IS INDIA MAKING, BAKING, PACKING, TRANSPORTING AND SERVING IT RIGHT?

28 THE DOLLAR BUSINESS II MAY 2016
COVER STORY FOOD PROCESSING

MAY 2016 II THE DOLLAR BUSINESS 29
IS INDIA
MAKING, BAKING,
PACKING,
TRANSPORTING
AND SERVING
IT RIGHT?
Despite being one of the largest producers of agricultural products
in the world, India's food processing industry remains for all
practical purposes, an infant! Logistics and storage issues have
led to enormous wastages over the years in an industry worth
$67 billion, and which provides direct employment to some 13
million people. But there's hope. The Centre's recent nod to allow
100% FDI in made in India processed food retail and efforts to
encourage investments in infrastructure through lower import
duties could lead to better days ahead for the industry.
Or are we just being unjustifiably optimistic?
The Dollar Business analyses.
BY THE DOLLAR BUSINESS INTELLIGENCE UNIT

L
ast year, when an industry report
from Credit Lyonnais Securities
made headlines with a finding
that a home-grown brand Pa-
tanjali Ayurved Ltd. had become the
fastest growing FMCG brand in India,
the news would have surely given some
undesired, anxious moments to the sales
and marketing teams of foreign FMCG
behemoths. And why not? For years –
actually, decades – these deep-pocketed
and muscular giants had been relishing
the sight of their food & beverage (F&B)
brands – big and small, global and lo-
cal – throwing their weights around in
When we talk about the potential of
the processed foods sector, one doesn’t
have to think hard to arrive at the con-
clusion that with a population of more
than 1.2 billion and adequate availabil-
ity of raw materials, India makes for a
promising market. For instance, even a
sale of Rs.10 per person per annum of
a basic food product like biscuit makes
the country a potential Rs.1,300 crore-
a-year market for the product. Or best
say, if each Indian was to even pur-
chase a packet of a soup worth Rs.40 a
year, that brand would have revenues of
over Rs.5,000 crore coming from a sin-
the Indian market. And the thought of a
made in India brand rising up the ladder
and suddenly becoming the icon of the
processed foods industry in the coun-
try must have got alarm bells ringing in
their boardrooms. After all, no compa-
ny would want to lose its grip on a mega
market like India; and definitely not in
a hard to settle market like processed
foods, where quality is as much about ad
spends as it is about something as sensi-
tive as "mass health"! [Wondering what's
that? Recall what happened to the Cola
giants in 2006 and to Nestlé's Maggi last
year. Sensitive industry, isn't it?]
Amit Lohani
Convener, Forum of Indian Food
Importers (FIFI) & MD, Max Foods
TDB: What's your observation of the
food processing sector in India?
Amit Lohani (AL): The major challeng-
es before the Indian food processing
sector can be broadly categorised into
two types – tariff barriers and non-tariff
barriers. In terms of tariff barriers, India
has one of the highest duties in the world
on imported food, wine, and beverages
which ranges from 30% to 180%. Due
to this, imported food products become
very expensive in India. For example,
wine which is sold in California or Spain
for about $1, costs around $15-20 in In-
dia. Similarly, prices of other food prod-
ucts are also high when they go for sale in
India. The basic customs duty is usually
about 30% and then there are additional
levies like countervailing duty (CVD),
VAT, Central Sales Tax (CST), cess, oc-
troi, etc. This makes Indian market not
a very lucrative proposition in terms of
tariff. However, India has a large middle
and upper middle-class population and a
majority of it aspires to buy international
brands, so it makes the country an at-
tractive market for international players.
The non-tariff barriers are the food
safety and labelling regulations imposed
by the government on imported food
products and beverages. India has one of
the most stringent norms in the world in
terms of labelling. India is the only coun-
try to have red dots and green dots re-
ferring to non-vegetarian and vegetarian
products respectively. No other country
has a maximum retail price (MRP) re-
gime. Across rest of the world the prices
are determined by the retailer based on
the location of the store and the cost fac-
tor of that particular store. For example,
store rental at Khan Market in New Del-
hi is about Rs.2,000 per sq. ft. whereas
the rent for a store in Lucknow is Rs.10-
45 per sq. ft. If a product is sold at the
same price at both the stores, it becomes
a challenge for the retailer at Khan
Market to maintain a decent profit.
The Indian government is amending
laws and regulations related to the food
& beverage (F&B) sector but the country
has not been able to align to internation-
al norms like Codex and others, which
are approved and accepted by more than
200 countries across the world.
TDB: You had earlier pointed out that
there is no uniformity in food safety
regulations and FSSAI has not been
able to implement Codex across all
segments. What is the scenario now?
AL: In the last nine months things have
changed after Ashish Bahuguna and
Pawan Kumar Agarwal joined FSSAI
as Chairperson and CEO respectively.
There are about 9,000 additives which
have been approved. Earlier, when these
additives were not in the FSSAI approved
list, products carrying these additives
were considered as proprietary foods and
it was a major challenge to get approvals
for these products. A lot of deliberation
is going on between the industry and the
food safety authority due to which there
has been progress with regard to issues
with FSSAI. The food safety authority is
a relatively newer authority, hence it will
take some time to resolve all issues. The
protectionist attitude that India had in
the past needs to change.
"THE PROTECTIONIST ATTITUDE THAT INDIA
HAD IN THE PAST NEEDS TO CHANGE”
Exclusive Interview

Production of noodles is a big business as consumers across the country have embraced this product as a comfort food.
TDB: Why is labelling such a major
issue for F&B importers?
AL: India is a large country but import
of processed F&B products is very small
in terms of volume. India-specific label-
ling is a big challenge. For example, if we
approach a company abroad to do an
India specific labelling for two pallets, it
will not be feasible for the manufacturer.
There are some labelling norms in India
which are not applicable elsewhere. For
example, food products in India come
with a date of manufacture whereas in
rest of the world there are only best be-
fore dates printed on products.
TDB: When Maggi was banned by FS-
SAI, it left consumers confused as to
whether to follow FSSAI or a compa-
ny which they had trusted for decades.
How can such issues be addressed?
AL: Let’s take an example to clarify this.
The earlier norm on food safety, the Pre-
vention of Food Adulteration Act, 1954,
stated that a certain amount of sugar
needs to be used to preserve jams. How-
ever, over a period of time, there has been
development in the methodology of jam
making, preservation and in the materi-
al used for packaging of these products.
Hence, the quantity of sugar used to
prepare jam has reduced in other coun-
tries, whereas in India we have to follow
the old norm laid down by the 1954 Act.
Countries in North America, European
Union, Middle East and South East Asia,
etc., follow the internationally approved
Codex norm, and jams prepared there
have lesser amount of sugar but we can’t
import that as we still follow the old rule.
This doesn’t mean that the product is
unsafe to use. India needs to update its
standards as per the development in the
sector globally.
TDB: You mentioned about trade bar-
riers put up by India to restrict import
of certain food products but Europe
and many other countries do the same
to protect domestic producers – Europe
restricts Indian milk products. So why
can't we, if their products don't adhere
to our norms and standards?
AL: Trade barriers should not be there,
be it from a developing economy or a de-
veloped nation. Products like olive and
cheese are not produced in India. Only
3% of India’s total milk production is
processed whereas developed countries
process around 95% of their milk. So a
large part of our milk is consumed with-
out any value addition. You would be
amazed to know that milk price in India
is one of the highest in the world. Even
countries like Italy which are considered
expensive, sell milk at price almost 20%
lower than that in India. Imports of such
products make market more competi-
tive. If demand for an imported product
rises to a critical level, it could be pro-
duced in India as is the case with cheese.
TDB: How difficult is it to convince
buyers to pay a higher price for an im-
ported product?
AL: We import products which have a
unique selling proposition. For exam-
ple, in the edible oil segment, we import
olive oil which is not produced in India
and is available only in certain European
countries. Products which have a value
proposition in terms of health or other
factors will be accepted by consumers.
We should also look at technology trans-
fer as the demand for a product increas-
es. Domestic companies too source in-
gredients from international companies.
For example, the gluten used to produce
bread is imported as is the ice cream
mix used to produce ice cream. How-
ever, when it comes to processed food,
domestic companies are against imports
and complain that it will ruin the Indi-
an market. We have been trying to make
the domestic industry understand that
there is a need for imported ingredients
as well as finished products. The pro-
cessed foods sector abroad is much more
mature and developed and they will
create benchmarks which will help the
Indian processed foods sector grow. We
can even become a production hub like
Thailand, Indonesia or Malaysia. These
countries are among the largest manu-
facturers of biscuits in the world and are
now fulfilling the demand of the entire
South East Asian market. They have de-
veloped their biscuit manufacturing bas-
es in the last 20 years and are exporting
about 70% of their total biscuit produc-
tion. India has the potential to be a hub
of manufacturing international standard
processed food products to cater to the
needs of at least the Asian market.
InterviewbySisirKumarPradhan

gle point of incidence with each person
in the country in an entire year! We're
talking of a mega market here. And not
to say, this excitement is shared by each
processed food brand in India.
And, why talk of just consumption?
India ranks amongst the world's top
producers of several agri-commodities
– while India ranks no.1 in the world
in production of milk, pulses, ginger,
bananas, guavas, papayas and mangoes,
it sits pretty at no.2 in items like rice,
wheat, vegetables and several other hor-
ticulture products.
With such attractive numbers one
would have expected the Indian pro-
cessed foods sector to demonstrate a
consistently high level of dynamism,
month after month, year after year. The
reality however is quite different, and we
dare say, disappointing.
Despite an enormous potential, the
sector has remained an underdog. In-
dustry insiders say that one of the major
reasons for this not so impressive perfor-
mance is lack of heavy investments from
big Indian conglomerates of the likes of
the Tatas, Reliances or Birlas, companies
which are otherwise ubiquitous in other
major industry sectors. And this claim is
true to a considerable extent. Except for
ITC, Britannia Industries and Dabur In-
dia, there are not many true blue hot In-
dian stocks in pure play processed foods
segment in the country.
Nevertheless, with the advent of 'Make
Arjun Gadre
Managing Director,
Gadre Marine Export Pvt. Ltd.
TDB: How has your experience in the
food processing sector in India been?
Arjun Gadre (AG): India is a huge mar-
ket for all types of consumer products.
We entered the Indian market in 2004
with an aim to be the top retail brand
in the Indian retail industry for seafood.
Over the years, the brand has achieved
considerable growth in the Indian retail
industry. Gadre had sales of 250 tonne
last fiscal, and we are targeting 500 tonne
this fiscal. Our current distribution sys-
tem works without any problems. We
haven’t really thought of changing it yet.
We are available in more than 500 outlets
across 20 cities in India. The capacity of
domestic market has not fully evolved.
Once the domestic market matures,
things will turn out better and we will re-
view our distribution and logistics at that
point of time according to requirements.
TDB: What are the major challenges
before the food processing industry?
AG: Consumer awareness is one of the
biggest hurdles in our country. The typi-
cal Indian consumer needs to be educat-
ed about quality and hygiene. Consum-
ers tend to think that frozen or processed
food is not fresh. However, this isn’t cor-
rect. If you look at the process, especial-
ly with our brands, you will notice that
our frozen products are absolutely fresh.
Eventually awareness and growth in
modern trade will help in the growth of
this category.
TDB: What are the major regulatory
hurdles before the industry? And what
are the major changes in terms of
regulations and taxation that you look
forward to?
AG: Fish processing industry faces prob-
lems like environmental issues, decline
in the catch of fish, over-exploitation of
resources, and fluctuation in prices. We
need to address these for sustainable
growth of the marine food industry. As
far as taxation hurdles are concerned,
one problem is the aggressive revenue
administration, perhaps because we are
a developing country. Other problem ar-
eas are a long-drawn dispute-resolution
mechanism and ambiguous legislations.
TDB: In the last decade, how have ex-
port markets changed for Indian pro-
cessed food? How easy or difficult is it
to market India-made processed foods
in the overseas market, particularly in
the developed countries?
AG: Indian products are now being
widelyacceptedininternationalmarkets.
Made in India food products are present
in supermarkets in most countries. The
weakening of the euro and yen is a ma-
jor issue in terms of price realisation and
profits. Moreover, India does not have
many free trade agreements and hence
import taxes also pose obstacles.

TDB: What are some of the major ex-
port markets for your products?
AG: We export to a lot of countries,
some of which are Belgium, Greece, Ita-
ly, Korea, Netherlands, Spain, UK, USA,
New Zealand, Vietnam, Japan, UAE, In-
donesia, France, Hong Kong, China and
Australia. Since we are present globally,
we haven't been targeting any specific
country. Also, in the coming months, we
plan to expand our wings further.
TDB: What is your outlook for the In-
dian food processing sector?
AG: We look forward to the GST bill be-
ing passed. It will help the trade. It will
also help us to keep uniform pricing in
all the states, as under the current system
there are different VAT structures across
states in India.
INDIAN PRODUCTS ARE NOW BEING WIDELY
ACCEPTED IN INTERNATIONAL MARKETS”
Exclusive Interview

In India' programme and the recent an-
nouncement of several new mega food
parks as well as the decision to allow 100%
foreign direct investment (FDI) in the
marketing of food products produced and
manufactured in the country, the sector
seems to be slowly warming up for the big
day.ThefoodprocessingindustryinIndia
has been hailed as one of the sunrise sec-
tors for 25 years now. Although the poten-
tialhasneverbeenindoubt,itsimportance
asakeygrowthdriverisbeingrealisedonly
of late, says a hopeful Dr. A. Didar Singh,
Secretary General, Federation of Indian
Chambers of Commerce and Industry
(FICCI), to The Dollar Business.
To quickly break-up contribution at
the product level, when it comes to rep-
resentations from the various sub-seg-
ments of the sector, grain processing
and spices category leads from the front.
While grain processing and spices seg-
ment constitutes 34% of the Indian pro-
cessed foods sector, packaged or conve-
nience food comprises 14%. As per Dun
Bradstreet data, non-alcoholic bev-
erages that include aerated drinks, tea,
coffee, fruit juices, water, etc., account
for 8%; milk milk products and fruits
vegetable processing account for 7%
each; 6% bakery; 5% sugar and confec-
tionery; 4% meat and poultry; 3% alco-
holic beverages; 3% marine products; the
rest 9% comes from other segments that
include flavours, additives, seeds, etc.
A SUCCESS STORY
Given the tremendous potential that In-
dia's processed foods sector holds, battles
between players to reach deep into com-
petitors' market shares are a common
sight. In fact, Indian processed foods
sector recently witnessed a battle royale
when ITC tried to capitalise on Nestle's
loss in the instant noodles segment when
the Food Safety and Standards Authority
of India (FSSAI) questioned the quality
of the latter's product.
And to touch upon where we started,
far removed from the battle of noodles
that hogged the limelight was Patanjali
Ayurved, busy ramping up its produc-
tion capacity and product portfolio in
Haridwar, a small town more known as
a place of Hindu pilgrimage. It's objec-
tive – meet the fast-growing demand
from its customers. In fact, the success of
Patanjali Group has now become a case
in point to establish the real market po-
tential of India's processed foods sector.
So, to what do we attribute the success
of a company that has always remained
isolated from the glitz and glamour of
mega events and brand ambassadors.
One of the many carefully crafted strat-
egies by the company was its decision to
set up a Mega Food Park in 2010. And
since then there has been no looking
back for Patanjali. That was a move well
made. But equally true is the fact that in
the absence of demand for quality food
products in a price-sensitive market like
India, Patanjali couldn't have come even
a mile close to tasting success in a clut-
tered Indian processed foods industry.
A POTENTIAL POWERHOUSE
If government data is anything to go
by, the Indian food and grocery market
is the world’s sixth largest, with retail
contributing 70% of the total sales. The
Ministry of Food Processing Industries'
(MOFPI) annual report for FY2015 re-
veals that the sector constituted around
Source: Ministry of Commerce and Industry, Department of Industrial Policy Promotion; figures in %
Growth of food products beverages manufacturing in India
Infrastructural and policy bottlenecks if treated, can lead to a sustained positive trend
20
15
10
5
0
-5
-10
*(APR-DEC)
12.5
-8.2
-1.4
7
15.4
2.9
-1.1
4.8
-5.2
FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 FY2016*
#Note: Industrial Entrepreneurs Memorandum (IEM) is an application for acknowledgment of a food processing unit;
Source: Ministry of Commerce and Industry, Department of Industrial Policy Promotion
IEMs#
and proposed investments in food processing
Industrial Entrepreneurs' Memorandum investments are on the rise since FY2011
250
200
150
100
50
0
20,000
15,000
10,000
5000
0
FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 (upto Dec)
No. of IEMs (L-axis) Proposed Investment (in Rs. crore; R-axis)
Red cherries being sorted by
hand for processing. About
18% of India's fruit and
vegetable production by value
is wasted annually because of
a lack of adequate storage and
transport facilities.

9% and 11% of GDP in manufacturing
and agriculture sectors respectively and
have been growing at an annual average
rate of 8.4%, as against 3.3% and 6.6%
rate clocked by agriculture and manu-
facturing sectors respectively.
Currently, Indian processed foods
sector is estimated to be worth about $67
billion and gives employment to about
480 lakh Indians (130 lakh directly and
350 lakh indirectly). Talking of job cre-
ation, a joint report by the National Skill
Development Corporation (NSDC) and
KPMG titled 'Human Resources and
Skill Requirements in the Food Process-
ing sector states, In the last five years,
the growth of the Indian food processing
sector has been faster than agricultural
growth. The sector is poised for strong
growth, driven by growth in organised
retail, changing consumer preferences
and favourable government policies.
The report also states that by 2022, the
Indian food processing industry is ex-
pected to generate about 44 lakh ad-
ditional employment opportunities.
Speaking of contribution, a joint indus-
try report titled 'Winning consumer
trust' from PwC and FICCI, states, The
Indian processed food industry accounts
for 32% of the country’s total food mar-
ket, 13% of India’s exports and 6% of to-
tal industrial investment. There's more
goods news for believers in the Indian
processed foods sector. The industry is
projected to grow at an annual average
rate of 104%, touching $482 billion by
2020. That's some growth to work hard
Major destinations of India’s marine product exports
Just five nations constituting 62% of our exports calls for more geographical diversity
Source: APEDA Agri Exchange; break-up for FY2015; value in $ million
0 500 1,000 1,500 2,000 2,500
Other
Belgium
Spain
Japan
Vietnam
USA
Ayush Agarwal
Director,
Calpro Foods Pvt. Ltd.
TDB: How has your experience with
food processing sector in India been –
with regard to setting up and running
a food processing unit, scope for prod-
uct innovation and Central and state
governments’ policies for the sector?
Ayush Agarwal (AA): The government
does realise the immense potential and
the need of a robust food processing in-
dustry. They have emphasised on build-
ing infrastructure, allowed FDI in the
sector and promoted various financial
schemes to support their vision. Howev-
er, a lot more needs to be done, especially
for small and medium enterprise (SMEs)
which are the backbone of the Indian
food processing industry.
As the industry is still at a nascent
stage, we have problems in sourcing in-
puts of consistent quality, getting skilled
manpower and are burdened with heavy
taxes. We need strong support at grass-
roots level from the government. Anoth-
er major obstacle is a lack of RD and
unavailability of equipment and ma-
chines for producing premium and novel
food products. Costs of imports for such
machines with the existing duty struc-
ture make them prohibitive. The need of
the hour is to allow duty free imports of
high-tech machines for product innova-
tion in food processing.
Further, the Food Safety Standard Au-
thority of India (FSSAI) discourages the
industry to innovate in existing product
lines or experiment with new product
categories. This needs to be reviewed, as
we need to constantly provide new prod-
ucts to our customers.
TDB: What are the major challeng-
es before the food processing in-
dustry in general and specifically
segments that you operate in?
AA: The Emerson food wastage and cold
storage report cites studies that have
pegged the value of fruits, vegetables
and grains wastage in India at Rs.44,000
crore annually. Fruits and vegetables
account for the largest portion of that
wastage. 18% of India’s fruit and vege-
table production – valued at Rs.13,300
crore – is wasted annually. This is our
biggest challenge. We must act fast to
process these perishable fruits and veg-
etables into non-perishable value-added
products with long shelf lives, that can be
thereon exported.
The second big challenge is that pro-
FSSAI DISCOURAGES THE INDUSTRY TO
INNOVATE IN EXISTING PRODUCT LINES
Exclusive Interview

Easy availability of a wide
range of food products
under one roof at large
stores have spurred the
demand for processed
food products across
the country.
cessed food is perceived to be unhealthy
or unsafe. Because of the recent events
with Nestle and others, a major section
of consumers are concerned and have
been avoiding processed food altogether.
This needs to be addressed immediately
by the industry as a whole.
In the bakery segment where Calpro
Foods predominantly operates, we face
similar issues as the product's shelf life
is short, especially for breads and cakes.
Expensive and unreliable cold storag-
es and lack of uninterrupted electricity
across India make frozen items inviable.
Additionally there are challenges in mak-
ing baked goods, especially wheat-based
products, healthier as well as tastier.
TDB: What are the major regulato-
ry hurdles before the industry? What
changes to the taxation and regulatory
frameworks could give this industry
the much-required impetus?
AA: The scope and ambit of Food Safety
Standard Authority of India (FSSAI) is in
fact a deterrent to the industry to inno-
vate in existing product lines or experi-
ment with new product categories. This
has perhaps become the biggest imped-
iment to the industry.
Food regulatory bodies in many de-
veloped economies have already laid
down guidelines for food categories. We
can simply take this as a base and make
changes and add categories relevant to
India. There is no point in reinventing
the wheel with food regulations.
Secondly, the onus should be on the
regulator to prove a new food product
launched is unsafe. They have the means
and the resources. This will also make
companies more compliant as they will
carry the risk of product recall and de-
struction of inventory.
TDB: In the last decade, how has ex-
port market changed for Indian pro-
cessed food? Are Indian products now
more acceptable in global markets or
do we just cater to the Indian diaspora?
AA: Food products account for 13% of
India’s total exports. Though exported
globally, most of these products are for
the Indian population settled abroad.
The big markets for Indian processed
foods are Middle East and South East
Asia. Acceptability is still low especially
in the developed countries.
APEDA does provide a host of op-
portunities for companies to participate
in global exhibitions. But the focus is
still on Basmati rice. The industry needs
to come together and conduct mam-
moth marketing exercises to show that
processed food products from India are
safe and hygienic.
TDB: What is your outlook for the In-
dian food processing sector?
AA: India’s food processing sector has
grown at an average of 8.4% during the
last five years ending FY2016. The trend
is expected to continue, providing ample
opportunities for the industry. With ris-
ing income levels, affluence and a grow-
ing middle-class the desire for branded
food is also increasing.
The industry will not only grow in
globally known processed food catego-
ries like snacks and juices, but also in
many traditional Indian categories. We
have already seen how idli mix and gulab
jamun mixes have opened new product
lines! We will see more such products.
This will make the market grow in the
rural and semi-urban areas, which ac-
count for 70% of India’s population.
In near future, many hurdles and
challenges will be resolved and big FB
companies will make India their food
processing hub, for not just Indian and
other Asian markets, but also for their
own population.
InterviewbyNehaDewan

for. [Now you understand why the likes
of Patanjali, ITC, Dabur, etc., are busy
diversifying within the processed foods
vertical, with some even distributing
their cookies as complimentary items on
domestic air routes!]
THE GOOD, THE BAD AND...
Many studies and forecasts based on
government and private research data
indicate that the Indian processed foods
sector is poised for exponential growth.
And that it is slowly emerging as a high
growth sector due to its immense poten-
tial for value addition, ability to control
inflation and ensure remunerative prices
to farmers. But is this just a case of being
over-optimistic?
Whether the industry can really
achieve all that it promises is something
that many experts doubt. Their reasons
– still unclear government policies and
of course, many other bottlenecks that
plague the sector.
Government policies lack clarity. The
government stresses on ease of doing
business and simultaneously imposes
barriers through restrictions, approvals
and licenses. The government encour-
ages exports and then abruptly comes
up with a notification banning export of
certain products. Business houses can’t
run like that. We need more clarity and
decisions have to be made keeping a
long-term time frame. There are so many
Acts that it will puzzle a new entrepre-
neur, Piruz Khambatta, Chairman
Managing Director, Rasna International,
tells The Dollar Business.
While government statistics under-
line the faster growth of the processed
foods sector against agriculture or man-
ufacturing sectors, this growth is as yet
unable to counter the annual tentative
perishables loss, which ranges from
4% to 18% (by value) across various
food categories. According to a recent
report titled 'Food Agriculture Out-
look' from consulting firm Technopack,
The annual tentative perishables loss is
in the range of $7 billion to $9 billion.
This wastage has attained a threshold at
which a population of about 175 million
can be fed annually. Perishability is high
D. V. Malhan
Executive Secretary, All India Food
Processors’ Association (AIFPA)
TDB: AIFPA is the oldest association
in the food processing sector. What are
its core activities?
D. V. Malhan (DVM): Yes. We're more
than 70 years old. Our birth happened
even before India won Independence,
and since then, we've been concerned
about the development of this sector. I
would like to add an interesting fact here
– given that in those initial times when
there was not much awareness about the
concept of food processing and the sec-
tor was largely about food preservation,
essentially confined to vegetable pickles
and fruit jams (murrabbas), our organi-
sation was called All India Food Preserv-
ers Organisation. But as time passed and
we became more aware of the latest chal-
lenges, we renamed it to All India Food
Processors Association (AIFPA). Today,
we represent, promote, encourage and
support the Indian food processing in-
dustry. We are active in seeking redressal
of the problems faced by the food pro-
cessing industry in India. We also work
towards improving the product quality
standards to match global standards.
TDB: According to you, what are the
main problems hurting the Indian
food processing sector?
DVM: Wastage of agricultural produce is
the biggest issue hurting the sector –not
just at the farming stage but across the
entire supply chain. I believe our insuf-
ficient storage systems, transport flaws,
handling and processing issues, have
all contributed to unacceptable levels of
wastages and value loss. That’s the reason
we have such a low processing level in
India of anywhere between 4-6%, when
compared to our global counterparts –
80% in USA, 70% in France. Even if we
compare ourselves with developing na-
tions, we lag behind many of them. For
example, nations like Malaysia and Thai-
land process up to 80% and 30% of their
produces respectively.
In our entire agri-range, for example in
cereals, wheat, oilseeds, fruits and vegeta-
bles, losses arising out of wastage are re-
ally very high – ranging from 4% to even
30% in some perishable segments. All
these wastages could have been processed
further but so far we have not been able
to effectively do so. However, of late, I see
things moving in the right direction. Lack
of value addition is another area where we
need to focus on. For this, we need to em-
power our processors with the latest tech-
nological know-how and skill sets. And
we are working in this direction.
We need to make the food processing
industry lucrative enough for our pro-
cessors – for whom cost of finance is still
a big challenge. Despite, food processing
having been acknowledged by the gov-
ernment as a priority sector, the reality
is that banks are unenthusiastic about
lending to MSME players. Their doors
are open only for big corporations.
REALITY IS, BANKS ARE NOT KEEN TO LEND TO
MSMEs IN THE FOOD PROCESSING INDUSTRY
Exclusive Interview

specifically in key sectors such as fruits
vegetables, dairy, seafood, and sup-
ply chain improvements are required if
the industry wants to tap opportunities
that these sub-sectors offer. In our en-
tire agri-range, for example in cereals,
wheat, oilseeds, fruits and vegetables,
losses arising out of wastage are really
very high – ranging from 4% to even
30% in some perishable segments. All
these wastes could have been processed
further but so far we have not been able
to do so, agrees D. V. Malhan, Executive
Secretary, All India Food Processors As-
sociation (AIFPA). The high wastage lev-
el clearly reveals that the extant state of
our infrastructure is incapable of coping
with crop surpluses.
SERVING THE WORLD
When it comes to the potential of the
processed foods sector, the sector can
definitely fetch more profits as com-
pared to other sectors in the consumable
category. However, what is required to
succeed in the sector is highly skilled
manpower, innovation in raw material
sourcing and marketing, investments
in technology and RD and, of course,
new product development on a continu-
ous basis. Although the sector is suscep-
tible to volatility in food consumption
pattern and the vagaries of the mon-
soons, if someone is ready to take the
plunge (with the correct approach) the
current global market for processed food
is huge. The food and agri-business has
Top destinations for India’s
dried and preserved vegetables
Europe US account for a major share
Germany UK USA Russia
Belgium Other
Source: APEDA Agri Exchange; break-up for FY2015
5.8%
4.6%
17.0%
10.2%
9.6%
52.8%
TDB: Please tell us about the endeav-
ours aimed at improving the state of
affairs in the food processing industry?
DVM: We are working in close coordi-
nation with all the stakeholders of the
industry to improve the situation in the
food processing sector. We are happy
with the initiatives taken by the cur-
rent government. We are continuously
in discussion with them and we believe
the Union Cabinet Minister of Food
Processing, Harsimrat Kaur, is doing a
wonderful job in this regard. She knows
the nuances of the trade and we are quite
hopeful that under her leadership, things
will soon change. We are also happy
with the vision document launched by
the Ministry of Food Processing. The
recently announced 100% foreign direct
investment (FDI) in multi-brand retail
for food products is a good move that
we believe will reduce wastage, help our
farms diversify, and will encourage big
MNCs to come to India and produce lo-
cally rather than import.
TDB: It has been a couple of years since
the Food Processing Ministry had ap-
proved 42 mega food parks, however
only five of them have started oper-
ations so far. What, as per you, is the
reason behind this slow progress?
DVM: A mega food park is a great
concept taken from developed econo-
mies and I believe this can turn around
the scenario in this sector. Apart from
concerns about the availability of raw
material, logistics, etc., I personally be-
lieve many MSME players are still not
wary about the whole concept – they
fail to understand how this is going to be
a cost effective proposition for them in
the long run, given the fact that owner-
ship of the place will not rest with them.
I guess, some of them may be thinking,
unlike opening a factory anywhere else
where they have the liberty to wind it up
at will (or dispose of), they may not have
the required freedom with these mega
food parks. There is a need for aware-
ness creation about the benefits of the
scheme.
TDB: What are the major regulatory
hurdles before the industry?
DVM: There is still a need to bring in
more uniformity with regards to sales
tax and VAT applicability. Today, many
states indulge in arbitrary tax slabs – for
example, on bread, some states have 4%
VAT, some have zero, and given the fed-
eral set up of the country there is nothing
much we can do.
Complex tax policies are also a big
hindrance. A different labour policy in
each state is not doing any good to the
industry. Inspector Raj with regards to
raw material inspections is still rampant
in many states. We are continuously
raising these concerns with the relevant
stakeholders and we aim to bring in
uniformity in structure and streamline
processes very soon.
TDB: Please tell us about the key mea-
sures that you feel are necessary to in-
crease export-competitiveness of Indi-
an food producers and processors.
DVM: We need to first empower our
agri-growers i.e., our farmers. We need
to urgently address their issues because
all the food processing stems from their
farms in the first place. I believe we are
working in the right direction in this re-
gard. Another issue is that quality-wise,
our products are not export-ready. For
example, we produce a lot of tomatoes
but most of them are not of export-qual-
ity. So processing will help. Further, tech-
nology upgradation is one factor which
can make a difference.
TDB: Do you think fairs like Aaahar
International have been beneficial to
the sector?
DVM: I believe, events such as Aaahar
International Fair bring in real benefits
to our food processors fraternity. These
events are a great platform to showcase
our products, to know what’s available
in other countries and where we stand
when compared to other overseas play-
ers. They also offer an excellent platform
for knowledge sharing and business
collaborations.
InterviewbyAhmadShariqKhan

a massive economic, social and environ-
mental footprint. The $5-trillion indus-
try represents 10% of global consumer
spending, 40% of employment, and 30%
of greenhouse gas emissions, Iride Ci-
accia, Project Manager, LC Internation-
al, an Italy-headquartered international
consulting group that assists companies
to get into food business in their targeted
markets, tells The Dollar Business.
When compared to its developed
counterparts, the country's processed
foods sector still lags behind in several
aspects – the first and foremost being
the low processing level. Though India’s
agricultural production base is rea-
sonably 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 – pro-
cessing of agriculture produce is around
40% in China, 30% in Thailand, 70% in
Brazil, 78% in the Philippines and 80%
in Malaysia. We have a very low pro-
cessing level in India when compared to
our global counterparts – while we have
a processing level of 4-6% here in India,
it's 80% in USA and 70% in France. Even
if we compare ourselves with developing
nations, we lag behind many of them.
For example, we have processing levels
accounting up to 80% in Malaysia and
30% in Thailand, agrees Malhan.
So, what makes the processed foods
segment thrive in these countries, where
as a country like India, which produces
agri-commodities in abundance, lags be-
hind? The food value chain in India is
different from many other markets like
US due to a unique consumption pat-
tern in the country and presence of both
organised and unorganised players. As
a result, consumption at the retail level
consists largely of non-processed prod-
ucts or food with very limited processing
in key categories like fruits and vegeta-
bles, meat and poultry, dairy, grains, and
pulses, states a joint report titled, 'Feed-
ing a Billion: Role of the Food Processing
Iride Ciaccia
Project Manager, LC International, Italy
TDB: How does LC International sup-
port SMEs and large food processing
firms in getting greater market access
and attain operational excellence in
domestic and overseas markets?
Iride Ciaccia (IC): LC International
provides effective tools for entrepreneurs
for developing projects aimed at inter-
nationalising SMEs, supporting their
integration, expansion and consolida-
tion, or even the creation of their hold-
ing structures in foreign markets such as
India, Brazil, China and USA. Thanks to
our offices in USA, China and Croatia,
we can assist them in the export process,
facilitate all their import operations and
help them in product marketing. We also
help Italian brands to get into their tar-
geted markets. LC International is the
perfect consultant for companies keen to
invest in new markets or enhance exist-
ing activities in established ones.
TDB: Which countries are the largest
producers and exporters of processed
foods in the world? And what are the
major reasons for the growth of the
sector in these countries?
IC: LC International mostly deals with
organic processed foods and wine and
high-quality food made in Italy, which
is part of the luxury-excellence of Italian
food. Regarding the largest producers
and exporters of processed foods, it de-
pends on the type of food. For instance,
in fruits and vegetables, North America
and Europe are very big players. Howev-
er, it's China that is the leader in the ex-
port of these products followed by USA
and Europe. Half of all processed fruit
and vegetable products that are trad-
ed are sourced from Europe. For wine,
France, Italy and Spain are in the top
ten and Italy produces about one-third
of the worldwide production of wine.
These countries have a leading role in
the export field too, especially for high
quality wines. The major growth reasons
in these countries are the quality of food
and wine as the European produce is
strictly controlled by EU laws, and they
are synonymous with healthy eating. Re-
garding the Chinese food industry, that
continues to grow. Many food manufac-
turers there have launched new strate-
gies, including employing high-quality
ingredients, introducing new technolo-
gies and diversifying product lines.
TDB: How is the current global market
for the processed food sector? What
impact has falling commodity prices
had on the processed food trade?
IC: The current global market for pro-
cessed food is huge, especially for food
and agri-business that have massive
economic, social, and environmental
footprints. The $5-trillion industry rep-
resents 10% of global consumer spend-
ing, 40% of employment, and 30% of
greenhouse-gas emissions. Developing
countries exporting agricultural com-
modities have obviously been particular-
ly concerned by recent low global price
levels and, given the inelastic nature of
INDIA STILL HAS A LONG WAY TO GO WHEN
IT COMES TO EXPORTS OF PROCESSED FOODS”
Exclusive Interview

Industry' by AT Kearney and FICCI.
Another significant factor that con-
tributes to the growth of the sector in de-
veloped economies is that a majority of
the contribution comes from small and
medium-sized enterprises (SMEs). For
instance, about 99% of all enterprises
in the food sector in Europe fall in or-
ganised SME category. Although even in
India the food processing sector large-
ly comprises SMEs which account for
more than 50% in value terms and 70%
in volume terms (as per Dun Brad-
street), they are largely concentrated in
the unorganised segment. This makes it
difficult for them to have access to gov-
ernment incentives and finances, which
in turn hampers their growth as well as
the quality of their produce. Not to say,
adherence to global standards is also
negligible. All this makes marketing of
India-made processed foods all the more
difficult in overseas market, particularly
in developed countries.
In developed countries, it is not al-
ways easy to market India-made pro-
cessed foods because there is a lack of
trust in Indian processed foods. India
needs a broader organisational structure
at the government level that can handle
these issues, and a concrete certifica-
tion system for processed foods that are
aligned with global standards, says Iri-
de. Innovation and new product launch-
es are also key priorities for companies in
the processed foods sector in the devel-
oped countries. If India needs to increase
its share in the processed foods segment
in the domestic as well as international
markets, the country’s SMEs need to lead
from the front. How that will happen in
an organised and documented fash-
ion is an apposite question for the Minis-
try of Food Processing Industries.
FDI. FDI. FDI. AGAIN, FDI.
Food processing is recognised as a prior-
ity sector in the new manufacturing pol-
icy and in the recent budget, attractive
fiscal incentives have been announced
by the government. These mainly relate
demand for their commodities, the con-
sequent decline in their export earnings.
Overall, I think there are still good op-
portunities to enhance import-export
earnings everywhere – it depends on
your commercial strategies.
TDB: In terms of competitiveness, how
would you rate the Indian processed
foods industry?
IC: I think the Indian processed foods
industry is growing significantly and
the food and agri-business sector is one
of the key areas where India could be
globally competitive. However, there are
some critical issues such as high duties
on incoming products and the fragmen-
tation of internal distribution. India
needs a big push towards modernisation
of infrastructure and significant reforms
to allow foreign operators to access busi-
ness opportunities in an easier way.
TDB: How different are the challenges
faced by Indian SMEs as compared to
SMEs in developed countries?
IC: The food industry is characterised by
fragmentation. There are a few Europe-
an multinational companies competing
worldwide with a wide variety of prod-
ucts, but most of the enterprises in the
food sector are small and medium sized
enterprises (SMEs). Innovation and new
product launches are key priorities for
companies in the food processing indus-
try in the developed countries, especially
after the globalisation. With globalisa-
tion, there is an urgent need of a dynam-
ic and self-sustaining culture of innova-
tion all around the world. In India, given
the nascent stage of the food processing
industry, spend on internal research
and development has been significantly
low even for large companies in the or-
ganised sector. SME contribution to the
Indian GDP is 8% and the sector has
registered a growth rate of 10.8%. De-
spite this high growth rate, SMEs in In-
dia are facing a number of problems like
sub-optimal scale of operations, techno-
logical obsolescence, supply chain ineffi-
ciencies, increasing domestic and global
competition, fund shortages, change in
manufacturing strategies and a turbulent
and uncertain market scenario. Overall,
I still think that India has great potential
and it is a market that is currently devel-
oping very fast, in particular in the or-
ganic sector, which is our focus.
TDB: In the last decade, how has the
global export market changed for pro-
cessed foods? How easy or difficult is it
to market India-made processed foods
in the overseas market, particularly in
developed countries?
IC: While in developed countries the
food trade has increased only minimal-
ly, developing countries have generally
fared much better. Geography, demo-
graphics and policy choices largely de-
termine a country’s deficit or surplus po-
sition with respect to agricultural trade.
In general, countries in Latin America,
East Africa and South Asia tend to be
net food exporters, while most of the re-
maining Asian and African countries are
net food importers.
Since 2008, many African as well as
Asian economies have experienced an
increasing reliance on imported food
products.
Developed countries, on the other
hand, have maintained a much more
neutral position. In developed coun-
tries it is not always easy to market In-
dia-made processed foods because there
is a lack of trust in Indian processed
foods, especially compared to the Euro-
pean ones. Talking about organic food
in India, I have experienced a massive
presence of counterfeit organic products.
Conversely, I have also come across Indi-
an organic products that are completely
genetically modified and pesticides free
but lack any certification recognised by
an authority. India needs a broader or-
ganisational structure at the government
level that can handle these issues, and a
concrete certification system for organic
processed foods that are aligned with the
European standards. In this sector, India
has to be more organised at every level
with a governmental body which can
control all the food ingredients both for
import and export sector. With these in
place, it would be easier for Indian pro-
ducers to access global markets.

to foreign direct investment (FDI), sub-
sidies, tax rebates, depreciation benefits,
as well as reduced Customs and Excise
duties for food processing machinery.
Interestingly, the BJP-led Nation-
al Democratic Alliance (NDA), before
coming to power at the Centre, was
against 100% FDI in the retail sector.
However, waking up to ground realities
and needs of the processed foods sector,
the party has now softened its stand on
the issue and on February 29, 2016, while
announcing the Union Budget 2016-17,
allowed 100% FDI in multi-brand retail
for food products that are fully grown
and processed in India. Speaking to The
Dollar Business, Harsimrat Kaur Badal,
Union Minister for Food Processing In-
dustries, Government of India, says that
the government's nod to allow 100% FDI
into this segment will be a game changer
for the sector. “I believe this can play a
catalytic role in setting up the infrastruc-
ture from farm-to-fork. We are at 10% of
our potential today and have 90% to go.
This will not only boost infrastructure
and strengthen the local supply chain in
the agriculture sector, but will also bene-
fit farmers and MSMEs across the coun-
try, in a big way,” she says.
The decision not only seems to be
a positive for the Indian economy, but
would have a huge multiplier effect
on the processed foods sector that has
been grappling with problems like lack
of funds and infrastructure, and obso-
lete technology, among others, for long
now. Allowing FDI into the sector will
also boost productivity of the sector by
reducing post-harvest wastage, helping
crop diversification, incentivising glob-
al players to invest and produce in India
and creating large number of jobs.
For the uninitiated, the food process-
ing sector in India received FDI worth
about $6.55 billion between April 1, 2000
and September 30, 2015 (DIPP data).
A LACK OF TRUST
MAKES IT DIFFICULT
TO MARKET INDIAN
PROCESSED FOODS
ACROSS DEVELOPED
MARKETS
Swati R. Paradkar
President, Shri Mahila Griha
Udyog Lijjat Papad
TDB: Please tell us about the initial
journey of Udyog Lijjat Papad?
Swati R. Paradkar (SRP): Let me brief-
ly take you through the journey of Li-
jaat papad. The day was March 15, 1959.
It was a hot summer day when most of
the women of Lohana Niwas, an old,
large residential building in Girgaum, a
thickly populated area of South Mum-
bai, were busy attending to their usual
domestic chores. But a few of them, sev-
en to be exact, came out of their rooms
and gathered on the terrace of the build-
ing No.15/H. They soon started a small
function, which hardly drew anybody’s
attention. A handful of social workers
were also present. The gathering was
over soon but only after rolling out four
packets of papads and taking a firm deci-
sion to continue making papads.
That’s how a pioneer batch of seven la-
dies had set the ball rolling. As the days
went by, more and more ladies joined us
and the institution started to grow. Those
early days were not easy. Today, I can say,
the institution has had its own share of
trials and tribulation. In fact, the faith
and patience of the members were put to
test on several occasions.
What really helped the institution was
the excellent quality of papads, which
has remained uniform from the very
first day of its production. At no time
have our members allowed it to dete-
riorate. I can say, the principles, upon
which the institution is based, have to-
day made Lijjat Papad a successful or-
ganisation. We have made exemplary
progress in the last 56 years of existence.
The membership which was just sev-
en, in the beginning, stands at around
45,000 today.

TDB: Apart from its flagship prod-
uct – Lijjat papad – Shri Mahila Griha
Udyog is also known for many other
products offerings. Can you shed some
more light on them?
SRP: Besides Lijjat Papad, we today have
a broad range of food products that in-
clude spices, wheat flour, chapaties, ap-
palam, and also non-food items like de-
tergent powder and laundry soaps, etc.
TDB: So, which overseas markets is
Shri Mahila Griha Udyog Lijjat Papad
currently exporting to?
SRP: Besides catering to the domes-
tic market, we are today successfully ex-
porting to various merchant exporters in
countries like UK, USA, Thailand, Singa-
pore, Hong Kong, Holland, Japan, Aus-
tralia and Middle East countries among
others. There is a strong demand for our
products amongst Indian diaspora who
want the authentic taste of home outside
India. This has helped spur growth for
our products across global markets.
THE GOVERNMENT NEEDS TO SORT OUT
POLICY-RELATED ISSUES OF THE SECTOR
Exclusive Interview

However, what's more encouraging is
that the Confederation of Indian Indus-
try (CII) estimates that the Indian pro-
cessed foods sector has the potential to
attract as much as $33 billion of FDI over
the next 10 years – a big number! In a bid
to support export-related activities in the
sector, the food ministry is also planning
to set up 42 mega food parks (of which
two are already operational and 35 have
got final approval) and these food parks
could really change status quo for a large
number of MSME players in the sector.
GOOD THINGS TAKE TIME
The Mega Food Parks Scheme (MFPS)
was introduced by MOFPI in 2008 in
an effort to develop common infrastruc-
ture for food processing units, similar
to special economic zones (SEZs). The
objective was to create a post harvest in-
frastructure to reduce wastage of perish-
ables, increase processing of food prod-
ucts and increase the country’s overall
share in global processed foods market.
The business model is based on a hub
and spoke architecture comprising raw
material collection centres (CCs) and
primary processing centres (PPCs) and
these facilities are linked to a Central
Processing Centre which acts as a hub.
Common facilities and enabling infra-
structure like modern warehousing,
cold storage, sorting, grading, packag-
ing, pulping, ripening chambers and
tetra packaging units, roads, electricity,
water, ETP (effluent treatment plant)
facilities, etc., at processing centres help
in reducing the cost of individual units
significantly and make them more vi-
able. Induction of latest technology,
quality assurance of processed food
products through better process control
and meeting of environmental and safe-
ty standards are other benefits of food
parks. The parks enable supply chain in-
frastructure and facilitate backward inte-
gration and cluster farming. These mega
food parks are being set up in collabo-
ration with private players, with partici-
pation of union and state governments.
While MOFPI has already approved
35 mega food parks, only a few have
started operations so far. So, what is it
that is stopping them from gaining mo-
mentum, despite the ministry pushing
for them so hard? Understanding of the
TDB: How do you view the current
state of affairs of the food processing
sector in India?
SRP: Despite being at a nascent stage,
Indian food processing sector, of late,
has shown remarkable progress. I be-
lieve in times to come, things will only
improve as the current government and
the Union Cabinet Minister of Food Pro-
cessing, Harsimrat Kaur, have been quite
successful in giving a much-needed di-
rection to the sector. The sector has huge
employment potential and I think the
mega food parks and the 100% foreign
direct investment (FDI) in multi-brand
retail for food products will surely add to
the progress of the sector. Also, I think
easing credit facilities to our MSMEs, in-
troducing new technologies and encour-
aging new investments into the sector is
the need of the hour.
Going forward, I envision schemes
such as ‘Make in India’, ‘Stand up India’,
and Mudra to play crucial roles in en-
hancing the development of the sector.
TDB: Experts say despite being a ma-
jor producer of food grains, India has
not been able to fully exploit the true
potential of its food processing sector.
What is your take?
SRP: This statement is true to a large ex-
tent. This is mainly because of the fact
that agriculture and food processing
sectors are interlinked and we see a high
degree of wastage in the sector – both at
the farm level as well the entire supply
chain. It's high time that we work togeth-
er to curb this wastage. And it will not
happen unless and until we succeed in
creating adequate storage facilities and
warehouses. When it comes to the farm
sector, India has a very high spoilage rate
and as a result, a lot of food grains get
wasted each year.
Apartfromlogisticalflaws,factorssuch
as a lack of warehousing capacity, sub-
par storage conditions, spoilage during
transportation and exposure to elements
of nature, all are acting as a drag in the
way of this sector’s progress. I believe,
with due planning, if we are able to uti-
lise ourfoodgrainsproperly,wewouldbe
able to see our food processing levels rise
dramatically.

TDB: What key measures do you feel
are necessary to increase export-com-
petitiveness of Indian processed food
players. Also tell us about your endeav-
ours in this regard.
SRP: As a member of the National Food
Processing Development Council, we
regularly put forward our suggestions to
the government. I believe, it’s high time
all states in the country come forward
and join hands to make the National
Food Processing Policy a reality. I be-
lieve all the obstacles in our way can and
should be resolved. Also the government
needs to sort policy-related issues of the
sector within a stipulated time. Such en-
deavours will only bring robustness and
efficiency to the sector. We also need to
upgrade the technology we use today;
obsolete technology is a reason why we
lag behind in the global marketplace.
Further, value addition to raw produce
in India is currently only 7%, compared
to 23% in China. Hence, going forward,
we also need to add more value to our
farm products so that they fetch us good
prices, both in domestic as well as over-
seas markets. Also, as is the case in de-
veloped economies that boast of a great
processed foods industry, inhouse re-
search and new product development as
well as collaborative research with lead-
ing institutions are a must. India is yet to
develop a robust and efficient networked
collaboration mechanism. Despite the
existence of a strong and wide network
of RD institutions such as CSIR, ICAR,
ICMR, etc., their linkages with the end
users like farmers and industry is not
well-established. It’s time we work on
turning this around. Initiatives like the
Mega Food Parks can to some extent
help in this respect by providing com-
mon RD facilities to producers, but
producers also need to do their bit to go
up the value chain.

mega food park concept and a grasp of
the intricacies involved in establishing
and running a mega food park is miss-
ing among some of the promoters of
food parks, which is a reason for the de-
lays in execution of projects, Raveendra
Nalluri, Executive Director, Srini Food
Park, an operational food park located
in Chittoor district in Andhra Pradesh,
tells The Dollar Business.
Nalluri believes the very concept of
food parks in India is at a nascent stage
anditrequiresmorethanfinancialinvest-
ment and acquisition of land by promot-
ers. Nalluri says when he and his associ-
ates started the Srini Food Park project
in 2009, he had to personally devote time
in travelling to different parts of the
world to learn the finer details of execut-
ing a food park project. However, the
biggest challenge was getting approval
from banks as it was a new project and
followed the SPV (special purpose vehi-
cle) model. Getting on board a consul-
tant capable of setting up a mega food
park was also difficult. We couldn’t find
anyone with practical experience. So, we
conducted field visits to plants across
India and abroad and learnt everything
on our own, he adds.
Cooperation of state governments
also plays a big role in the success of a
food park. Furthermore, while selecting
the location of a food park, government
agencies need to keep into account the lo-
gistics, availability of raw material and sea
and air connectivity into account. Con-
sidering all this and the stage at which
the maximum mega food parks are stuck
at the moment, it's still a long wait until
players in the processed foods industry
actually reap benefit out of the concept.
OLD WINE IN NEW BOTTLE?
While most policies and initiatives
launched by the current government
seem nothing but modified versions of
older ones, the industry has welcomed
the Rs.2,000 crore Food Processing Fund
(FPF) to be disbursed under the supervi-
sion of NABARD.
The fund will provide the much-need-
ed financial assistance to SMEs looking
for financial assistance to sustain busi-
Harish Ramnani
Director, Karachi Bakery India Pvt. Ltd.
TDB: You are a household name in
bakery business. How has your experi-
ence been so far in this segment?
Harish Ramnani (HR): Our brand was
established in 1953. However, we got
into the confectionery business in the
year 2000. It has been quite a challeng-
ing task for us as our business involves a
huge requirement of skilled manpower.
We are known for our handmade cookies
and therefore procuring skilled labour is
our biggest challenge. As to availability
of machinery and equipment, there has
been a vast improvement in the line of
cookie-making machines. Technology
has gone beyond imagination nowadays
and it helps in creating and innovating
new products and categories. As far
as taxation is concerned, our products
suffer from an excise duty of 6% on the
MRP which thereby makes it slightly
heavy for the customers’ pocket.
TDB: What are the major challenges in
the food processing industry in general
and specifically in your segment?
HR: The major challenge in our industry
is to get the right consistency and qual-
ity of the raw material that we use and
maintaining the right temperature at the
warehouses for our products. Also, as I
mentioned earlier, finding skilled man-
power for our products is a major chal-
lenge too. And how can we forget about
food wastage; it is part and parcel of the
industry. Lastly, since we are known for
the quality and taste of our biscuits, we
keep a close eye on our quality control
checks as we have to deliver a consistent
product throughout.
TDB: What are the major regulato-
ry hurdles before the industry? What
changes in the regulatory and tax
regime do you look forward to?
HR: The major regulatory hurdle we
face is that we have to go through mul-
tiple regulatory boards to procure fresh
licences. Had it been a single window
system, it would have consumed lesser
time and helped companies grow faster.
TDB: In the last decade, how has ex-
ports market changed for Indian pro-
cessed foods?
HR: In the last couple of years, we have
seen an increasing demand for our
products overseas. As our brand is well
known, it is easier for us to make inroads
in these markets. It is necessary for In-
dian processed food manufacturers to
keep investing in consumer awareness
which will allow their products to gain
global acceptance.
TDB: What is your outlook for the seg-
ment that you operate in?
HR: The overall outlook is that the de-
mand for premium cookies should grow
by 10% or more in the coming years in
comparison to the regular biscuits sold.
For our sector, the future is bright.
WE NEED A SINGLE WINDOW SYSTEM FOR
PROCURING LICENCES”
Exclusive Interview
InterviewbyNehaDewan

ness growth. Like other manufacturing
sectors, the food processing sector also
requires funds to meet its working cap-
ital requirements as payment realisation
in the segment takes a few months time
and business is mostly cyclical in nature.
While financial assistance under FPF
has also been extended to mega food
parks, loans at concessional rates of in-
terest may be availed from this fund
for establishing food parks and food
processing units in the designated food
parks. Till December 2015, MOFPI had
notified 148 food parks in which conces-
sional credit could be availed of by food
processing units, and loans of Rs.519.20
crore had been sanctioned to 12 Mega
Food Park projects. However, industry
A plant of the Moscow Brewing Company, which is currently renowned for being the most
modern beverage processing plant in Russia. India needs such present-day facilities too.
Mahendra Swarup
President, Federation of Cold Storage
Associations of India
TDB: What are the major challenges
faced by the cold storage industry?
Mahendra Swarup (MS): The overall
business environment to set up a cold
storage unit in India is quite favourable.
There are not many difficulties before
the industry except marketing. In our
country, consumers are not habituated
to purchase refrigerated fruits or vege-
tables. One of the main reasons for less
demand of stored fruits or vegetables is
that fresh farm produce is easily available
throughout the year and these products
are sold to the consumers at lower prices
as compared to stored ones. Encourag-
ing people to consume stored products
remains a big challenge for the industry.
On the other hand, lack of stable pow-
er supply and higher per unit cost of
electricity are some of other difficulties
for cold storage chains in the country.
TDB: When it comes to regulatory and
taxation regimes governing the indus-
try, what changes would you like to see
in the current scheme of things?
MS: Practically, there are not many pol-
icy hurdles for the cold storage industry.
As far as regulatory challenges are con-
cerned, there are some regulations in Ut-
tar Pradesh and West Bengal that require
urgent government attention. We have
urged the governments in these states
to review the regulations as per current
industry requirements. The existing reg-
ulations were conceptualised about forty
years ago and the cold storage industry
has undergone many changes during
this period. Hence, outdated regulations
need to be amended as per the current
industry scenario.
TDB: How can an efficient cold chain
system boost the country’s exports of
processed food products?
MS: Existence of an efficient cold storage
chain can definitely boost country’s food
product export. Food products which are
well-packaged and stored in a safe man-
ner in a cold storage and transported by
refrigerated vans and reefer containers
will certainly gain more acceptance in
the overseas market due to its quality.
However, India still lacks modern pack
house facilities. We need to work on this
area if we really want exports of food
products from the country to pick up.
TDB: What is your outlook for the cold
storage industry?
MS: Cold storage industry is bound
to increase manifold. It has got a very
bright future. At present, we are work-
ing only in limited fields. Various prod-
ucts like pharmaceuticals, dairy, fish
and meat products, and some varieties
of seeds need cold storage facilities to a
greater extent, one which is currently in
short supply. Hence, there is a scope for
growth in and demand for cold storage
units in India. As consumers become up-
wardly mobile, demand will grow.
ENCOURAGING PEOPLE TO CONSUME STORED
PRODUCTS IS A BIG CHALLENGE IN INDIA
Exclusive Interview

players have expressed dissatisfaction
with the tardy pace of loan dissemina-
tion by NABARD and have suggested
that the loan amount should be depos-
ited to the bank accounts of the eligible
entities as is being done with disburse-
ment of subsidy.
Realising the direct engagement and
betterment of the cold chain industry
in furthering the cause of processed
foods industry, the government has ini-
tiated related actions such as the Cold
Chain Scheme, modernisation of ab-
attoirs, Food Testing Laboratories, and
the Technology Upgradation Scheme,
among others. In terms of tax rebate, the
services of pre-conditioning, pre-cool-
ing, ripening, waxing, retail packing, la-
belling of fruits and vegetables have been
exempted from service tax with effect
from April 1, 2015.
This will provide further impetus
to the cold storage industry, which is
already growing annually at 28% and
whose total value in India is expected to
reach $13 billion by 2017.
INNOVATION IS THE KEY
Though the industry in India is moving
from the unorganised to organised for-
mat due to demanding quality standards
and technology adoption, it still has a
long way to go before it comes at par
with those across other developing and
developed peers.
Innovation in terms of development
of new food products or flavours, pack-
aging, and value addition are some of the
activities a FB player needs to contin-
ue with and invest in to remain relevant
and competitive. If we take examples of
French dairy major Danone’s yoghurt or
American QSR brand Dunkin Donuts’
doughnuts or smoothies, their products
have become their brand’s biggest mas-
cots. These global brands have become
popular and loved by simply inno-
vating new categories in their existing
portfolios. While Danone has a series of
flavours to suit the taste buds of locals
where it has a presence, Dunkin Donuts’
has crafted a brand out of doughnuts and
smoothies.
Callebaut, Barilla, Bayernland, and
Beni di Batasiolo are some privately
or family-owned companies that have
earned a name around the world in their
Dr. Ajit Kumar
Vice Chancellor, National Institute of
Food Technology Entrepreneurship
and Management (NIFTEM)
TDB: Can you please quickly run our
readers through the history, activities
and achievement of your organisation?
Dr. Ajit Kumar (AK): I regard the Na-
tional Institute of Food Technology
Entrepreneurship and Management
(NIFTEM) as a unique institution in the
country. We have a multifaceted man-
date. NIFTEM was essentially concep-
tualised by the Government of India
on persistent demand from the food
industry to have an apex body as a ‘one
stop solution provider’ for the various
problems of the sector. And ever since
inception, we have been aspiring for
excellence in research and education
(in a non-traditional way) to meet the
shortfall of skilled manpower in the food
processing sector, manpower which is
competent in both food technology and
entrepreneurial management. We aim to
build techno-managers who are equal-
ly qualified in both technological and
managerial aspects of the trade. Apart
from academics, we do entrepreneurship
development, consultancy, industrial
research, skills development and indus-
try connect. For these, we have roped in
talented and dedicated faculty members
from India and abroad. With such rich
exposure, we believe our students de-
velop the technical knowledge and the
managerial ability to achieve success in
the food processing sector. We are also
actively involved in world-class research
in this sector.
We also run short-term training pro-
grammes for rural youth and farmers.
We are also involved in large scale train-
ing of farmers to actually transform
them into micro-entrepreneurs. We go
to various villages, ‘adopt them’, teach
them various ways and tools of value
additions. Till date, we have adopted 39
villages across the country.
TDB: What other activities are you un-
dertaking to promote the Indian food
processing sector?
AK: We work both as a sector promotion
organisation and a business promotion
organisation of the food processing sec-
tor in the country.
In order to meet demand in this cru-
cial sector, we have adopted a multi-
pronged approach. Apart from ‘Skill
Development and Entrepreneurship De-
velopment’ for the sector, we are facilitat-
ing business incubation services, cutting
edge research and innovation for devel-
opment of the sector, functioning as a
knowledge repository, working for the
up-gradation of SME food processing
clusters, providing intellectual backing
for regulations governing food quality
and safety and promoting cooperation
and networking among existing institu-
TRAINING AND AWARENESS BUILDING IS THE
KEY TO SUCCESS IN THE SECTOR”
Exclusive Interview

respective FB categories by keeping
their products simple yet exotic. Indian
MSMEs in the business can learn a quick
lesson or two from their books. [Not to
say there is a lack of inspiration on the
Indian front. Brands like Cremica, Pri-
yagold, Karachi Bakery, Rasna, Nectar
Fresh, etc., have more than an instance of
hardships, trails and successes to share.]
Unlike Europe, which has a long and
rich history in the food processing sector,
the Indian processed food sector came to
life in the early 90s after the liberalisation
of the economy. For long, India lacked an
institution which could produce skilled
manpower capable of carrying out RD
in the processed food segment. Whatev-
er little innovation took place was due to
the efforts of individual entrepreneurs.
Tomatoes being cleaned manually before being processed. Lack of automated processes and
machinery lead to great damages being borne by India's agricultural community.
tions within India as well as abroad.
TDB: There is a perception that large
Indian conglomerates are not invest-
ing in the processed food and beverage
segment as much as they do in other
sectors? How do you see this?
AK: I do not believe this notion to be
correct. Because you see these days, all
the big business houses are present in
the segment and they are doing excellent
business. Tata, Godrej, Ambani, Adani –
everyone is here. Many MNCs are com-
ing in as well. That is the reason that I
think of this sector as a gold mine. The
recently-announced 100% foreign direct
investment (FDI) in multi-brand food
retail is also going to further motivate
global MNCs to come here and make in
India, instead of importing from over-
seas destinations.
TDB: While India has close to 1.5 bil-
lion people, it has failed to create a
large multinational corporation in the
FB segment like those in US or Eu-
rope. What's your take?
AK: Yes, that is true. Despite the fact that
our processors have made great strides
in the recent past, the sector is still com-
paratively at a nascent stage. Earlier,
there was not much focus on the sector
and I believe as an industry it got the at-
tention of the policymakers only recent-
ly. But one thing is certain – things are
now moving very fast. Today, the sector
is growing at a CAGR (highest of all sec-
tors) of 10-11%. Other sectors are grow-
ing at about 5-7%.
TDB: In your opinion what more
should the Centre and states be doing
to boost India’s growth in the pro-
cessed foods sector?
AK: We need to do a lot to provide the
much-needed impetus to the sector. Ini-
tiatives like training of farmers and ru-
ral youth at their doorstep, creating an
enabling infrastructure in rural areas to
enable value additions in food and cre-
ating as many cold chains as possible can
help the Indian processed food sector in
a big way. We also need to provide a big
push to in-house manufacturing of pre-
cision equipment that are needed by our
food processing industry. Presently these
are being imported and as such are very
costly. It’s high time we manufacture
such tools in the country.
TDB: How do you see the current gov-
ernment's efforts in this direction?
AK: I believe the government, including
Union Cabinet Minister for Food Pro-
cessing Harsimrat Kaur, is working in
the right direction. I believe, it’s due to
the minister's efforts that we now have
100% foreign direct investment (FDI)
in multi-brand retail for food products.
But we need to focus on value additions.
Training of farmers is also much need-
ed to achieve a sustainable model of ag-
riculture as practiced elsewhere across
the globe. Our Prime Minister Narendra
Modi’s unique campaigns such as Stand
up India, Make in India, Skill India and
Mudra, all can play a big part in enhanc-
ing the development of the sector.
TDB: What key measures do you
think are necessary to enhance the
competitiveness of Indian processed
foods exporters?
AK: We need to give more concessions
to the food industry as it is the highest
employment generator for the country.
This is also the only sector that can give a
big boost to a sustainable model for agri-
culture. This sector surely deserves more
concessions as far as tariffs and taxes are
concerned. Large scale awareness drives
and training programmes on creating
more hygienic food and adhering to in-
ternational standards can surely boost
our export potential.
The idea of mega food parks is real-
ly praiseworthy. A small unit cannot set
up an effluent power plant, RD facili-
ties and cold storage facilities, and this
is where the food parks will add value to
the producers. We need more such parks
to promote exports from SME units.

However, after persistent demand of the
food industry, MOFPI invested Rs.500
crore to set up the National Institute of
Food Technology Entrepreneurship and
Management (NIFTEM) in 2006 with
the sole purpose of producing profes-
sionals in the field of food technology
and management. But is one institute
enough to cater to a population of more
than a billion?
As consumers become more knowl-
edgeable and time-starved with respect
to food, the demand for value-added
food (such as functional and ready-to-
eat foods) is likely to increase in the com-
ing years. Significant skill-enhancement
training would be required to tap the
potential of these segments, states a re-
port from NSDC and KPMG. Setting up
of an innovation fund or a similar fund
to promote innovations and technolo-
gy development in food processing can
help the sector cover a long way. How-
ever, considering how some innovations
have been treated by the Food Safety and
Standards Authority of India (FSSAI) in
the past, success of such funds remains
doubtful. [To read more, please read the
story titled 'Low Standards of Standard-
ising' featured in the March 2015 issue of
The Dollar Business]
SAFETY FIRST
One of the biggest nightmares for food
product exporters are tariff and non-tar-
iff barriers imposed by developed coun-
Piruz Khambatta
Chairman MD, Rasna International;
Chairman, CII National Committee
on Food Processing; Chairman, CII
Task Force on Processed Food Out-
sourcing; and Member, Consultative
Committee (MICC) of Ministry of Food
Processing Industries
I have been closely associated with the
sector for a long time now. I have been
chairing the food processing committee
of CII for the last 10 years and have also
been the President of the All India Food
Processors’ Association. I am also on the
panel of various government commit-
tees on VAT, FSSAI and other regulatory
matters and am quite upbeat about the
development in this sector.
Around 10-15 years ago when we in-
troduced a new product, people were
apprehensive about it as the consumer
at that time was more into basic food
products and was hesitant to try new
food items. It was very difficult to mo-
tivate people to break away from their
regular food habits. For example, it was a
rare instance to notice corn flakes in the
breakfast table of a common Indian fam-
ily. It took so many years for Kellogg's to
convince people to add corn flakes on
their breakfast menu and they still have
not succeeded to the extent they would
have liked to. India’s per capita consump-
tion of juice is also less than that in many
developing countries.
However, in recent years there has
been a growth in modern retail and the
penetration of super markets and malls
has increased. More people are travelling
abroad. People are becoming aware of
various food and beverage products and
are ready to experiment with their food.
Now products like oats or organic prod-
ucts are easily accepted by consumers.
In the value-added processed food and
drinks segment there is scope for large
multinationals (MNCs) as well as small
and medium size companies.
Another change that has taken place
in the Indian food market is that the base
of mass consumption has also increased.
Now people in rural areas or low-income
groups are also spending more money
on food items like tomato ketchup.
The perception about processed food
of Indian origin has changed among
consumers in developed countries. Now,
whether it is about brand value or qual-
ity, people in export markets are taking
Indian food products seriously. This is
why I believe there is a greater potential
for growth of processed foods in the ex-
port markets as compared to the domes-
tic market. However, Indian companies
have to put in more efforts to increase
the marketshare of Indian FB products
abroad. Export markets require a differ-
ent approach. We have a different logo
for export markets and there are differ-
ences in product taste, colour and pack-
aging to suit the requirements and taste
of the overseas market.
Companies need to invest in the agri-
culture sector, largely in export-orient-
ed agriculture, like cultivation of farm
products like gherkins and exotic crops
which have a good demand in over-
seas markets. There is also a scope for
contract farming of grapes for exports.
Companies are now investing in direct
farming or co-operative farming or con-
tract farming, but not in the convention-
al way. When the focus is on export-ori-
ented farming, there is an emphasis on
value-addition like inventing newer vari-
eties of seeds. Acres of grapes and gher-
kins are being cultivated only for export
purpose. A lot of work has been done in
the agriculture sector by private com-
panies, both in the fresh and processed
food segments, where companies are
also getting into basic agriculture.
The biggest challenge for the pro-
GOVERNMENT IMPOSES BARRIERS THROUGH
RESTRICTIONS, APPROVALS AND LICENSES
Exclusive Column

tries. A majority of agriculture products
are produced by marginal farmers who
own very small pieces of land. Due to
fragmented landholdings, mechanisa-
tion of farming or control over the qual-
ity of produce still remains a challenge
for the food processing sector in India.
Even a minor trace of any banned in-
secticide, contaminant, toxin or resi-
dues can result in the banning of the
entire shipment or even all shipments
for a season. Sometimes banned sub- Meat processing under controlled environment. India is a major exporter in this segment.
cessed foods sector is finding people
with the right set of skills. Although
there are institutions in agriculture and
food sector, there is a scarcity of people
in the field of research and management
in this segment. Our agricultural col-
leges are not paying much attention to
skill development. The IT industry in
India has grown because the country has
some of the best human resources in the
world. That is not the case in the food
sector. We hardly have enough patents
in the food and agriculture sector. Even
Indian products like parathas and cur-
ries are better made in UK than in India.
Some recent positive developments are
institutions like NIFTEM, which in col-
laboration with the industry is focusing
on research and development and skill
development.
Government policies too lack clarity.
The government stresses on ease of do-
ing business and simultaneously imposes
barriers through restrictions, approvals
and licenses. The government encour-
ages exports and then abruptly comes
up with a notification banning exports
of certain products. Business houses
can’t run like that. We need more clarity
and decisions have to be made keeping
a long-term time frame. There are so
many acts that it will puzzle a new entre-
preneur. Companies need to maintain a
full team just to understand various acts
and provisions related to taxation and
other company laws and regulations in-
volved in the business, like FSSAI, essen-
tial commodity act and several other acts
and rulings. For example, there is a rule
on packaged commodities, as per which,
wherever quantity is mentioned, the law
requires it to be mentioned in grams.
The notification says to print grams as ‘g’
on the package and there are many cases
of people being prosecuted just because
they fail to adhere to this print guideline
and print 'gram' or 'grm' on the package.
For a consumer it doesn’t make any dif-
ference whether it is ‘gram’ or ‘grm’ or ‘g’.
However, I must say processes for getting
licences have become faster, which is a
great positive in the sector.
Taxation is also another area of con-
cern. Many states classify processed food
as a premium product and as such pro-
cessed products like macaroni and pasta
attract 15-20% tax. When a consumer
buys a processed food worth Rs.100, he
pays about 25% of that to the exchequer
in various forms of tax like VAT, octroi
and excise, etc. Because of the higher
cost, common people can’t afford these
products, whereas if we take instance of
places like Dubai or Saudi Arabia, there
are no taxes on food products. Even in
Singapore, tax on food products is just
4%. In India, we need to bring down tax-
es on these products.
Cost of freight is also high in the coun-
try. The cost to ship goods from Ahmed-
abad to Dubai is about $80 whereas the
freight cost to transport a container from
Ahmedabad to Delhi is a whopping
$600. The cost of freight for FB com-
panies is around 15% of the production
cost. Trailers burn a lot of expensive fuel
due to poor road connectivity, long wait-
ing time at state borders and at many
checkpoints. All these factors add up to
high freight costs and transport time.
There are food products with a shelf life
between a couple of weeks to a month
and if the shipment spends 10 days in
transport the retailer has little time to sell
the product before it expires.
It takes an average of 7 to 10 years to
establish a food brand in India and there
is no short-cut. Especially in value-add-
ed products like premium biscuits,
noodles, food confectionery or ready-
to-serve drinks like Rasna, where mar-
gins are high, it takes years to establish
a brand or a new product. A company in
this segment needs deep pockets to sus-
tain as both distribution and advertising
costs are high. And finance is another
challenge for micro, small or medium
size enterprises in the sector. There is a
need to make finance easily accessible for
the industry to grow.
Mega food parks failed to take-off ear-
lierbecauseofvariousregionalissueslike
road connectivity and land allocation. In
the last year, however, food park proj-
ects have been executed at a much faster
pace. The food processing ministry has
been doing lot of work to encourage the
sector. For example, if a company sets up
its unit inside a food park, it will be eligi-
ble for loans from NABARD. The Union
Cabinet Minister of Food Processing has
been very proactive in allocating more
number of food parks and she has also
allocated more funds for the food park
from the Union Budget. The minister is
a good brand ambassador of Indian food
exports and she has managed to con-
vince the government to allow 100% FDI
in food retail.
Overall, there is a lot of potential in
the sector and a lot of work has also been
done, but we need to do more for the
sector to achieve its true potential.

stances can get into processed food even
at the post-harvest stages like storage,
transportation, processing or pack-
aging. Hence, Indian processed foods
players need to adapt to global quali-
ty standards and set up laboratories to
check the quality of export-oriented
shipments (and which, as per The Dollar
Business Intelligence Unit's field surveys/
reports, they already have, to an extent).
Considering this, the Food Safety
and Standards Authority of India (FS-
SAI), the statutory body for food quality
monitoring in India, has been insisting
upon product-by-product approval for
all food items that have not been allo-
cated any specific standard in The Food
Safety and Standards Regulations (FSS)
Regulations, 2011. However, this has not
gone well with processed foods manu-
facturers. Due to FSS, the launch of new
products are getting delayed, which has
discouraged a lot of food processors who
wanted to experiment and come up with
innovative food products. However, the
positive development is, due to the inter-
vention of MOPFI, FSSAI in the last few
months has approved more than 8,000
new additives that are in harmony with
the International Codex Standards. The
department has also notified an amend-
ment to the regulations as a result of
which non-standardised food products,
called proprietary foods (except novel
food and nutraceuticals) that use ingre-
dients and additives approved in the reg-
ulations, will no longer require product
approval. This has provided considerable
relief to the industry. But then, there
remain a lot of areas where the regula-
tor and the industry are at loggerheads.
Speaking to The Dollar Business, Amit
Lohani Convener, Forum of Indian Food
Importers (FIFI), opines that India needs
to update its standards as per the devel-
opment in the sector globally. Agreed!
WAKE UP! INDIA
India, with its huge young population
and rising disposable incomes has be-
come a market where all global majors
in the FB segment want a play. And
the reason is simple. The average Indian
consumer is reportedly spending almost
Dr. Sriparna B. Baruah
Head, CIE, Indian Institute of
Entrepreneurship, Guwahati
TDB: The North East has a conducive
climate for farming of fruits and vege-
table, but why do we not see progress in
the food processing sector in this zone?
Sriparna B. Baruah (SBB): A combi-
nation of factors has played a role in the
lack of progress in this region. The first is
that historically, people from the region
are not very enterprising. Due to the
good weather conditions and availability
of enough livelihood and resources, peo-
ple do not need to work too hard. Infra-
structure is another factor affecting the
growth of industrialisation in the region.
Connectivity in North Eastern states is
still in a very bad state. Though there
are some developments taking place
to connect state capitals, but if we take
the example of a state like Arunachal
Pradesh, there is very poor connectivity
to Tawang. There are no flights to many
parts in the region. Another major rea-
son for lack of growth is insurgency. Due
to insurgency, in the mid-80s, many fam-
ilies sent their children outside the North
Eastern states for education. However, in
the last 2 to 3 years some positive chang-
es are taking place. Some students who
had moved outside have started coming
back or they are looking for opportu-
nities to come back to their respective
states to start their own enterprises.

TDB: Bhutan and Nepal, which are in
many ways similar to the North East-
ern states, have some well known FB
brands. What is different?
SBB: The North Eastern region is pri-
marily a rural and agrarian economy,
hence if youths in rural parts can be
connected to skill development pro-
grammes, it could help growth of var-
ious agro-based enterprises including
food processing units. I have not seen
any SEZ being very vibrant in the region.
There has been news about inauguration
of food parks taking place, but nothing
much has happened on the ground. If
these units can be made vibrant, a lot of
development can happen in the region.
When we talk about growth of sectors
like food processing, industry associa-
tion has to play a very big role in groom-
ing local entrepreneurs. A proper stock
is required on part of the state and union
governments to address challenges faced
by entrepreneurs in the region.
TDB: Among North Eastern states,
apart from Assam, which ones have the
most conducive environment to attract
business in this sector?
SBB: Tripura offers a very good business
environment. The state government has
managed to attract some investment. The
state government in Meghalaya is also
very proactive and connectivity in the
state is also not as bad when compared to
other states in the region. Sikkim is also
another state which has a good potential.
Connectivity is a bottleneck in states like
Mizoram and Arunachal Pradesh.
NORTH EASTERN STATES HAVE A LOT OF
POTENTIAL IN PROCESSED FOODS SECTOR”
Exclusive Interview

A view of a cow milking facility. India has the largest livestock population and is one of the largest producers of milk in the world. However,
the country lags behind its peers when it comes to exports of value-added dairy products.
Raveendra Nalluri
Executive Director, Srini Food Park
TDB: The Food Processing Ministry
plans to set up 42 mega food parks, of
which 35 have got final approval but
only a few food parks, including yours,
are actually operational. What is the
reason for the slow progress in com-
missioning of mega food parks?
Raveendra Nalluri (RN): Recently a
few more mega food parks have been
inaugurated by the Ministry. One is in
Punjab, one in Indore and one more in
Jharkhand. From an operational point of
view, a food park promoted by the Fu-
ture Group is operational in Tumkur in
Karnataka, which was inaugurated by
Prime Minister Narendra Modi. Some
food parks have started off slow, as they
have some issues related to land. If we see
it from the overall point of view, under-
standing of the mega food park concept
and a grasp of the intricacies involved in
establishing and running a mega food
park is missing among some promoters
of food parks, which is a reason for the
delays in execution of projects.
TDB: Did you face difficulties in get-
ting finance for the project?
RN: The biggest challenge for any food
processing unit or a mega food park is
getting finances. The Ministry has intro-
duced a financing programme through
NABARD and has allocated Rs.2,000
crore for the purpose. However, NAB-
ARD not being a traditional bank, de-
layed the financing of some projects.
Mega food parks are agri-infrastructure
projects and the term of the loan is lon-
ger in rest of the world. In India, loans
are being given for a timeline of 7-10
years. In our case, SBI has given us a 10-
year timeline. But the loan being given
by NABARD has a 7-year term, which
includes 2 years for park construction.
This means the entire loan needs to be
paid back in 5 years, which is imprac-
tical! Agri-infrastructure projects are
not like traditional infra-projects, as
we have to deal with issues like market
conditions, the pace at which food units
set up their plants in a park, and more
importantly environmental and climatic
conditions which are not in our control.
The gestation period is much longer as
compared to other sectors.
TDB: How does climate change affect
the sourcing of raw material?
RN: It has a big impact. When a business
chalks out plans for investment and does
capacity calculation, it is done based on
the historical data available for crop pro-
duction. We have tried to offset some
of those factors by using our capacity
to process short crops like tomato, and
other crops which have a shorter harvest
time. We encourage farmers to work on
a contract farming basis where we can
provide them some support in terms
of seeds and other benefits to make up
for the losses due to changes in climatic
conditions.
MEGA FOOD PARKS NEED LONGER
GESTATION PERIODS”
Exclusive Interview

IS INDIA MAKING, BAKING, PACKING, TRANSPORTING AND SERVING IT RIGHT?

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