Marketing
POLICY SUPPORT
A summary of the key opportunities is listed below
5
Summary of Opportunities across the value chain
Opportunity
Customised equipment for the local market
Processable variety of crops
Forward Linkages with the Processors
Contract Farming Arrangements
Consolidation of farm produce
Access to global markets
Forward linkages with Organised Retail
Backward linkages with farmer
Institutional segment business
Increase in integrated storage facilities requirement
Cold storage facilities
Mega Food Parks
Integrated Cold Chain
Quality Control and R&D labs
Food Safety management systems
Joint Research Initiatives
Training and Provision of Market Intelligence
Packaging and barcoding
Player
Farm Equipment
Farmer
Processor
Logistics provider
Investors
Enabling Segment
Food Processing Value Chain

Constraint Long and fragmented supply chain leading to high wastage and high costs especially due
to seasonality, perishability and variability of produce.
Supply Chain hindrances
08
Various constraints are impeding
the growth of the sector
The opportunity in Food Processing industry
is significant, but so are the challenges that
ail the sector. Certain limitations could be
seen as an opportunity waiting to be
exploited for the allied sectors and others as
a guiding light to a roadmap for
government's intervention. Below is a
summary of various constraints and strategic
measures.
Summary of Constraints and Strategies
R&D
Constraint Commodity-centric R&D
Compartmentalization of R&D agencies
Poor validation and feedback mechanisms
Strategy Need for a systems approach to R&D to enable a holistic research-development-
technology transfer continuum involving all stakeholders
Strategy Contract farming helps certainty of supply, reduction of costs, and high remuneration to the
farmers. Suguna Poultry successfully implemented contract farming creating a win-win
situation for the farmer and the integrator. Terminal markets, that operate on a hub-and-
spoke format, where in the terminal market (hub) is linked to a number of collection
centres (the spokes) help procurement of right quality produce at the right price.
Constraint Industry is in dire need of highly skilled and trained manpower across different levels to
handle various operations
Strategy Need for institutes and courses that provide managerial, safety and enforcements,
technology and production, warehousing and distribution trainings, and regulatory bodies
to focus on trade agreements
Human Resource Development
Constraint Low level of interaction between industry and research institutes
Strategy A few initiatives by CFTRI with industry (MTR, Rishang Keishing Foundation) have been
successful. Similar efforts needs to be encouraged
Industry Linkages
Constraint Indian Export related infrastructure for agri-produce is grossly inadequate, especially at sea
ports and airports. More than 30 percent of the produce from the fields is lost due to poor
post-harvesting facilities and lack of cold chain infrastructure.
Strategy India has merely 21.7 Million Ton cold storage facilities whereas it needs at least 9-10
Million Ton more. Supportive measures for infrastructure investments from the private
sector are required.
Infrastructure bottlenecks
Constraint Either unavailability of funds or availability of funds through unorganized sector at
unfavourable terms and conditions.
Strategy Some organizations have been exploring equity investments in SMEs that operate along the
food value chain. These investors place less emphasis on collateral or creditworthiness and more
on the capabilities of the entrepreneurs and viability of their business plans. Two such initiatives
are African Agricultural Capital (AAC) and the Africa Enterprise Challenge Fund (AECF).
Poor Financing Options

09
CHAPTER – Constraints and strategies – details various constraints and strategies, with
case studies on how some players have been approaching the constraints.
Constraint The packaging material is imported from China as the sector lacks government support.
Packaging
Constraint
Constraint
Constraint
Constraint
Multiple laws at state and centre level are applicable to the FPI.
Was to enable establishment of private markets, direct purchase centres and promotion of
PPPs, but there is no uniform implementation of the Act. Only 15 states have adopted the
model law.
India's overall agriculture productivity is still at approximately 2 percent
Urgent need to make the law uniform across states. Support e-choupal like initiatives that
encourage market reforms
Strategy Encourage the sector by extending the tax breaks and concessions to players setting up
packaging industry in India
Strategy
Strategy
Players need to device a twin pronged strategy of improving agricultural yields coupled
with delivering the right quality to different markets
Strategy
Ensure that the requisite controls are put in place across the agri-value chain-from farm
inputs to storage of produce to food processing techniques.
Strategy
Need for a consolidated law that removes the hassles of multiple departments and multiple
laws
Multiplicity of Laws and Stringent Regulations
Poor implementation of APMC Act
Productivity Issues
Low adherence to quality standards
Unavailability of basic standardization and certification infrastructure. Given the size of the
industry, there is a huge gap in the availability of laboratories, trained manpower, and
certification agencies.
6

10
Industry expects a lot more from the government
KPMG has interviewed various players across the value chain for the study and collated
their expectations. The expectations are as under:
100 percent tax breaks in R&D – Large companies are willing to invest in R&D and also
support small scale industries provided the government provides incentives
Support for nutritional products – The industry expects the government to differentiate a
nutritional product from a non-nutritional product and make laws for labelling and
incentives
Conducive policy for Contract Farming – Need a change in the currently restrictive land
ceiling law
Harmonisation of taxes – VAT is not uniform across states leading to different prices in
different states
More incentives in Infrastructure Development – Government also needs to share the risks
of development and market
Focus on Skill Development – Need for improved focus on establishing training and
education facilities for production technology, warehousing, testing, safety and quality
systems
Easier Financing to Food Processing – Need to enable easier financing possibly with a
separate bank
KPMG’s recommendations for the sector:
More Production of processable varieties to help minimise wastage, improve value addition
and improve farmer income. This requires more investments in quality systems, sorting,
grading etc.
Promotion of Indian Food in global markets to market India as a brand in Food Processing.
Infrastructure development through Private Sector Participation (PSP)
Implementation of GST (to remove the non-uniformity in indirect taxes)
Fiscal incentives for modernisation
Support in meeting export quality norms by training facilities and providing market
intelligence through private bodies and institutes like NIFTEM, CFTRI etc
Extend incentives to players who invest substantial amounts in backward integration as this
helps farmers earn remunerative prices by minimising middlemen.
Promotion of Nutrition Foods – Need to make nutritional labelling a must and also
incentivise the players who produce nutrition foods.
– Industry Expectations and Recommendations – details the expectation of the
industry and KPMG recommendations for the sector.
A dynamic Food Processing sector will help India ensure higher value addition to agricultural
produce, generate employment, improve farmer income and create markets for domestic
consumption and export of agro foods.
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CHAPTER
7

11
Contents
Introduction: India - Global Food processing Hub
India’s Food Processing Trade
Key Growth Drivers of Food Processing Sector in India
Opportunities in the Food Processing Value Chain
Constraints and Strategies
Industry Expectations and Recommendations
Conclusion
Abbreviations
12
16
26
41
46
51
64
68
69

12
With agriculture at the core of Indian economy and more than two-thirds of the population
dependent on farming, a developed Food Processing sector can be a strong link between
agriculture and the consumers. Government's high priority to the sector coupled with a
growing consumption-led demand is leading to a fast pace growth in the sector. A
developed Food Processing sector will help overcome the biggest challenges in front of
India
Low farmer income and high subsidies
High wastage along the value chain
Poor hygiene and safety standards
Food processing is the set of methods and techniques used to transform raw ingredients
into food or to transform food into other forms for consumption by humans or animals
either at home or by the food processing industry. Food processing is a large sector that
covers activities such as agriculture, horticulture, plantation, animal husbandry and fisheries.
It also includes other industries that use agriculture inputs for manufacturing of edible
products. The food processing industry is made up of primary, secondary and tertiary food
processors.
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In India, Primary Food Processing is a major industry with lakhs of rice-mills/hullers, flour
mills, pulse mills and oil-seed mills. Also, there are several thousands of bakeries, traditional
food units and fruit & vegetable/spice processing units in unorganized sector.
Primary Food
Processors
Secondary Food
Processors
Tertiary Food
Processors
Primary industries process raw foods (wheat into flour, for example)
Secondary industries use primary products to manufacture other foods
(flour into bread).
Tertiary industries produce prepared convenience foods such as frozen
dinners or canned soup.
Introduction:
India - Global Food processing Hub

1. Ministry of Food Processing Industries, Annual Report 2007-08
2. IBEF Food Processing Report, June 2008
3. Changing lifestyle, thriving food processing; FFY
Magazine June 2009
13
These numerous advantages and factor conditions like low cost of labour put India in an
enviable position to produce a wide variety of food crops and commercial crops for
domestic consumption as well as export.
Significant Contribution to GDP
and Employment
India's Strengths in Food
Processing
Indian food processing industry is estimated to
be around USD 67 billion, of the USD 180
1
billion food industry, making it the fifth biggest .
The food industry expected to grow to USD
2
280 billion by 2015 and generate an additional
employment for approximately 8.2 million
people. It has been observed that employment
potential of the food-processing sector is much
higher than other sectors. For instance, an
investment of INR 10 billion generates
employment for 54,000 people in the food-
processing sector, jobs for 48,000 people in
textiles and employment of 25,000 people in
the paper industry.There is also fourfold
generation of indirect employment in auxiliary
and other downstream activities on account of
investment in the food sector. Also, 60 percent
of the employment generation takes place in
3
small towns and rural areas .
India is one of the key food producers of the
world and has access to several natural
resources. Diverse agro-climatic conditions
and wide ranging raw material base adds to
the huge advantage of a large untapped
domestic customer base.
Food processing industry in India is
supported by a great agri-climatic diversity
suitable for round the year cultivation of
crops. In terms of production, India is among
the world's major food producers – India
accounts for 17 percent animal, 12 percent
plants and 10 percent fish genetic resources
of the globe; and 16 percent of cattle, 57
percent of buffalo, 17 percent of goats and 5
percent of sheep population of the world.
Diverse agri-supply
52% cultivable land compared
to 11% world average
Largest livestock population
All 15 major climates in the
world exist in India
Largest producer of milk
46 out of 60 soil types exist
in India
Largest producer cereals
20 agri-climatic regions
Second-largest fruit and
vegetable producer
Sunshine hours and day length
are ideally suited for round the
year cultivation
Among the top five producers
worldwide of rice, wheat,
groundnuts, tea, coffee, tobacco,
spices, sugar and oilseeds.
India has the largest area in the world
under pulse crops
India is the first in the world to evolve a
cotton hybrid
India grows more than half of the world's
mangoes and leads all countries in the
production of cashews, millet, peanuts,
pulses, sesame seeds, and tea
The nation ranks second in the production
of cauliflowers, jute, onions, rice,
sorghum, and sugar cane
India is also the world's largest grower of
betel nuts, which are palm nuts chewed
as a stimulant by many people in tropical
Asia. It is also a leading producer of such
spices as cardamom, ginger, pepper, and
turmeric.
Some Interesting facts on
Indian Agriculture
Source: Can India be the Food Basket for the World, An ISB Working Paper
Statistics Source - National Horticulture Board, FICCI, MoFPI

14
India's Rank relative to the world in various agri-products
Percent Share HighLow
RankHighLow
Pulses, 1 , 21
Buffalo, 1 , 57
Paddy (Rice), 2 , 21
Chicken, 6 , 3
Sheep, 5 , 5
Eggs Total (m) 5, 3
Cattle, 1, 16
Total Milk, 1, 14
Cereal, 3, 11
Potatoes, 3, 8
Wheat, 2 , 12
Onions, 2 , 11Veg & Melons,
2, 10
Item, Rank, % of Global Share
Consumption-led demand
Source: BMI, Q1 2009 & CSO
Food Consumption in India
151.7 157.7
168.6
USDBn
180.1 184.4 191.4 198
210.3
229.7
0
50
100
150
200
250
2005 2006 2007 2008e 2009f 2010f 2011f 2012f 2013f
CAGR: 5.32%
India, with a population of more than 1.1 billion, is one of the largest consumer markets in
the world. Food consumption in India is expected to grow to 229.7 billion in dollar terms by
4
2013 from 168.6 billion in 2007 . Food and Beverages is largest category in Indian
5
consumer spending and is expected to remain in the future . The country's highly favourable
demographic patterns, with more than 50 percent of the population below 30 years of age,
increasing disposable income, urbanisation and lifestyle change are likely to bring about
changes that will enforce shifts in the Indian food and drinks industry, as young populations
are one of the key drivers in the demand for processed and health foods.
4. Business Monitor International, Jan-Mar 2009
5. The Rise of the Indian Consumer Market, McKinsey 2005
Source: FAO, Kotak Securities

15
Hurdles in the growth path
In spite of the huge supply advantages, India's share in the global food trade is still around
1.5 percent. Huge losses across the value chain resulting in poor processing levels are
limiting the growth the India's share in the global processed food trade.
Processed food has a longer shelf life and reduces wastage. The lack of processing and
storage of fruits and vegetables results in huge wastages, as shown in the figure,
estimated at about 35 percent, the value of which is approximately INR 33,000 crore
6
annually (Recent reports put the number at a much higher level). So, it is imperative for the
government and private players to invest in infrastructure to make India not only have
sustainable food production for its growing population but also export more to the world.
The low share of processed food and global trade is an opportunity waiting to be tapped.
Increasing urbanisation and rise in disposable incomes will further push demand for
processed food. This is an opportune time for companies to invest in quality facilities and
develop products with features that appeal to the growing Indian consumer base and the
export markets.
Also, from a government's point of view, Food Processing sector can help reduce the
burden of subsidies and raise the farmers' income simultaneously. Agricultural produce that
is processed for domestic consumption can not only fetch higher prices and hence higher
income for the farmers, but also generate direct and indirect employment helping alleviate
rural poverty. So, the government should continue to support the industry with an enabling
and growth oriented policy.
Significant Opportunity – Domestic Market and Exports
Field Losses
(Pest, Diseases, Rodents etc)
Pre-Processing
(e.g. inefficient harvesting, drying, milling)
Transport
(e.g. spillage, leakage)
Storage
(e.g. technical deficiencies)
Processing & Packaging
(e.g. excessive peeling, washing)
Marketing
(e.g. spoilage, rotting in stores)
Wastage by Consumer
(e.g. overeating, food wastage)
Developing Countries
Relatively high losses in
the initial parts of the
value chain
Rich Countries High
losses at a
in the food chain
later stage
Field
ConsumerProducer
Fork Britt-Lousie Anderson, SIWI
6. Ministry of Food Processing Industries, Annual Report 2007-08

16
India's low level of processing is expected to change significantly in the future fuelled by
sustained economic growth and steady urbanisation. Processed food output is expected to
grow at a strong 7 percent CAGR in terms of value from 55.6 billion USD in 2005 to 95.6
1
billion USD in 2013 . Premiumisation, especially among the young and rich urban population,
is also a key factor helping value growth over the forecast period.
Source: BMI, Q1 2009
USDBn
CAGR: 7%
Processed Food Output
55.6
58.9
62.5
66.2
71.5
77.2
83.4
90.1
95.6
0
10
20
30
40
50
60
70
80
90
100
2005 2006 2007 2008e 2009f 2010f 2011f 2012f 2013f
A schematic diagram of the key segments in the industry is as shown below.
Food Processing
Fruits &
Vegetables
Meat &
Poultry
Dairy
Marine
Products
Grains
Consumer
Food
1. Business Monitor International, Jan-Mar 2009

17
Source: EXIM Bank
India's share of global production - F&V
41 23 24 36 10
59 77 76 64 90
0%
20%
40%
60%
80%
100%
Mango Banana Cashew Nuts Green Peas Onion
India Rest of the World
Common features across segments –
Largely unorganised – Though the unorganised segment varies across categories
mentioned above, approximately 75 percent of the market is still in the unorganised
segment.
The organised sector is relatively bigger in the secondary processing segment than the
primary processing segment. Also, the primary processing segment is highly
fragmented.
The following sub-sections provide a brief overview of the key segments. While the
opportunities and constraints at segment level are touched upon, a detailed analysis is
provided in later chapters.
Supply
Fruits and vegetables is one of the most important and fast growing sub-sectors of the food
processing sector, as fruits and
vegetables form an indispensable part of
healthy diet. India accounts for 13
percent of vegetables and 12percent of
fruits production globally, with an
enviable share in few categories like
Mango, Banana, Cashew, Green Peas
and Onion. The productivity has also
improved from 10.25 and 14.37 million
Tons/Hectare for Fruits and Vegetables in
2002-03 to 10.94 and 16.14 million
Tons/Hectare for Fruits and Vegetables
respectively.
Processing
The installed capacity for fruits and vegetable processing in India has increased from 11.08
2
lakh tons in 1993 to 24.74 lakh tons in 2007 , mainly due to the increasing demand from
ready-to-serve beverage industry, fruit juices and pulps, dehydrated and frozen fruits and
vegetable products, pickles etc.
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Fruits and Vegetables Processing
Year
2002-03
2003-04
2004-05
2005-06
2006-07
2007-08
Fruits – (Mn Ha)
5.1
5.3
5.3
5.6
5.8
4.8
Fruits Vegetables
Fruits - Production (Mn Tons)
49.8
52.8
55.4
59.6
63.5
49.2
Vegetables – (Mn Ha)
5.9
6.7
7.1
7.2
7.5
7.8
Vegetables – (Mn Tons)
84.8
101.4
108.2
111.4
115. 0
125.9
Source: National Horticulture Board
2. India's share in world fruit, veg market remains poor, Feb 14 2009, news.webindia123.com

18
3
The share of the organised sector in Fruits and Vegetables processing is 48 percent .
Majority of the units are in the Small Scale sector, having low capacities up to 250 tons/year
though big Indian and multinational companies have capacities in the range of 30 tons/hr.
Currently, only 2.2 percent of the total produce in India is processed and the rest marketed
as fresh fruits and vegetables. Globally, developed countries process fruits and vegetables
in excess of 65 percent.
Bottlenecks
4
In spite of the strong supply base, India has a low 1.38 percent share of global trade . India's
exports of fresh fruit and vegetable stood at INR 2,411.66 crore (534.97 million dollar) in
2006-07. It is estimated that around 30 percent of the produce is lost due to lack of
processing facilities (in flush season) and inadequate infrastructure for post-harvest
treatment, packing, storage and transportation.
The demand for processed fruits and vegetables is lower in India mainly on account of
higher costs that can be attributed to higher duties and taxes on packaging material,
inefficient supply chain with lot of intermediaries, absence of cost-effective latest
technologies for processing, infrastructural bottlenecks and high cost of finance. Smaller
units and their lack of marketing strength for end-products also is a major constraint for
expansion of domestic market.
Summary
Fruits and vegetables offer a significant potential for the organised processing players due
to the low level of processing and a vast supply base, coupled with considerable
international demand for certain fresh as well as processed fruits and vegetables. However,
inefficient domestic farming, higher costs of product delivery, exports protection and
demanding standards, intermediaries and inefficiencies in the supply chain are the biggest
bottlenecks in the growth of the sector. The recent emphasis on Fruits and Vegetables in
light of nutrition security, growing interest of food processors and more profitable land use
has brought in a significant change in the outlook of the producers who started using the
arid/semi-arid lands and the horticultural crops that have lesser demands on water and gives
three to four times more remuneration than field crops.
Supply
India's has the largest livestock population in the world, however, most animals are not bred
for meat, as a vast majority of the Indian population is vegetarian. Animals generally used
Meat and Poultry Processing
Dried fruits and vegetables
Fruit juice concentrates
Vegetable curries in restorable pouches
Mushroom products
Fruit pulps and juices
Ready-to-serve beverages
Canned/Frozen fruits, Pulp and vegetables
Jams, squashes, pickles, chutneys
Prominent
Processed
Fruits and
Vegetables
(India)
3. DGCIS
4. MoFPI Annual Report, 2007-08

As is evident from the figure, most of the broiler meat produced is used for domestic
consumption, while beef and veal meat is also exported.
Processing
5
The level of processing in meat is just about 6 percent , as the Indian customers prefer
fresh meat from the market than
processed/frozen meat.. For this reason,
processing of large animal meat is
usually high in exports. Also, Indian
buffalo meat, due to its lean character
and nearly organic in nature, is highly
preferred in the export market. Poultry,
with advantages of being the most
economical source of animal protein,
acceptability to all non-vegetarian
population and with no religious taboo, is
the fastest growing segment.
Source: MOFPI
Meat and Poultry Processed Quantity in Tons and INR Crore
0
200000
400000
600000
800000
1000000
1200000
1400000
2003-04 2004-05 2006-07
Year
MetricsTons
INRCrore
0
500
1000
1500
2000
2500
3000
3500
4000
Processed Meat in Metric Tons Processed Meat in INR Crore
2005-06
19
for production of meat are cattle, buffaloes, sheep, pigs and poultry. India accounts for more
than half of the global buffalo population indicating a significantly high export opportunity.
India ranks among the top six egg producing and among the top five chicken producing
countries.
India - Broiler Meat and Beef Production Vs Consumption
1900
2000
2240
2490
2770
2,250
2,375
2,500
2,655
1,633
1,694 1,735
1,845
1,975
2770
2490
2239
2000
1899
2,790
1300
1500
1700
1900
2100
2300
2500
2700
2900
2004 2005 2006 2007 2008 2009
2,130
1650
1648
1,638
Broiler Meat Production (1,000 Metric Tons (Ready to Cook Equivalent))
Broiler Meat Consumption (1,000 Metric Tons (Ready to Cook Equivalent)
Beef and Veal Production (1,000 Metric Tons (Carcass Weight Equivalent))
Beef and Veal Consumption (1,000 Metric Tons (Carcass Weight Equivalent))
Source: USDA-FAS, Oct 2008

20
Bottlenecks
There are a limited number of integrated poultry processing plants in the organized sector,
though the small poultry processing units are in plenty. Per capita consumption levels of
meat is very low in India, as there are religious taboos attached with consumption of beef
and pork. Also, exports in Poultry are hindered by the subsidies that developed countries
like USA and EU provide.
Summary
Apart from the huge opportunity for India in the buffalo meat export, the poultry segment
with the current low per-capita consumption and world class production infrastructure and
productivity offers a potential export opportunity. There is a large potential for setting up
modern slaughter facilities and development of cold chains in meat and poultry processing
sector. India needs to come up with strong support measures to increase its domestic
consumption levels, like for example, inclusion of eggs in the mid-day meal program and a
re-look at the taxes including VAT for poultry segment.
Supply
India is the largest producer of milk in the world –
Milk. Milk products production is expected to
increase from 99.9 million tons equivalent in 2006 to
108.8 million tons in 2009 growing at a CAGR of 2.89
percent.
The milk surplus states in India are Uttar Pradesh,
Punjab, Haryana, Rajasthan, Gujarat, Maharashtra,
Andhra Pradesh, Karnataka and Tamil Nadu with
majority of the manufacturing of milk products also
concentrated in these states.
Dairy Processing
Source: USDA-FAS, Oct 2008
Source: FAO Food Outlook, June 2009
Consumption - India Vs Global - Poultry and Beef
22.8 22.6 22.5 23.0 22.9 22.8 22.5
1.4 1.5 1.7 1.8 2.0 2.2 2.4
17.9 17.7 17.6 18.2 17.9 17.9 17.7
1.4 1.5 1.5 1.5 1.5 1.6 1.7
0.0
5.0
10.0
15.0
20.0
25.0
2003
KilogramsperPerson
2004 2005 2006 2007 2008 2009
Global (Poultry) India (Poultry) Global (Beef) India (Beef)
India - Milk/Milk Products Production
99.9
102.9
105.8
108.8
94
96
98
100
102
104
106
108
110
MillionTons
2006 2007 2008 2009 (f)
CAGR: 2.89%

21
Processing
India's unique pattern of production,
consumption, processing and marketing of
dairy products consist of over 11 million
farmers organised into about 0.1 million
village Dairy Cooperative Societies (DCS).
These cooperatives form part of a national
milk grid which links the milk producers
throughout India with consumers in more
than 700 towns and cities handling about 18
6
million kg of milk per day . The dairy sector
ranks first in terms of processed food, with
37 percent of the produce being processed,
but the organised sector accounts for a
mere 15 percent, processing about 13 million tons annually while the unorganised sector
7
processes about 22 million tons per annum
Ghee is the most widely marketed and branded product with a nation-wide penetration of
24.1 percent and growing at a rate of 8 percent per annum. The dairy whitener market
comprises of sweetened milk powders, condensed milk and creamers. The organised
cheese market is dominated by processed cheese which accounts for 74 percent market
share. In the Ice Cream segment, organised sector accounts for a high 70 percent and is
8
growing at 20 percent per annum .
Bottlenecks
The packaged milk segment is dominated by the regional and national level Dairy
Cooperative Societies. These Dairy Cooperative Societies collect milk from the various
small-scale vendors, pack it and distribute it under their brand name. Despite the high
production, the per capita consumption of milk in India is still lower at 229g/day compared
6
to the world average of 285g/day . The farmers are not allowed to sell milk to new players
outside the cooperatives preventing huge investments from large foreign players.
Summary
Less than 0.4 percent of the total milk and milk products are exported and virtually none
imported. Most of the production is consumed in the domestic market. Also, the organised
Source: MOFPI
Dairy Products Processing in India
Quantity Value
0
10000
20000
30000
40000
50000
60000
70000
Year
QuantityinMetricTons
ValueinINRCrore
0
100
200
300
400
500
600
2003-04 2004-05 2005-06 2006-07
Source: Diary India Yearbook, Rabobank
Share (%)
45%
19%
8%
5%
23%
Retention by rural consumers/ sale to rural non
Sold as loose milk in urban areas
Packed liquid milk
Value added milk products
Value added milk products
Type
Processed (Unorganized)
Processing Segment
Unprocessed
Processed (Organized)
6.
7. India Infoline
MoFPI Annual Report, 2007-08 8. IBEF Food Processing Report, 27-Jun-2008

segment accounts for a lower 15 percent share. There is tremendous potential for the
organised play if the restrictions on the sale from farmers are removed and a level playing
field is created for all.
Supply
India is the third largest producer of fish and second largest producer in terms of fresh
water fish. The fisheries sector is classified as marine, inland and aquaculture. The captured
fish consists of 62 percent of total fish production while the rest 38 percent is from
9
aquaculture . The total production of fish and fishery products has grown from 7 million tons
10
(live weight equivalent) in 2006 to 7.4 million tons in 2007 .
Processing
The infrastructural setup of the sea food processing industry indicates a distribution of
major fishing bases in Kerala, Tamil Nadu, Karnataka and Maharashtra whereas the
concentration of the processing plants, freezing and storage capacities are more in Kerala,
Gujarat, Andhra Pradesh, Tamil Nadu, Maharashtra and West Bengal.
Utilised capacity is just 20 percent of the
installed capacity in the fish processing
industry due to raw material shortage,
inability to meet the market demand for
value added products and safety related
regulation of importing countries. The frozen
products propel sea food exports business
and hence need a strong emphasis on value
addition in addition to addressing problems
of idle capacity utilisation, technological
upgradation and compliance with safety
related regulations of buyers.
Bottlenecks
Majority of the Agri-Export Zones and Food Parks are related to horticulture products and
very few are ascribed to development of sea food processing industry although 25 percent
of the total agricultural export is on account of sea food. Although by volume, the major
share of marine fish rates is in the fresh form (70 percent), the major focus of the industry
11
is on the frozen products which have a share of 7.5 percent of the total catch . This is mainly
because of the export demand for frozen products and consequent need for value addition.
Marines Products Processing
22
Marine Products Processing in India
0
100000
200000
300000
400000
500000
600000
700000
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
INRCrore
MetricTons
Quantity (in Metric Tons) Value (in INR Crore)
2001-02 2002-03 2003-04 2004-05 2005-06 2006-07
9.
10. FAO Food Outlook, June 2009
MoFPI Annual Report, 2007-08 11.
K.G.Karmakar, Managing Director, and Dr G.D. Banerjee,
Deputy General Manager, NABARD
Value Addition by the Marine Fisheries Sector - Dr

23
Source: Value addition by the marine fisheries sector - Dr K.G.Karmakar & Dr G.D.Banerjee, NABARD
The basic tenet on which the sea food industry is presently working is that there is no
demand for value added products in the domestic market as consumers prefer fresh fish.
Also, the infrastructure for handling, distribution and storage is not well developed in the
domestic market and hence the segment focuses heavily on exports.
Summary
Government needs to support the industry by developing technology for value addition and
infrastructure for exports in the form of food parks focused on marine products. Value
addition to a part of the fish catch can transform the domestic market which is experiencing
a sea change with an increasing demand for processed and ready-to-eat fish products like
Breaded and Battered fish items, Fish Burgers, Sea food mix, fish fillets, etc. Fish sauce,
silage and other fermented products are important areas of value addition at the lower end
of the chain. The segment focuses heavily on exports as the local demand in primarily in the
fresh fish. As the demand for processed marine products is increasing in India, the
government needs to encourage investment in infrastructure for distribution and storage.
Processed IQF (Instant Quality Freezer) marine products have a higher price in foreign
markets than conventional block-frozen material. So, products like shrimp, lobster, fish,
clams and fish fillets, provide opportunities for export.
Supply
India produces more than 200 million tons of different food grains every year - 209.32
million tons in 2005-06. India produces all major grains - rice, wheat, maize, barley and
12
millets like jowar (great millet), bajra (pearl millet) and ragi (finger millet) . The major
segments within Grain Processing are Oil Milling and Pulse Milling & Flour Milling. Indian
Oilseed sector is one of the largest in the world, with a total turnover of INR 86,000 crore of
which INR 16,000 crore are import/exports. India is next only to European Union and China
in terms of vegetable oil imports.
Grain Processing
Fish Disposition in India
Fresh 70.00%
Frozen and Processed 7.50%
Cured Form (dried, salted
and smoked products)
12.50%
Canned 0.50%
Fish Oil 6.00%
Fish Meal & Manure 1% Miscellaneous 2.80%

24
Processing
The solvent extraction processing of oilseed, oilcakes and rice bran during 2006-07 is
13
reported at 115.4 lakh tons compared to 122.0 lakh tons in the previous year .
Grain processing is the biggest component of the food sector, with a share of 40 percent.
But the sector is predominantly into primary processing, sharing 96 percent of the total
value, while the secondary and the tertiary sectors add 4 percent.
Bottlenecks
The low level of technology modernisation in the sector with a high primary processing
leads to low value addition in the sector. India needs to promote the products for export
better, like Basmati.
Summary
Indian rice, especially Basmati rice, has gained international recognition, and is a premium
export product. The sector is recognised as a key for nutrition security in India and hence,
there is a need for improving the processing capabilities beyond the small scale/cottage
unorganised industries to the organised segment. So, for adequate and focused growth of
the sector the Ministry is providing financial assistance to the grain processing industries
for its setting up/ expansion/modernization in the form of grant.
Consumer foods consist of packaged foods, non-alcoholic and alcoholic beverages.
Packaged foods includes pasta, breads, cakes, pastries, rusks, buns, rolls, noodles, corn
flakes, rice flakes, ready to eat and ready to cook products, biscuits etc. Bread and biscuits
constitute the largest segment of consumer foods. The packaged food sales topped 13
billion USD in 2007 and are expected to reach 23.4 billion USD by 2013.
Consumer Food Processing
Source: BMI, Q1 2009
Packaged Food Industry Data
10.5
11.7
13
14.2
15.5
17.3
19.5
21.7
23.4
9.6
10.6
11.5 12.4
13.5
14.8
16.5
18.1
19.3
0
5
10
15
20
25
USDBillion
USDollar
2005 2006 2007 2008e 2009f 2010f 2011f 2012f 2013f
0
5
10
15
20
25
Packaged food sales (USD Bn) Per-capita package food spending (USD)

25
Non-Alcoholic Beverages segment is broadly
divided into carbonated drinks, non-
carbonated drinks and hot beverages. The
carbonated drinks comprise the soft drinks
that are the colas. The non-carbonated drinks
category consists of fruit based/flavoured
beverages. In non-alcoholic beverages, India
is a small but competitive player in coffee.
India is the fifth largest coffee producer in
the world accounting for 4.07 percent of the
world production (2004-05). In Tea, India is
the largest producer in the world, which
contributes around 31 percent in the world.
But owing to high domestic demand, the
14
share of exports for India is just 14 percent .
Alcoholic beverages segment is the largest
in the world and provides ample scope for
value addition and employment generation.
The estimated demand for spirits and beer is
around 373 million cases. Twelve joint
ventures companies having a licensed
capacity of 33919 Kilolitres per annum
produce grain based alcoholic beverages. 56
units are manufacturing beer under license
15
from the Government .
Majority of the processing in the segment is
still under the unorganised sector – 60
percent for Bread and 80 percent for Biscuits
15
in terms of production . Manufacturing of
bread is reserved for small-scale industry
(SSI).
India accounts for less than 1.5 percent of
the global food trade, despite being the
world's leading producer of milk, live stock
and cereals, and ranked second in terms of
fruit and vegetables, the level of processing
Level of Food Processing in India
across segments is not comparable to the global levels. The following table shows the level
of processing across segments and the relative global levels for the segment.
India's agricultural production base is strong but at the same time wastage of agricultural
produce is massive. Even, within the country, share of fruits and vegetables processed is
much less when compared to other segments such as milk (35 percent) and Fisheries (26
percent). The high wastage levels across the value chain lead to a significant value loss. The
main reasons attributed to the loss are lack of proper infrastructure for handling,
transportation and storage. Another form of wastage is the high level of intermediation in
the supply chain that leads to higher costs as well.
Globally, countries and large companies have invested in disintermediation, developed
storage and transportation infrastructure and facilitated in bringing commercial/ technical
knowledge and market intelligence to the farmer. The hygiene/safety standards training and
certification facilities also were provided across the value chain. This resulted in
tremendously increasing the value of the output and reduction in costs of raw material for
the producers, while improving farmers' income levels. If India was to lift its share of global
processed food trade to just 3 percent, the Ministry of Food Processing estimates that
some USD 24.7 billion worth of investment would be needed to restructure the industry.
Taking a cue from the global examples, India also should invest in infrastructure and policy
development that helps reduce waste across the supply chain and increase the level of
processing and overall value of output.
Need for improved focus and investment
Level of Processing across segments (Source: MOFPI Annual Report 2007-08)
Segment
Fisheries
Poultry
Buffalo Meat
Milk
Level of Processing
2.2%
26%
6%
20%
35%
Comments
USA (65 %), Philippines (78%) and China (23%);
14.
Cygnus Research, Jan 2007

26
India's Food and Drink Trade
Supported by a committed government in improving the food trade and providing a
conducive atmosphere for agriculture, India is a net exporter of agricultural products. BMI
India Food and Drink Report for Q1 2009, expects India to be a net food exporter to 2013.
The report attributes the status to India's immense landmass and availability of a large
number of commodities. Over the forecast period to 2013, exports are expected to increase
by 72.8 percent over 2008 to USD 24.25 billion. However, in spite of vast natural resources,
import growth of food products in India is also expected to be strong over the forecast
period, to reach USD 12.3 billion by 2013. At an overall Food and Beverage level, the export
1
of processed segments is growing much faster as shown in the figure .
India's Food Processing Trade
Source: BMI, India Food & Drink Report Q1 2009
India - Food and Drink Trade
0.00
5.00
10.00
15.00
20.00
25.00
30.00
2005 2006 2007 2008e 2009f 2010f 2011f 2012f 2013f
Exports Imports
10.81
12.28
14.03
15.58
17.27
19.49
21.92
24.25
4.58
6.14 6.82 7.53
8.67 9.44
10.42 11.24
12.31
9.19
1. UNCOMTRADE

Two nodal agencies, APEDA and MPEDA, were formed for promoting exports from India.
MPEDA is responsible for overseeing all fish and fishery product exports; other processed
food product exports are the responsibility of APEDA. The Government of India (GOI) has
accorded high priority to the establishment of cold chains and encourages major initiatives
in this sector.
Foreign equity participation of 51 percent is permitted for cold chain projects.
There is no restriction on import of cold storage equipment or establishing cold
storages in India.
National Horticulture Board (NHB) operates a capital investment subsidy scheme (CISS)
that subsidises the promoter.
!
!
!
27
Source: UNCOMTRADE
Export Growth Rate: Food Vs Processed Food
18.75%
21.84%
24.63% 25.44%
23.63%
28.96%
31.25%
28.78%
0.00%
5.00%
10.00%
15.00%
20.00%
25.00%
30.00%
35.00%
2005 2006 2007 2008
Export of Food and Beverages Export of Processed Food and Beverages

28
Role of APEDA
APEDA is the apex agency entrusted with the responsibility
of facilitating and promoting exports of agricultural and
processed food. APEDA is responsible for 40 percent of the
total agricultural exports from India.The remaining
commodities such as tea, coffee, tobacco, spices, marine
products and rubber are handled by separate boards.
! Promote exports to maximise foreign exchange
earnings
! Increase per unit value realisation to the farmers and
improve their income
! Promote value addition to farm produce and generate
employment opportunities
! Development of industries relating to scheduled
products for exports by providing financial assistance or
otherwise
! Fixing of standards and specifications for the scheduled
products for the purpose of exports
! Carrying out inspection of meat and meat products for
ensuring quality
! Improving of packaging and marketing of the scheduled
products outside India
! Collection of statistics from various sources and
publication of the statistics so collected or of any
portions thereof or extracts there from
! Training in various aspects of the industries connected
with the scheduled products
Goals of APEDA
Accordingly APEDA has been entrusted with the following
functions:
Case Study: Role of APEDA in developing exports from
North East Region (NER)
Benefits
APEDA identified the major horticultural products of the
NER with good export potential – Citrus, Banana, Pineapple,
Papaya, Jack fruit.The following strategy was adopted by
APEDA to promote exports from the region
! Provision of Infrastructural facilities like pack houses,
cold storage and refrigerated transport
! Farmer Education on pre- and post-harvest measures in
local language and quality awareness
! Transport assistance for horticultural products from the
region
! Market linkages – Establish linkages with major players
like ITC, HUL, Dabur etc
! Financial Assistance – Sponsored delegations of
exporters every year to Aahaar, integrated packhouse
facility in Mizoram for INR 3.2 crore, 4 refrigerated
transport vans for NERMAC ltd and Government of
Tripura, INR 3.15 crore to AIDC, Guwahati, MoU with
CONCOR to operate and manage all infrastructure
projects
! Export Development Fund – Increase in expenditure
from INR 38 lakhs in 2000-01 to INR 6.3 crore in 2005-06
for the NER
! Promotion of Agri-Export Zones – 4 AEZs inTripura,
Assam and Sikkim.
InTripura, AEZ is expected to benefit more than 400 farmers
in the first phase and incremental exports are expected to
be INR 32 crore. Sikkim AEZ is expected to benefit a much
large section of the farmer community – 5000 farmers in
addition to more than 500 in processing and value chain.
Source: APEDA

29
India's Position in the Global Trade
According to the WTO statistical database, the US is the world's leading food exporter
followed by Netherlands, Germany, France and Brazil in the top five. In spite of the supply
advantages, India stands a distant 21st for the year 2007, with a 1.4 percent share in the
global trade. India is a major exporter in the Food Industry and imports less. The exports are
growing at over 15 percent y-o-y with 2007 growth a high 29 percent. During the period
1980-2007, India's share in the global exports have increased from 1.1 percent to just 1.4
percent, the majority of the increase happening in this decade.
Annual percentage changeShare in world exportsValue
19
16
27
23
19
20
-2
42
45
9
29
45
13
20072006
9
12
12
13
13
15
5
16
14
17
14
23
15
2005
7
7
3
13
18
3
-5
15
-3
13
16
30
14
2000-07
12
10
7
19
14
9
5
17
17
9
14
19
12
2007
44.6
9.6
9.6
4.6
3.6
1.9
1.9
1.8
1.8
1.6
1.4
1.4
1.1
2000
43.8
10.7
12.6
3.0
3.1
2.3
2.9
1.3
1.3
1.9
1.2
0.9
1.0
1990
-
-
13.4
2.8
2.5
2.1
2.5
0.9
1.1
1.0
0.9
-
0.6
1980
-
-
17.6
4.2
1.4
1.3
3.3
0.7
0.9
0.9
1.1
-
0.3
2007
406.83
87.93
87.59
42.10
33.15
17.69
17.57
16.31
16.20
14.62
13.20
12.62
9.65
Exporters
European Union (27)
extra-EU (27) exports
United States
Brazil
China
Thailand
Australia
Indonesia
Malaysia
Mexico
India
Russian Federation
Chile
(Value In USD billion)
The food industry is one of the most important segments of Germany's
economy, with high relevance for employment and economic output. Novel
food, new scientific and technical approaches in food processing, the
impacts of structural changes in the food industry and in food retailing, the
effects of food scandals and socio-economic behaviour are having a far
reaching technical and economic impact on processing value chain.
Germany has taken several initiatives in R&D innovation to become a
leading food exporter.
Case Study: Food Industry
innovations in Germany
Source: FAO

30
Joint R&D – Due to the predominantly large number of SMEs in the country, a joint research institute, FEI
(Forschungskreis der Ernährungsindustrie e.V.) has been established to carry out joint applied research in
Food and Nutrition. In 2001, around 50 associations of the German food industry were members in FEI
which represented more than 4500 companies.There is a parallel private research activity as well.The
connectivity and the cluster for research for Food and Nutrition are as shown in the picture below.
R&D Financing –The research activities of FEI are jointly financed by the member associations and
companies as well as the Federal Ministry for Economic Affairs. By 2001, the joint research projects
organised by FEI are financed to around 75 percent by the industry – mainly in the filed of food structure
(Quality of food and ingredients) and process optimisation.
Innovation Activities – Measured as the number of product innovations, Germany has consistently
launched more than 1000 food products every year. Process innovations of food SMEs are wide-ranging,
without a specific focus on a particular area – Product quality, cost-saving aspects, higher flexibility and
faster production processes apart from improvement of the working conditions for employees.
Innovation in the food industry needs a strong multidisciplinary co-operation, the institutional framework
conditions and administrative competencies.The administrative bodies responsible for the food industry
in Germany cause significant delays in bringing scientific and technical innovations. A more flexible
framework for regulations is planned for newly emerging innovation fields which can be jointly formed by
public authorities and early innovators.
Industry Private Research
Institutes
Federal Research
Centres
Leibniz
Centres
Helmholtz
Centres
Fraunhofer
Society
Universities/Colleges
Industrial
R&D
departments
Combined
Research
IGV, DIL,
Natec
BFE, BAFF, BAfM
, BAGKF, BgW, RKI
DFA, IFE DKFZ, GSF IVV >50 institutes and
technical colleges
Food Industry
Flow of Funds
Economy
Consumer
Protection/Agriculture
Health Education/ Research Federal States EU
1
2
3
4
Source: Innovations in the food industry in Germany, K. Menrad; Department of Horticulture and Food Processing, University of Applied Sciences of Weihenstephan

The prominent export products are Fruit pulp & juices, Canned F&V, Jams, Squashes,
Dehydrated vegetables, Frozen pulps and vegetables, Frozen dried fruits, Vegetable curries,
Pickles and chutneys, Mushroom products etc
The main destinations for fruit exports are Middle East, UK, Europe and to some extent
Singapore and Malaysia. Mango Pulp is exported to Saudi Arab, Kuwait, UAE, Netherlands
and Hong Kong. In case of Pickles & Chutneys, the popular markets are USA, UK, UAE,
Germany, & Saudi Arabia. Other items like Tomato Paste, Jams and Jelly & Juices are
exported to USA, Russia, UK, UAE, Netherlands, etc. Vegetable exports are largely to
Middle East, Europe, UK and Singapore.
31
Export/Imports of Select Food Processing Segments
India's exports of processed fruits and vegetables have increased consistently over the last
few years, from USD 144 million in FY 04 to USD 278 million in FY 07. Exports of processed
vegetables have increased from USD 273.47 million in FY 04 to USD 420 million in FY 06
2
and declined marginally to USD 396 million in Fy07 .
Key Export Product
Mango Pulp
Dried and Preserved vegetables
Pickles and Chutney
Export Value (2007-08) in INR crore
509
444
389
Source: Directorate General of Commercial Intelligence and Statistics
Source: DGCIS, MOCI
Exports of Processed Fruits and Vegetables
273.42 462.14 420.64 395.57
143.82
193.54 235.28 278.02
673.59655.92655.68
417.24
0
100
200
300
400
500
600
700
800
2004-05 2005-06 2006-07 2007-08
Processed Vegetables Processed Fruits
In Million USD
The growth of the processed
food segments has been faster
and has nearly doubled in terms
of value in a short span from FY
04 to FY 07. However, with
respect to the potential and
supply base of being the second
largest fruits and vegetables
producer in the world, India can
do much better at processed
food exports. The quality issues
and high costs of raw material,
packaging, wastage and
distribution are hindering the
growth of exports. India needs to
focus more on crops of
processing grade, diversify the
markets that it exports to and
improve promotional activities to
further trade.
2. DGCIS

32
Meat and Poultry Processing
India is predominantly an exporter of bovine meat, especially buffalo meat, which has high
demand in the developed countries, due to its lean and almost organic nature. The import of
meat and poultry is virtually non-existent. The production and export/import data of meat
and poultry is provided in the table below.
At present, poultry export from India is mostly to Maldives and Oman. Some other markets
like Japan, Malaysia, Indonesia and Singapore can be explored for export of poultry meat
products. Poultry production and egg processing industries have come up in the country in
a big way. The export products are egg powder, frozen egg yolk, albumin powder to Europe,
Japan and some other countries.
Indian Poultry has world class production infrastructure and boasts of high productivity with
Farm and hatchery automation systems, well networked disease diagnostic laboratories,
unique disease surveillance and monitoring model and genetic research and breeding.
Broilers are reared to achieve a body weight of 1.8 kg in 6 weeks.
Yet the poultry segment is faced with roadblocks to exports in the forms of
Subsidies by developed countries
Sanitary and Phyto-sanitary conditions
Increasing cost of production inputs
!
!
!
Imports ExportsProduction
million Tons
Total Meat
Bovine Meat
Ovine Meat
Pig Meat
Poultry Meat
2008
672
2854
775
500
2400
2009
7022
2997
780
500
2600
2008/09
1
1
-
-
-
2009/10
2
1
-
-
-
2008/09
534
523
8
1
2
2009/10
561
550
8
1
2
1000 tons (Carcass
Weight Equivalent)
Total Meat Statistics, India
In order to take advantage of the
exports opportunity in the
poultry segment, India should
take steps in increasing
production, providing assistance
in transportation and reduction in
taxes/duties to poultry by
including it under agriculture.
Also, quarantine and testing
facilities should be made
available at all ports of entry.
Also, market expansion into
Singapore, Malaysia, Japan and
Indonesia provide opportunities
for exports growth.
India also needs to set up more
slaughter houses, modern
abattoirs and cold storage
facilities to export the surplus
and much-in-demand buffalo
meat.

Grain Processing
The grain processing sector, with 96 percent Primary Processing, has a limited exports
focus. However, Basmati Rice is gaining traction in the Indian market and commands a
premium in the export market as well. The table below shows the key segments and the
production and Export/Import over the last two years.
The major exports segments are cereals and rice. Though production is expected to remain
stagnant during the year as compared to last year, the exports of cereals and rice is
expected to slightly increase.
India has expanded the basket for Basmati rice, by extending the classification. The Indian
government last year expanded the definition of basmati, and it now recognizes even those
rice varieties as 'evolved basmati' which have at least one traditional basmati grandparent.
Also, India had last year set the export floor for basmati at USD 1,200 per ton and also
imposed an export tax of USD 200 per ton to discourage exports and conserve domestic
supplies but has since revoked the export tax, and lowered the export floor to USD 1,100
3
per ton . This is expected to further boost exports.
Grain Processing Statistics, India
Imports ExportsProduction
million Tons
Cereals
Wheat
Coarse grain
Maize
Barley
Sorghum
Rice
Total
2008
215.3
78.4
38
19.5
1.2
7.2
98.9
458.5
2009
214.9
77.6
37.8
18.5
1.5
7.5
99.5
457.3
2008/09
0.6
0.5
0.1
0.1
0
0
0.1
1.4
2009/10
0.6
0.5
0.1
0.1
0
0
0.1
1.4
2008/09
4.9
0.3
0.6
0.6
0
0
3.7
10.1
2009/10
5.7
1
0.6
0.6
0
0
4
11.9
Rice Exports, India
11 9 9 13 17 19 18 22 18 17 19 20
3 4
37
19
17
44
14 8 13
36
21
38
0
10
20
30
40
50
60
70
1993-
94
1994-
95
1995-
96
1996-
97
1997-
98
1998-
99
1999-
00
2000-
01
2001-
02
2002-
03
2003-
04
2004-
05
Basmati Non-Basmati
INRBn
India needs to increase the
promotional activities for Basmati
and other cereals and continue to
provide tax breaks for exports.
The country also needs to
provide incentives for
modernisation of processing
equipment to improve the levels
of secondary and tertiary
processing so as to make the
quality of produce export worthy
and promote exports.
33
3. Commodity Online

Processed fish products for export include: conventional block frozen products, instant quick
frozen products, minced fish products like fish sausage, cakes, cutlets, pastes, surimi,
textured products and dry fish, etc.
European Union, USA, Japan, China, South East Asia, Middle East etc. are the major export
destinations. The export has been strong with frozen shrimp continuing the largest item in
terms of volume.
In view of the supply and growth potential of the sector, Government of India has set a
target to increase fisheries export from INR 6000 crore to INR 14000 crore during the XI
Five Year Plan Period. Achieving the target for exports is dependent on the raw material
supply; optimum capacity utilisation of processing industries, product diversification; value
addition and adherence to quality control regulations. The share of export of shrimp in block
frozen form is around 22 percent as against 2.2 percent in IQF form. The unit value of IQF
products being INR 475 per kg as against INR 194 per kg for the block frozen shrimp, there
is considerable scope for boost of marine exports through value addition. Similarly, the
share of fish surimi which is priced at INR 68/kg, is only 3.2 percent of the total export as
compared to that of ribbon fish (which is the raw material for surimi) which is priced at INR
4
25/kg and enjoying an export share of 18.3 percent .
70 percent of Indian sea food exports constitute fish
and shrimp in various forms and shrimp alone accounts
4
for 71.5 percent of the value of exports . However,
value added products comprise of a smaller share and
the major share of the present export in volumetric
terms is in bulk form. India needs to promote value
addition, be more export-driven by promoting products
like fresh surimi, and raise the share of IQF products
that claim a higher price to boost trade.
2006
3.8
2007
4
2006
3.2
2007
3.4
2006
1.8
2007
1.7
2008
1.7
Fish and Fisheries Products Processing Statistics, India
Capture fisheries
production
(million tons)
Aquaculture fisheries
production
(million tons)
Exports
(USD billion)
Imports
-
Fisheries Products Processing
34
4.
Director, and Dr G.D. Banerjee, Deputy General Manager, NABARD
Value Addition by the Marine Fisheries Sector - Dr K.G.Karmakar, Managing

Milk and Milk Products Processing
Milk and Milk Products Statistics, India (in million tons milk equivalent)
Production ExportsImports
2006/07
102.9
2007/08
105.8
2008/09
108.8
2006/09
-
2006/07
0.4
2007/08
0.4
2008/09
0.4
Milk and milk products are produced for domestic consumption. Also, storage facilities
infrastructure bottleneck prevent the segment from growing in exports. India's share in
exports of dairy products in international market is insignificant. These markets are
dominated by OECD countries, some of whom provide a very high level of support to their
domestic producers which are unlikely to be scaled down in the near future. SPS and TBT
clauses are stringent and make the export markets protective. Therefore, even if India is
able to find fresh opportunities for exports, the gains may not be significantly high.
India's Food Processing Trade by Geography
The Indian food processing industry is primarily export oriented. India's geographical
situation gives it the unique advantage of connectivity to Europe, the Middle East, Japan,
Singapore, Thailand, Malaysia and Korea.
India exports mostly to the proximate
countries. Globally, most of the countries
import from countries that are geographically
closer. For example, 45 percent of USA
imports are from Canada and Mexico.
Another 50 percent is accounted by select
Cairns group countries. EU imports 50
percent from Spain, Netherlands, France,
Italy, Belgium and Germany, while another
25 percent is accounted by select Cairns
group countries.
In the current scenario, where the sector is strongly
controlled by cooperatives, an export-oriented growth
strategy will need to support the private players at the
expense of the Dairy Cooperative Societies. Private
sector targets very narrow segment of exports and
emerging urban areas. This would seriously affect the
dairy farmers unless government comes up with
innovative measures to produce surplus milk at low cost
at global quality standards.
Source: UN COMTRADE; CEPII
India's Exports - By Geography
0
South Asia 34%
Middle East 29%
East Asia 17%
Western Europe 10%
Rest of the world 7%
Africa 1%
ShareofTrade
0%
5%
10%
15%
20%
25%
30%
35%
40%
2000 4000 6000 8000 10000 12000 14000
Distance (Kms)
US and Canada 1%
35

Impediments to Export Growth
!
!
India is still a production-supply driven market and not a market-
demand driven. For example, the apples produced in Himachal Pradesh
are of table variety and not of the processing grade. There are not
enough grading facilities in India that can separate class A products
from the rest. This not only leads to wastage and higher costs for
processors, but also low level of processing and value addition, leading
to lower realisation for farmers. Improved knowledge on processing
grade will improve supply of such products and fetch remunerative
prices for the farmers.
!
!
!
!
India's products are a lot cheaper but the high costs of transportation
and distribution leads to low level of exports. India's grapes are 40
percent cheaper than Chile's, but by the time they reach Netherlands,
they cost the same. Poor infrastructure and lack of government
support is making the exports uncompetitive in certain cases and
needs to be looked into.
!
Value added processed food exports need to satisfy two necessary conditions -
1. A threshold base of manufacturing and other infrastructure facilities and,
2. A reasonable level of marketable surplus in those primary products that enter as crucial
inputs into food processing (industrial activity) chain.
A successful and viable business enterprise must be able to harness economies of
scale. Large volumes of raw material of adequate quality are a paramount for the
economics to be favourable.
India faces challenges on this front:
Poor quality and grading mechanisms for raw material leading to loss of consistency
in variety of raw material
High level of wastage across the value chain
Presence of too many intermediaries implying a high cost of raw material
High costs of packaging
Low technology equipment and knowledge
High costs and poor quality of distribution
Stringent Food Safety and Traceability norms from importing (developed) countries
Developed countries, with better access to advanced technology and packaging
innovations, have a distinct edge over the developing countries in the manufacturing.
The distribution network to cater to the changing dietary patterns globally, makes them
nimble and responsive. Hence, the developed countries account for a majority of world
processed food. For India to increase its share in the global trade, the barriers across
the value chain need to be removed quickly.
36

Exports promotion strategy
!
!
!
!
1. India needs to map demand with production capabilities
Himachal Pradesh, known as the fruit bowl of the country, has approximately
200,000 hectares of land under horticulture cultivation yielding about half a million
tons of different kinds of fruit. The state earns more than INR 25 billion from
cultivation of fruits and vegetables. While apple is the main fruit crop, other fruits
like pears, peaches, cherries, apricots, almonds and plums are the major
commercial crops of Himachal Pradesh. Recently the production of apple has been
severely affected by adverse climatic changes. As an alternate, farmers in Himachal
Pradesh are increasingly moving towards commercial cultivation amongst which
kiwi is one of the most preferred crops.
Apple orchards require 1,000 to 1,600 hours of chill, while kiwi requires just 200 hours
of chill for a favourable crop. Fruit growers in the areas where the chilling hours are not
static now have opted for kiwi cultivation as a cash crop.
Impact
As per horticulture department estimates, at least 200 farmers in the Kullu valley
alone have taken up kiwi cultivation.
In 2008, the total kiwi yield in Himachal Pradesh was 137 tons
Different varieties of kiwi such as Hayward, Abbot, Allison and Bruno are cultivated
on almost 120 hectares of land
Kiwi typically needs temperate climate to grow, but Indian farmers have been
successful in growing it even at extremely low temperatures. Some of the farmers
are growing kiwi at an altitude of 8,500 feet
2. Move towards non-traditional items.
About Sea-buckthorn: Sea-buckthorn is a shrub which has 6 species and 12 subspecies
native over a wide area of Europe and Asia. More than 90 percent or about 1.5 million hectares
of the world’s sea buckthorn resources can be found in China where the plant is exploited for
soil water conservation purposes. The shrub’s fruit can be used to make pies, jams, lotions and
liquors. The juice or pulp has other potential applications in foods or beverages
Defence Research & Development Organisation (DRDO), Field Research Laboratory (FRL), Leh
undertook serious research studies on the product to harness its vast potential in facilitating
human adaption to extreme cold and hypoxic environmental conditions prevalent in
inhospitable mountainous region with special reference to the world’s highest battle field,
Siachin.
Leh Berry: Unleashing the potential of Sea-buckthorn
37

Aim: To find Seabuckthorn preparations for improving physical and mental performance
under hypoxic environment, prevention and treatment of cold injuries, and as an immun-
modulatory agent.
Result: The research let to the development of an herbal beverage whose trials were
successfully concluded in high altitude areas including Siachin under varying environmental
conditions. These trials revealed that the fruit extract did not freeze even at temperatures as
low as minus 15 degrees Celsius
Challenges: The juice could not be stored more than a day, limiting commercial viability.
The FRL technology has enabled the juice to be transported from Leh to Madhya Preadesh,
for packaging
Market Opportunity:
A INR 3,000 crore market for Seabuckthorn exists in Chine alone, combined with global
prospects amounting to INR 5,000 crore.
Seabuckthorn fruit, with its vast intrinsic properties offers manifold opportunities for
manufacturing a variety of products. The entire Seabuckthorn plant can be judiciously
utilized to produce high value food and medicinal products. With as many as 180 key
products already lined up and other categories like pharmaceuticals. cosmeceuticals,
natraceuticals, poultry & cattle feed and the pisciculture segment waiting to be
explored
!
!
Export Growth in Brazil
Brazil is a formidable food-producing country owing to its vast agricultural wealth, and
owing to the application of modern techniques, food production also has risen strongly in
recent years. Food production and processing accounts for nearly 25 percent of the GDP. In
terms of exports, Brazil is ranked fourth globally. Key factors responsible for export growth
are as listed below:
Strong government-funded agricultural research programme, together with heavy
private investment led to the higher food production growth than the overall economy.
Legalisation of commercial production of genetically modified (GM) crops. Though it
!
!
38
3. Improve promotional activities for Indian food and market India as a food sourcing hub
4. Promote investment for increasing the level of processing in the sector

39
was started off for research, the cultivation spread to officially illegal commercial
production. As the sale of GM products was allowed, the rules on cultivation were
being flouted on a large scale. Inspite of some protests from environmentalists and
potential loss of market in Europe, the GM crops was legalised.
! Food exports grew by a huge 25 percent due to currency depreciation and despite a
stronger Real in 2004, Food exports grew by another 30 percent to some USD 18.5bn.
! Market consolidation is a continuing trend and FDI in the Food and Beverages sector
surged to USD 5.3bn, or 26 percent of total FDI, in 2004.
! Economic liberalisation was also responsible for improved productivity during the
1990s resulting in a significant increase in foreign participation in key sectors, such as
dairy and coffee, through joint ventures and acquisitions of local companies.
! An expanding food-service sector also led to a faster food production growth.
Chile's strategy to become an Export Hub
Chile's export strategy is to promote itself as a reliable supplier of a range of high-quality,
affordable goods and services. Other basic campaign points are: ease of trade, with few
tariff walls or bureaucratic hindrances, low risk, due to political stability and a solid
economy, a respect for quality and environmental protection standards, and a qualified
workforce.
Special emphasis is being given to projects that diversify exports and aid small- and
medium-size companies. Chile also encourages exports through a simplified duty drawback
system that refunds duties paid on imports without an excessive documentation burden.
Within the past decade Chile has entered into a growing network of trade agreements,
including accords with Bolivia, Brunei Darussalam, Canada, Central America, China,
5. Upgrade agri-infrastructure to have a sustainable supply chain for consistent high
quality raw material
6. Provision for Training and Education on the safety and health regulations in export
markets
7. Market Diversification – Move over the geographical distance barriers and initiate joint
efforts with potential partners in identifying the focus of trade and creation of
conducive regulatory policies

Colombia, Cuba, Ecuador, the European Union, Iceland, India, Liechtenstein, Mercosur,
Mexico, New Zealand, Norway, Peru, Singapore, South Korea, Switzerland, the United
States and Venezuela. In excess of 76 percent of all Chilean trade is conducted with these
countries, which account for 87 percent of world GDP.
These agreements plus regional accords with most of Latin America have provided Chile
with a unique degree of access to markets encompassing more than 3.8 billion consumers
worldwide. As a result, Chile stands as a natural gateway for trade with both Latin America
and Asia-Pacific.
An Export-Oriented Economy: Export diversification is one of the key factors of Chilean
success. Noting the growing volume and sophistication of its trade, the Economist
Intelligence Unit ranked Chile as the No. 1 Latin American country in which to do business
for the period 2005-2009. Trade figures show that export performance has been nothing
short of spectacular.
15
50
USDBillion
NumberofCountries(ExportMarkets)
0
20
40
60
0
100
150
200
58.9
181
1975 19752006 2006
Encourage an internationally competitive environment
Balance unilateral trade liberalization with open regionalism
Lower export transaction costs
Long-term view of enterprise-level support
Coordinate export support programmes through a central technical agency
Facilitate foreign direct investment
Promote private sector involvement in infrastructure development
Encourage innovation
Chile’s strategic approach to boost exports
Impact
40x 3.6x
Trade Promotion Institute
(ProChile) established to
develop the country’s
non-traditional exports,
design and introduce
export incentives and
modernise administrative
procedures
International investor
extended non-
discriminatory treatment
40
Source:
KPMG Analysis
Chile: Product and market development through international standards of competitiveness (http://www.intracen.org/wedf/ef1999/chile.pdf),

41
Demand-side Drivers
!
!
Urbanisation, rise in disposable incomes and changing lifestyle and aspirations are leading
to significant changes in food habits of Indians. The key trends are as listed below:
Increasing spends on health and nutritional foods – Consumers are more focused on
health. Any packaged food that has sugar, salt, oil, preservatives etc beyond a
“healthy” level are becoming a no-no. Companies already are targeting this segment
with numerous product launches – Pepsico's “100 percent” juice and usage of rice
bran oil to reduce saturated fat in its products; Amul's energy drink “Stamina” are a
few examples towards this trend.
Increasing Nuclear Families and Working Women – Increasing nuclear families,
students and single employees staying alone on work/education and increasing women
employees are leading to rise in consumption of processed read-to-eat canned and
frozen foods. The number of upper and middle class Indians consuming packaged food
Key Growth Drivers of Food
Processing Sector in India
Source: Euromonitor
Employed Female Population
111,910
126,510
129,705
131,424
134,207 135,370
100,000
105,000
110,000
115,000
120,000
125,000
130,000
135,000
140,000
1995 2000 2002 2004 2006 2007
Year
‘000sEmployed

•
•
•
Functional Foods – Functional Foods, Fresh or Processed Foods that claim to provide
health benefits apart from serving the basic function of nutrition, are on the fast-growth
path in India. Fabindia Organics, Organic Food retail outlets like 24 Letter Mantra and
Godrej Agrovet’s Nature Basket have big plans in this segment.
Organised Retail and Private Label
penetration – Organised retail
comprises of less than 5percent of the
total retail market in India, but is
growing at over 20 percent. Food
retailing, which constitutes 14 percent
of the organised retailing, is also
expected to benefit from the growth of
organised retail and the demand for
3
processed foods is expected to rise .
With increasing trend of major retailers
towards private labels, the demand from
retail market for processed foods is also
expected to increase significantly.
Changing demographics and rising disposable incomes – This is the most important
demand booster for the processed food in India. The proportion of the “productive” age
is expected to rise to 200 million in 2012 from the current 30 million . ITC, MTR, Amul,
etc are quick to capitalise on this trend with products like Dal Bukhara, Murg Methi,
Sunfeast Pasta Treat, Shrikhand, Pure Ghee, Nutramul etc
Urbanisation – Changing lifestyle and increasing spend for snack-on-the-go is
2
responsible for a USD 3 billion and growing snack market . Haldiram’s, Frito Lays, ITC
are quick to capture this market with products such as Masala Peanuts, Chips, Bhujia
and Chats.
1
•
Source: Euromonitor
Source: Euromonitor

group (15-59 years) is nearly 80 in India . This age group’s propensity and ability
to spend on quality processed food is higher. Higher incomes as more Indians join to
middle class and upper class also impact the demand of processed food positively.
4
percent
Policy Drivers
5
Indian government recognised the potential of Food Processing sector to the economy and
has come up several initiatives to boost the quantity and quality of output in the sector. The
vast discrepancy in output between the agriculture and food processing is a major cause for
concern and government has increased the spending from INR 72.77 crore in 2002-03 to
159.78 crore in 2006-07 to increase the value of the output, share of global processed
market and provide a fillip to the farmer’s income.
Scheme for Infrastructure development
- The government plans to set up Mega Food Parks so as to integrate the value
chain comprising of farmers, processors and retailers. The move will help reduce
wastage, maximise value addition and increase farmer’s income as they get a
chance to sell the produce directly. 30 mega food parks are planned in the XI five-
year plan.
- Government plans to support Integrated Cold Chains including a value added
centre to ensure that there is no missing link from farm gate to
retailers/consumers, by increasing the grant assistance.
- Modernisation of Abattoirs for supply of hygienic raw material for meat
processing industry.
- In a bid to develop the food processing units, the government is ready to offer a
grant of INR 10 crore for projects providing backward integration for food
processing units and INR 50 crore to modernise meat processing units.
•

•
•
•
•
Scheme for Technology Upgradation/ Establishment/ Modernisation
- Government provides a grant of 25 percent of the cost of plant & machinery
and technical civil works subject to a maximum of INR 50 lakhs in general areas
and INR 75 lakhs in difficult areas.
Scheme for setting up/ Upgradation of Quality Control/ Food testing Laboratory, R&D &
promotional activities
- Setting up a network of laboratories to help in implementing quality regime for
processed food.
- Higher level of assistance to research institutes like IITs and other central/state
level institutes
- Assistance for organising promotional activities like workshops, seminars,
exhibitions, fairs, surveys etc
- 50 percent subsidy to private companies, which set up quality testing
laboratories and 100 percent subsidy for State governments that install new
testing laboratories.
Scheme for HR Development
- Financial assistance to set up training centres, Degree/Diploma courses on
Food Processing in Institutes, Entrepreneurship Development Programs and
training programs sponsored by the ministry
Scheme for strengthening of institutions
- Establishment of National Institute of Food Technology, Entrepreneurship &
Management (NIFTEM).
- Strengthening of State Nodal Agencies (SNA)
- Information Technology
The challenge in front of the players in the food value chain is to leverage the demand and
policy push effectively to deliver to the growing Indian/Global demand and give continuous
feedback to the government on further improvement measures. Meanwhile, the
government should ensure a smooth policy implementation by investing time and money in
institutional capacity building and in removing complications for the investors and
manufacturers due to multiplicity of departments and regulations.
44

45
1. Agriculture:The measures will lead to stabilisation of rural demand.
Agriculture will be made less dependent on the monsoon with
increased focus on irrigation development.
a. Agricultural credit flow at INR 287000 crore in FY09.Target for
FY10 at INR 325000 crore.
b. Continuation of interest subvention for short term farm loans
upto INR 300000. Additional subvention of 1 percent in cases of
timely debt servicing. Effective interest on farm loans thus 6
percent under new scheme.
c. Period of earlier one off debt waiver increased by six months till
31st December 2009.
d. Task force to be set up to look into debt burden of farmers due to
private informal lending in Maharashtra.
e. Allocation under Accelerated Irrigation Benefit Programme (AIBP)
increased by 75 percent.
f. Allocation under Rashtriya Krishi VikasYojana increased by 30
percent.
2. Improving Rural Demand: Increased allocation to National Rural
Employment Guarantee Scheme by a whopping 144 percent to
improve employment and consumption.
3. Taxation: GST by April 2010 will lead to rationalisation and
simplification of the tax structure at both the central and state level,
removing the non-uniform VAT currently in place.
4. Cold Chain: A deduction is allowed in respect of entire capital
expenditure (other than the acquisition of any land or goodwill or
financial instrument) incurred by the taxpayer engaged in the
following businesses:
- setting up and operating cold chain facilities for specified
products
- warehousing facilities for storage of agricultural produce
Budget 2009 Support Measures
Mr Subodh Kant Sahai, Hon'ble
Minister for Food Processing
Industries, however is of the
view that the industry needs
more sops on the lines of IT
industry – Tax holiday for 8-10
years and 100 percent
depreciation on plant and
machinery. Also, he feels that for
Agriculture to grow at 4 percent,
Food Processing should achieve a
growth rate of 6 percent.
Currently, the mismatch between
harvest and post-harvest
production is huge and this gap
needs to be bridged. The minister
is also for improving the training
facilities by using the ITIs. The
Minister projects an investment
requirement of INR 1,00,000
crore for the sector and is bullish
on the PPP mode to achieve the
target investments in the sector.
He also says the regulatory
framework needs to be
streamlined from 16 laws and 13
ministries taking measures to one
law that governs the sector.

Kpmg assocham - india food processing - 2009

Kpmg assocham - india food processing - 2009

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