The Ministry of Food Processing Industries is the central agency responsible for the development, management, and regulation of India’s food processing sector. Food processing refers primarily to “value addition” to agricultural and horticultural products. Simply put, it means the usage of a variety of processes such as storage, irradiation, packaging, preservation, and transportation that result in longer shelf lives, improved quality, enhanced nutritional value, and food surplus. Food processing serves as an indispensible tool for economic development. By linking together agriculture and industry, it enables farmers to diversify and commercialize, reduce wastage, enhance their earnings, create export markets, and foster employment. Over years, the industry has started producing ready-to-eat food, frozen fruits, vegetables, and meat, and beverages. India’s economic liberalization and the subsequent economic growth, growing middle class, rising disposable incomes, and urbanization have resulted in a consumption boom. Currently ranked 12th in the world, India is expected to become the fifth largest consumer base by 2025. The food processing industry is one of the largest industries in India and is currently ranked fifth for production, consumption, and expected growth. The industry value is about Rs. 6,76,215 crore ($135 billion USD), and is estimated to reach Rs.10,01,800 crore ($200 billion USD) by the end of 2015. Market size for food in India is also expected to climb, reaching about Rs. 17,23,096 crore ($344 billion USD) by 2025. With expected increases in investments, processing levels, population, and as a percent of overall GDP, the ministry holds a crucial mandate of developing, nurturing, and guiding the food processing sector.
Recognizing the potential of the food processing industry to tackle some of the problems faced by the agricultural sector, the government of India decided to establish the Ministry of Food Processing Industries in July 1988. In October 1999, Notification No. Doc. CD-442/99 relegated the ministry to a department within the Ministry of Agriculture. In 2001, however, the Cabinet Secretariat upgraded the department to the Ministry of Food Processing Industries again.
Before the establishment of the ministry, food-processing responsibilities went back and forth between the Department/Ministry of Food and the Department/Ministry of Agriculture. Particularly, the processing was divided for two categories: food and vegetables; and non-vegetarian food. In the post-independence period, food processing fell under the purview of the Department of Agriculture at the Ministry of Food and Agriculture. In 1962, this responsibility was transferred from the Department of Agriculture to the Department of Food. In 1966, the Ministry of Community Development and Cooperation was merged with the Ministry of Food and Agriculture to form the Ministry of Food, Agriculture, Community Development, and Cooperation. While the processing and refrigeration of food remained the responsibility of the Department of Food, the responsibility of processing fish for industrial reasons was transferred back to the Department of Agriculture.
In 1976, the Department of Agriculture was given additional processing responsibilities for infants’ milk, malted milk food, condensed milk, meat, meat products and the canning and freezing of fish. Additionally, the department was to set up the Development Council for Fish Processing Industry and provide technical assistance and advice to the fish processing industry. In 1983, the Department of Food was merged with the Ministry of Food and Civil Supplies. Processing of food and vegetables became the responsibility of this new ministry.
In 1988, with the creation of the Ministry of Food Processing Industries, all processing responsibilities of the Department of Agriculture and Cooperation were transferred over to the this new ministry.
The Ministry of Food Processing Industries was created with the intention of exploring, developing, and expanding the potential of the food processing sector in India. To this end, it seeks to increase processing levels, adopt and better utilize value addition techniques, attract increased investment, develop a strong base, introduce modern technology, promote related R&D, undertake development plans and programs, create the required processing infrastructure, formulate comprehensive policies, and work with stakeholders to establish a growth inducing environment.
The Government of India (Allocation of Business) Rules, 1961 tasked the ministry with the management of all industries relating to processing and refrigeration of certain selected agricultural products; processing of fish and provision of technical assistance to the fish processing industry; the fruits and vegetable processing industry; the food grains milling industry; and beverages, including alcoholic beverages. Additionally, the ministry is to engage in the planning, development, and control of, and provide assistance to select industries relating to bread, breakfast foods, high protein foods, extruded food products, and others.
The actual work of the ministry can be classified into two broad categories: policy support and developmental activities.
Policy Support: The ministry is responsible for formulating policies for the food processing sector in line with national priorities. This includes the formulation of regulatory policies, development policies, and compensation schemes. The ministry, in the policy support role, also advocates for reasonable tariff and tax policies.
Perhaps the most aspirational policy undertaking of the ministry is its Vision 2015 program. Seeking to leverage India’s vast food resources along with the strengths and available opportunities, the document sets out policies and strategies required to catalyze significant growth of the industry and to turn India into a food leader. Released in April 2005 and finalized in 2010, the Vision aims to increase the level of processing from 6% to 20%, increase value addition from 20% to 35%, triple the size of the processed food sector to almost Rs. 10,01,800 crore ($200 billion USD), increase the market share of value added products in food consumption from 16% to 50%, and increase India’s share in the global food trade from 1% to 3% by 2015. Successfully meeting the quota would result in increased farmer incomes, increased employment opportunities, increased consumer choice, and benefits to the nation’s economy. A draft of the vision formulated by Rabo Finance India Limited in 2005 envisaged a 117% growth in the sector from 2005-2015. Pursuit of these objectives has spurred changes in investment policies, national and state food processing policies, food safety regulations as well decentralization efforts by the ministry.
While Vision 2015 was formulated, revised, and accepted under the 11th Five Year Plan (2007-2012), most of the actions toward the realization of its stated goals will occur under the 12th Five Year Plan (2012-2017). The ministry has already stated that its proposed outlay for the entire plan period is Rs.15, 000 crore ($3 billion USD), as opposed to Rs. 4031 crore ($805 million) for the 11th Five Year Plan. Infrastructure development is slated to be a big part of the plan. Keeping in line with its decentralization efforts, it wants to transfer most of the responsibilities to the states, including human resources development, and storage and processing. The ministry also plans to improve supply chains by creating primary collection and distribution areas throughout the country in conjunction with the private sector. In order to raise the expected Rs.100,000 crore ($20 billion USD) to achieve Vision 2015, the Ministry plans to work closely with the private sector and attract foreign investment.
In addition to providing policy and planning frameworks, the ministry has undertaken several policy initiatives that have directly benefited the food processing sector. Some of these are: most processed food items have been exempted from licensing under existing laws in order to cut through needless delays; for easy access to capital, food processing industries were included in the priority sector for bank lending list; automatic approval for 100% foreign equity for most of the processed food items to facilitate much needed investment; Customs duty on refrigerated motor vehicles has been waived whereas it was reduced from 7.5% to 5% on food processing machinery to reduce government and private sector operating costs; and implementation the Fruits Product Order and Meat Food Products Order for easier licensing. Additionally, the ministry also played an important role in the enactment of the Food and Safety Standards Bill, 2006. The ministry has also requested states to lower Value Added Tax (VAT) rates and amend the Agricultural Produce Marketing Committee Act to ensure improvement of produce quality and enhanced return on investments for farmers.
Developmental Activities: The other aspect of the ministry is the implementation of programs and initiatives designed to achieve the objectives set out in its policies and plans. To this extent, the ministry has initiated the Scheme for Infrastructure Development, Scheme for Technology Up-gradation/Establishment/Modernization of Food Processing Industries, quality assurance projects, human resources development, and the establishment of autonomous research, education, and management institutions.
Ministry resources are primarily concentrated in the Infrastructure Development Scheme. Infrastructure development consumed over 50% of the 11th Five Year Plan budget. The realization of Vision 2015 requires development of necessary processing facilities and mechanisms. Under the 11th Five Year Plan, the ministry launched a variety of schemes under the Scheme for Infrastructure Development. Perhaps the most ambitious and far reaching of these is the Mega Food Parks Scheme (MFPS). MFPS seeks to provide large processing facilities in order to counter wastage and related detriments. The 2011-2012 budget called for the establishment of 15 major food parks with $104.9 billion in loans to farmers. The ministry proposed 20 Mega Food Parks for the 11th Plan; however, it was able to undertake only 15 such projects. Final approval has been given to food parks in Andhra Pradesh, Punjab, Jharkhand, Assam, West Bengal, Uttarakhand, Tamil Nadu, and Karnataka.
To complement MFPS, the ministry also established the Scheme for Cold Chain, Value Addition, and Preservation Infrastructure. This scheme emanated from a need of cold storage capacity of about 10 million tons to reduce the over Rs.50,000 crore ($10 billion USD) wastage of agricultural products. The scheme was also designed to establish a reliable supply chain infrastructure. Additionally, the ministry has also made the modernization of abattoirs a top priority under the Scheme for Infrastructure Development.
Another major thrust of the developmental initiatives is the Scheme for Technology Up-gradation/Establishment/Modernization of Food Processing Industries. Under this scheme, the ministry provides grants (up to 25% of the total cost) to entrepreneurs for establishing new food processing units as well modernizing current units. The 11th Five Year Plan allocated Rs. 600 crore ($120 million USD) to this scheme. Over 2,500 processing units have taken advantage of the grants.
Various measures have been taken by the ministry for quality assurance purposes under the scheme for food safety, codex, and R&D. These include the establishment/up-gradation of 22 Food Testing Laboratories at the cost of about Rs.2.50 crore ($500,000 USD); implementation of HACCP/ISO/GMP/GHP/Safety Management System in 18 projects; and 40 R&D projects. For human resource development, the ministry has established education and management institutions.
Attached Bodies or Autonomous Bodies
Indian Institute of Crop Processing Technology: Formerly known the Paddy Processing Research Center (PPRC), the Indian Institute of Crop Processing Technology (IICPT) is an autonomous research and development body under the Ministry based in Thanjavur. Founded in 1967, PPCR’s initial focus was on the harvest season in South India. It was upgraded to a national laboratory in 1972 and given the task of researching and developing solutions for post harvest processing and the preservation of paddies. It was upgraded to a national institute in February 2008 and renamed IICPT. The institute’s R&D efforts currently include post-harvest processing, preservation of paddy, and preservation and value addition of raw agricultural produce.
National Meat and Poultry Processing Board: Formed on February 27, 2009, the National Meat and Poultry Processing Board (NMPPB) is a new initiative by the ministry to manage and oversee the meat and poultry sectors. The need for the establishment of the board emanated from increased consumption as well as demands for processing of meat and poultry in a safe and sanitary environment. The board will set policies the development of the sector, oversee sanitation and safety standard in the industry and propose required changes, support R&D in related areas, address environmental problems within its scope, develop laboratories and guidelines for meat quality testing, and work on human resources development. The First Food Testing Laboratory of NMPPB was inaugurated in March 2010.
Indian Grape Processing Board: A huge potential for the growth of the Indian wine industry, including exports to other countries and massive group production necessitated the creation of a national body to oversee this particular sector. The Indian Grape Processing Board (IGPB) was established in 2009 in Pune as a means to generate the development of the nascent Indian wine industry. The board, an autonomous body under the ministry, is focused on research and development, quality assurance and upgrade, and promotion of the Indian wine industry. It is also tasked with formulating a comprehensive development plan for the sector. It will also fulfill an advisory role for the industry by conducting market research, gathering relevant statistics, etc.
National Institute of Food Technology Entrepreneurship and Management The National Institute of Food Technology Entrepreneurship and Management (NIFTEM) was established at a cost of Rs.244.60 crore ($49 million USD) in response to the failure of policies to fully develop and tap the potential of India’s agricultural center. Vision 2015 recognized the need for not only cutting-edge technologies but also competent business leaders and entrepreneurs who can help achieve the stated objectives. The institute is set up as an apex institute capable of providing research, management, and educational programs specific to the food industry. It is also tasked with establishing food industry standards and encouraging entrepreneurial development in the industry.
A disproportionate amount of the Ministry of Food Processing Industries’ budget is spent on other programs for food, storage, and warehousing. For Fiscal Year 2009-2010, out of the Rs.282.61 crore ($55.4 million USD) allocated to the ministry, food, storage, and warehousing consumed Rs.160.03 crore ($32 million USD); for 2010-2011, out of a total budget of Rs.409.72 crore ($82 million USD), Rs.355.94 crore ($71 million USD); and out of the Rs.610.09 crore ($122 million USD) for 2011-2012, almost Rs. 535 crore ($107 million USD) will be devoted to these other programs. Out of these programs, a significant chunk of the budget is used for horticulture-based industries.
As discussed before, the ministry spends a majority of its budget on the development of required infrastructure. For the 11th Five Year Plan, out of Rs. 4031 crore ($805 million USD), the ministry spent more than Rs. 2600 crore ($519 million USD) on the mega scheme for infrastructure development. This included the construction of Food Parks, packaging centers, modernized abattoirs, integrated cold chain facilities, irradiation facilities, and value added centers. The second biggest consumer was the scheme for technology up-gradation and the establishment and modernization of food processing centers. Most of this money was given as grants of Rs.5 0 lakhs ($100,000 USD), or in some cases, Rs. 75 lakhs ($150,000 USD).
Based on the indications of the ministry, it can be reasonably inferred that the budget will continue to be allocated in this fashion. The ministry has a planned outlay of 15,000 crore ($3 billion USD) for the 12th Five Year Plan. Most of this money will go toward infrastructure development. Research and educational institutions are also likely to have their budget increased in anticipation of the sector’s development.
Dysfunctional Food Parks
There has been much angst about the ministry’s handling of food parks’ construction and management. While the idea of food parks throughout India is a laudable one, the ministry has failed to achieve its prescribed goals of establishing functional food parks. Out of the ten parks that have been set up, only two or three are operational. The ministry blames the problem on land acquisition and required clearances. Bureaucratic hassle and government incompetence is also forcing the private sector to reconsider taking control of the food parks. In 2007-2008, the ministry was cited by the Comptroller and Auditor General of India (CAG) for failing to complete the required number of food parks under the Infrastructure Development Scheme. The report stated that a grant of Rs.11.055 crore ($2.3 million USD) doled out in 2003-2004 “remained largely unfruitful.” In early 2011, a parliamentary committee criticized the lack of progress in the building the parks and recommended that the Ministry restructure the program along the lines of a program used successfully by the dairy sector. Another concern for food parks appears to be the inability of the ministry to monitor grants or subsidies, sometimes as much Rs.50 crore ($10 million USD), for the construction of food parks. The ministry insists that proper mechanisms are in place; however outside experts do not buy it.
2008 Audit Report: Chapter VII: Ministry of Food Processing Industries (Comptroller and Auditor General of India)
Interview with Rakesh Kacker, Secretary, Ministry of Food Processing Industries (by Orum Khan, FnBnews.com)
Parliamentary Panel Asks MOFPI to Remodel the Food Parks Schemes on Cooperative Structure (FnBnews.com)
Interview with A L Meena, Joint Secretary, Ministry of Food Processing Industries (FnBnews.com)
No Takers for Food Parks in MP (by Irum Khan, FnBnews.com)
15 More Mega Food Parks, Alright. But Who Are the Takers? (by Mumbai Bureau, Fnbnews.Com)
How Effective is the Ministry of Food Processing Industries?
It is Effective
In its annual reports, press interviews, and other outreach campaigns, the ministry has touted its performance by pointing out a variety of statistics: the average growth rate of the sector for the past few years has been over 13%; processing levels have reached 26%; and waste of perishable food items has gone down 5%, from 35% to 30%. The ministry, for its part, has highlighted the wide variety of initiatives and programs undertaken, and maintains that its policies and actions have undoubtedly helped the food processing sector.
It is Not Effective
However a parliamentary committee slammed the statistics and instead cited concern over the food-processing sector’s “appalling” state. In response to the statistics cited by the ministry, the committee stated that it “cannot but, consider these achievements of the ministry with a pinch of salt, as their estimation is based merely on 'regular discussions' with stakeholders.” The committee highlighted the lack of statistics and a system to compute data, and pointed out this “also reflects poorly on the planning and management capabilities of the ministry.” The ministry’s inability to take advantage of India’s strong agricultural sector despite it being a ministry for over two decades has also left some questioning the effectiveness of the ministry. The food parks fiasco has made matters only worse. To add to its growing worries, foreign direct investment (FDI) in India’s food processing sector declined 32% in 2010-2011, from Rs. 1,396.96 crore ($278.89 million USD) in 2009-2010 to Rs. 945 crore ($188.67 million USD) in 2010-2011.
Food Processing Sector In India In An "Appalling" State: Parliamentary Panel (Economic Times)
Domestic Food Processing Facilities “Appalling” – Government Panel (KamCity)
Creation of a Statistical Database
The food processing industry currently has no integrated statistical database or established index that it can use as a market research or measurement tool. The lack of reliable statistics makes it difficult to assess the effectiveness of implemented programs. While the Ministry of Statistics provides information regarding economic growth, demographics, and other broad areas, industry-specific numbers are hard to come by. Creation of reliable and authentic statistical database would not only aid the ministry but industry decision makers as well.
Management Reforms
The continued wastage of agricultural products of over Rs. 50,000 crore ($10 billion USD every year), the small amount of food being processed (only 2.5% every year), India’s minute share of the global processed food trade (1.5%), and a perceived lack of any real progress have resulted in calls of fundamentally restructuring the Ministry. A Federation of Indian Chambers of Commerce and Industry survey in 2010 identified 15 major factors that prohibit any real change. These factors include the lack of a comprehensive national level policy for the sector, access to credit, market intelligence, lack of applied research, inconsistent state and central policies, taxation, food safety laws, unavailability of trained manpower, and inadequate infrastructure facilities. In order to tap into the vast potential of the sector, fundamental reforms must be made to ministry’s management policies. It needs to develop a comprehensive national policy that will provide an overarching framework as well as mitigate the inconsistencies of the different policies. It needs to initiate effective and quick infrastructure building programs that also address supply chain problems. Additionally, the ministry should also take necessary steps to produce trained and competent industry workers and leaders. Currently, the ministry only focuses on entrepreneurial training. The FICCI report suggests setting up an Inter-Ministerial Working Group to understand and tackle existing problems from all angles. In summation, a reform of management policies is required if the food processing sector is to realize its potential.
Subodh Kant Sahai
Subodh Kant Sahai was the former Union Minister for Food Processing Industries. He is a native of Jharkhand and received his B.Sc. and LL.B. from A.N. College of the Patna and Ranchi University. He began his political career as a member of the Bihar Legislative Assembly. Elected to Lok Sabha in 1989, he has since also served as the Union Minister of State for Home Affairs, Union Minister of State for Information & Broadcasting, and Union Minister of State for Food Processing Industries. He currently serves as the Union Cabinet Minister for Tourism.
- Table of Contents
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- What it Does
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Ministry of Food Processing Industries
The Ministry of Food Processing Industries is the central agency responsible for the development, management, and regulation of India’s food processing sector. Food processing refers primarily to “value addition” to agricultural and horticultural products. Simply put, it means the usage of a variety of processes such as storage, irradiation, packaging, preservation, and transportation that result in longer shelf lives, improved quality, enhanced nutritional value, and food surplus. Food processing serves as an indispensible tool for economic development. By linking together agriculture and industry, it enables farmers to diversify and commercialize, reduce wastage, enhance their earnings, create export markets, and foster employment. Over years, the industry has started producing ready-to-eat food, frozen fruits, vegetables, and meat, and beverages. India’s economic liberalization and the subsequent economic growth, growing middle class, rising disposable incomes, and urbanization have resulted in a consumption boom. Currently ranked 12th in the world, India is expected to become the fifth largest consumer base by 2025. The food processing industry is one of the largest industries in India and is currently ranked fifth for production, consumption, and expected growth. The industry value is about Rs. 6,76,215 crore ($135 billion USD), and is estimated to reach Rs.10,01,800 crore ($200 billion USD) by the end of 2015. Market size for food in India is also expected to climb, reaching about Rs. 17,23,096 crore ($344 billion USD) by 2025. With expected increases in investments, processing levels, population, and as a percent of overall GDP, the ministry holds a crucial mandate of developing, nurturing, and guiding the food processing sector.
Recognizing the potential of the food processing industry to tackle some of the problems faced by the agricultural sector, the government of India decided to establish the Ministry of Food Processing Industries in July 1988. In October 1999, Notification No. Doc. CD-442/99 relegated the ministry to a department within the Ministry of Agriculture. In 2001, however, the Cabinet Secretariat upgraded the department to the Ministry of Food Processing Industries again.
Before the establishment of the ministry, food-processing responsibilities went back and forth between the Department/Ministry of Food and the Department/Ministry of Agriculture. Particularly, the processing was divided for two categories: food and vegetables; and non-vegetarian food. In the post-independence period, food processing fell under the purview of the Department of Agriculture at the Ministry of Food and Agriculture. In 1962, this responsibility was transferred from the Department of Agriculture to the Department of Food. In 1966, the Ministry of Community Development and Cooperation was merged with the Ministry of Food and Agriculture to form the Ministry of Food, Agriculture, Community Development, and Cooperation. While the processing and refrigeration of food remained the responsibility of the Department of Food, the responsibility of processing fish for industrial reasons was transferred back to the Department of Agriculture.
In 1976, the Department of Agriculture was given additional processing responsibilities for infants’ milk, malted milk food, condensed milk, meat, meat products and the canning and freezing of fish. Additionally, the department was to set up the Development Council for Fish Processing Industry and provide technical assistance and advice to the fish processing industry. In 1983, the Department of Food was merged with the Ministry of Food and Civil Supplies. Processing of food and vegetables became the responsibility of this new ministry.
In 1988, with the creation of the Ministry of Food Processing Industries, all processing responsibilities of the Department of Agriculture and Cooperation were transferred over to the this new ministry.
The Ministry of Food Processing Industries was created with the intention of exploring, developing, and expanding the potential of the food processing sector in India. To this end, it seeks to increase processing levels, adopt and better utilize value addition techniques, attract increased investment, develop a strong base, introduce modern technology, promote related R&D, undertake development plans and programs, create the required processing infrastructure, formulate comprehensive policies, and work with stakeholders to establish a growth inducing environment.
The Government of India (Allocation of Business) Rules, 1961 tasked the ministry with the management of all industries relating to processing and refrigeration of certain selected agricultural products; processing of fish and provision of technical assistance to the fish processing industry; the fruits and vegetable processing industry; the food grains milling industry; and beverages, including alcoholic beverages. Additionally, the ministry is to engage in the planning, development, and control of, and provide assistance to select industries relating to bread, breakfast foods, high protein foods, extruded food products, and others.
The actual work of the ministry can be classified into two broad categories: policy support and developmental activities.
Policy Support: The ministry is responsible for formulating policies for the food processing sector in line with national priorities. This includes the formulation of regulatory policies, development policies, and compensation schemes. The ministry, in the policy support role, also advocates for reasonable tariff and tax policies.
Perhaps the most aspirational policy undertaking of the ministry is its Vision 2015 program. Seeking to leverage India’s vast food resources along with the strengths and available opportunities, the document sets out policies and strategies required to catalyze significant growth of the industry and to turn India into a food leader. Released in April 2005 and finalized in 2010, the Vision aims to increase the level of processing from 6% to 20%, increase value addition from 20% to 35%, triple the size of the processed food sector to almost Rs. 10,01,800 crore ($200 billion USD), increase the market share of value added products in food consumption from 16% to 50%, and increase India’s share in the global food trade from 1% to 3% by 2015. Successfully meeting the quota would result in increased farmer incomes, increased employment opportunities, increased consumer choice, and benefits to the nation’s economy. A draft of the vision formulated by Rabo Finance India Limited in 2005 envisaged a 117% growth in the sector from 2005-2015. Pursuit of these objectives has spurred changes in investment policies, national and state food processing policies, food safety regulations as well decentralization efforts by the ministry.
While Vision 2015 was formulated, revised, and accepted under the 11th Five Year Plan (2007-2012), most of the actions toward the realization of its stated goals will occur under the 12th Five Year Plan (2012-2017). The ministry has already stated that its proposed outlay for the entire plan period is Rs.15, 000 crore ($3 billion USD), as opposed to Rs. 4031 crore ($805 million) for the 11th Five Year Plan. Infrastructure development is slated to be a big part of the plan. Keeping in line with its decentralization efforts, it wants to transfer most of the responsibilities to the states, including human resources development, and storage and processing. The ministry also plans to improve supply chains by creating primary collection and distribution areas throughout the country in conjunction with the private sector. In order to raise the expected Rs.100,000 crore ($20 billion USD) to achieve Vision 2015, the Ministry plans to work closely with the private sector and attract foreign investment.
In addition to providing policy and planning frameworks, the ministry has undertaken several policy initiatives that have directly benefited the food processing sector. Some of these are: most processed food items have been exempted from licensing under existing laws in order to cut through needless delays; for easy access to capital, food processing industries were included in the priority sector for bank lending list; automatic approval for 100% foreign equity for most of the processed food items to facilitate much needed investment; Customs duty on refrigerated motor vehicles has been waived whereas it was reduced from 7.5% to 5% on food processing machinery to reduce government and private sector operating costs; and implementation the Fruits Product Order and Meat Food Products Order for easier licensing. Additionally, the ministry also played an important role in the enactment of the Food and Safety Standards Bill, 2006. The ministry has also requested states to lower Value Added Tax (VAT) rates and amend the Agricultural Produce Marketing Committee Act to ensure improvement of produce quality and enhanced return on investments for farmers.
Developmental Activities: The other aspect of the ministry is the implementation of programs and initiatives designed to achieve the objectives set out in its policies and plans. To this extent, the ministry has initiated the Scheme for Infrastructure Development, Scheme for Technology Up-gradation/Establishment/Modernization of Food Processing Industries, quality assurance projects, human resources development, and the establishment of autonomous research, education, and management institutions.
Ministry resources are primarily concentrated in the Infrastructure Development Scheme. Infrastructure development consumed over 50% of the 11th Five Year Plan budget. The realization of Vision 2015 requires development of necessary processing facilities and mechanisms. Under the 11th Five Year Plan, the ministry launched a variety of schemes under the Scheme for Infrastructure Development. Perhaps the most ambitious and far reaching of these is the Mega Food Parks Scheme (MFPS). MFPS seeks to provide large processing facilities in order to counter wastage and related detriments. The 2011-2012 budget called for the establishment of 15 major food parks with $104.9 billion in loans to farmers. The ministry proposed 20 Mega Food Parks for the 11th Plan; however, it was able to undertake only 15 such projects. Final approval has been given to food parks in Andhra Pradesh, Punjab, Jharkhand, Assam, West Bengal, Uttarakhand, Tamil Nadu, and Karnataka.
To complement MFPS, the ministry also established the Scheme for Cold Chain, Value Addition, and Preservation Infrastructure. This scheme emanated from a need of cold storage capacity of about 10 million tons to reduce the over Rs.50,000 crore ($10 billion USD) wastage of agricultural products. The scheme was also designed to establish a reliable supply chain infrastructure. Additionally, the ministry has also made the modernization of abattoirs a top priority under the Scheme for Infrastructure Development.
Another major thrust of the developmental initiatives is the Scheme for Technology Up-gradation/Establishment/Modernization of Food Processing Industries. Under this scheme, the ministry provides grants (up to 25% of the total cost) to entrepreneurs for establishing new food processing units as well modernizing current units. The 11th Five Year Plan allocated Rs. 600 crore ($120 million USD) to this scheme. Over 2,500 processing units have taken advantage of the grants.
Various measures have been taken by the ministry for quality assurance purposes under the scheme for food safety, codex, and R&D. These include the establishment/up-gradation of 22 Food Testing Laboratories at the cost of about Rs.2.50 crore ($500,000 USD); implementation of HACCP/ISO/GMP/GHP/Safety Management System in 18 projects; and 40 R&D projects. For human resource development, the ministry has established education and management institutions.
Attached Bodies or Autonomous Bodies
Indian Institute of Crop Processing Technology: Formerly known the Paddy Processing Research Center (PPRC), the Indian Institute of Crop Processing Technology (IICPT) is an autonomous research and development body under the Ministry based in Thanjavur. Founded in 1967, PPCR’s initial focus was on the harvest season in South India. It was upgraded to a national laboratory in 1972 and given the task of researching and developing solutions for post harvest processing and the preservation of paddies. It was upgraded to a national institute in February 2008 and renamed IICPT. The institute’s R&D efforts currently include post-harvest processing, preservation of paddy, and preservation and value addition of raw agricultural produce.
National Meat and Poultry Processing Board: Formed on February 27, 2009, the National Meat and Poultry Processing Board (NMPPB) is a new initiative by the ministry to manage and oversee the meat and poultry sectors. The need for the establishment of the board emanated from increased consumption as well as demands for processing of meat and poultry in a safe and sanitary environment. The board will set policies the development of the sector, oversee sanitation and safety standard in the industry and propose required changes, support R&D in related areas, address environmental problems within its scope, develop laboratories and guidelines for meat quality testing, and work on human resources development. The First Food Testing Laboratory of NMPPB was inaugurated in March 2010.
Indian Grape Processing Board: A huge potential for the growth of the Indian wine industry, including exports to other countries and massive group production necessitated the creation of a national body to oversee this particular sector. The Indian Grape Processing Board (IGPB) was established in 2009 in Pune as a means to generate the development of the nascent Indian wine industry. The board, an autonomous body under the ministry, is focused on research and development, quality assurance and upgrade, and promotion of the Indian wine industry. It is also tasked with formulating a comprehensive development plan for the sector. It will also fulfill an advisory role for the industry by conducting market research, gathering relevant statistics, etc.
National Institute of Food Technology Entrepreneurship and Management The National Institute of Food Technology Entrepreneurship and Management (NIFTEM) was established at a cost of Rs.244.60 crore ($49 million USD) in response to the failure of policies to fully develop and tap the potential of India’s agricultural center. Vision 2015 recognized the need for not only cutting-edge technologies but also competent business leaders and entrepreneurs who can help achieve the stated objectives. The institute is set up as an apex institute capable of providing research, management, and educational programs specific to the food industry. It is also tasked with establishing food industry standards and encouraging entrepreneurial development in the industry.
A disproportionate amount of the Ministry of Food Processing Industries’ budget is spent on other programs for food, storage, and warehousing. For Fiscal Year 2009-2010, out of the Rs.282.61 crore ($55.4 million USD) allocated to the ministry, food, storage, and warehousing consumed Rs.160.03 crore ($32 million USD); for 2010-2011, out of a total budget of Rs.409.72 crore ($82 million USD), Rs.355.94 crore ($71 million USD); and out of the Rs.610.09 crore ($122 million USD) for 2011-2012, almost Rs. 535 crore ($107 million USD) will be devoted to these other programs. Out of these programs, a significant chunk of the budget is used for horticulture-based industries.
As discussed before, the ministry spends a majority of its budget on the development of required infrastructure. For the 11th Five Year Plan, out of Rs. 4031 crore ($805 million USD), the ministry spent more than Rs. 2600 crore ($519 million USD) on the mega scheme for infrastructure development. This included the construction of Food Parks, packaging centers, modernized abattoirs, integrated cold chain facilities, irradiation facilities, and value added centers. The second biggest consumer was the scheme for technology up-gradation and the establishment and modernization of food processing centers. Most of this money was given as grants of Rs.5 0 lakhs ($100,000 USD), or in some cases, Rs. 75 lakhs ($150,000 USD).
Based on the indications of the ministry, it can be reasonably inferred that the budget will continue to be allocated in this fashion. The ministry has a planned outlay of 15,000 crore ($3 billion USD) for the 12th Five Year Plan. Most of this money will go toward infrastructure development. Research and educational institutions are also likely to have their budget increased in anticipation of the sector’s development.
Dysfunctional Food Parks
There has been much angst about the ministry’s handling of food parks’ construction and management. While the idea of food parks throughout India is a laudable one, the ministry has failed to achieve its prescribed goals of establishing functional food parks. Out of the ten parks that have been set up, only two or three are operational. The ministry blames the problem on land acquisition and required clearances. Bureaucratic hassle and government incompetence is also forcing the private sector to reconsider taking control of the food parks. In 2007-2008, the ministry was cited by the Comptroller and Auditor General of India (CAG) for failing to complete the required number of food parks under the Infrastructure Development Scheme. The report stated that a grant of Rs.11.055 crore ($2.3 million USD) doled out in 2003-2004 “remained largely unfruitful.” In early 2011, a parliamentary committee criticized the lack of progress in the building the parks and recommended that the Ministry restructure the program along the lines of a program used successfully by the dairy sector. Another concern for food parks appears to be the inability of the ministry to monitor grants or subsidies, sometimes as much Rs.50 crore ($10 million USD), for the construction of food parks. The ministry insists that proper mechanisms are in place; however outside experts do not buy it.
2008 Audit Report: Chapter VII: Ministry of Food Processing Industries (Comptroller and Auditor General of India)
Interview with Rakesh Kacker, Secretary, Ministry of Food Processing Industries (by Orum Khan, FnBnews.com)
Parliamentary Panel Asks MOFPI to Remodel the Food Parks Schemes on Cooperative Structure (FnBnews.com)
Interview with A L Meena, Joint Secretary, Ministry of Food Processing Industries (FnBnews.com)
No Takers for Food Parks in MP (by Irum Khan, FnBnews.com)
15 More Mega Food Parks, Alright. But Who Are the Takers? (by Mumbai Bureau, Fnbnews.Com)
How Effective is the Ministry of Food Processing Industries?
It is Effective
In its annual reports, press interviews, and other outreach campaigns, the ministry has touted its performance by pointing out a variety of statistics: the average growth rate of the sector for the past few years has been over 13%; processing levels have reached 26%; and waste of perishable food items has gone down 5%, from 35% to 30%. The ministry, for its part, has highlighted the wide variety of initiatives and programs undertaken, and maintains that its policies and actions have undoubtedly helped the food processing sector.
It is Not Effective
However a parliamentary committee slammed the statistics and instead cited concern over the food-processing sector’s “appalling” state. In response to the statistics cited by the ministry, the committee stated that it “cannot but, consider these achievements of the ministry with a pinch of salt, as their estimation is based merely on 'regular discussions' with stakeholders.” The committee highlighted the lack of statistics and a system to compute data, and pointed out this “also reflects poorly on the planning and management capabilities of the ministry.” The ministry’s inability to take advantage of India’s strong agricultural sector despite it being a ministry for over two decades has also left some questioning the effectiveness of the ministry. The food parks fiasco has made matters only worse. To add to its growing worries, foreign direct investment (FDI) in India’s food processing sector declined 32% in 2010-2011, from Rs. 1,396.96 crore ($278.89 million USD) in 2009-2010 to Rs. 945 crore ($188.67 million USD) in 2010-2011.
Food Processing Sector In India In An "Appalling" State: Parliamentary Panel (Economic Times)
Domestic Food Processing Facilities “Appalling” – Government Panel (KamCity)
Creation of a Statistical Database
The food processing industry currently has no integrated statistical database or established index that it can use as a market research or measurement tool. The lack of reliable statistics makes it difficult to assess the effectiveness of implemented programs. While the Ministry of Statistics provides information regarding economic growth, demographics, and other broad areas, industry-specific numbers are hard to come by. Creation of reliable and authentic statistical database would not only aid the ministry but industry decision makers as well.
Management Reforms
The continued wastage of agricultural products of over Rs. 50,000 crore ($10 billion USD every year), the small amount of food being processed (only 2.5% every year), India’s minute share of the global processed food trade (1.5%), and a perceived lack of any real progress have resulted in calls of fundamentally restructuring the Ministry. A Federation of Indian Chambers of Commerce and Industry survey in 2010 identified 15 major factors that prohibit any real change. These factors include the lack of a comprehensive national level policy for the sector, access to credit, market intelligence, lack of applied research, inconsistent state and central policies, taxation, food safety laws, unavailability of trained manpower, and inadequate infrastructure facilities. In order to tap into the vast potential of the sector, fundamental reforms must be made to ministry’s management policies. It needs to develop a comprehensive national policy that will provide an overarching framework as well as mitigate the inconsistencies of the different policies. It needs to initiate effective and quick infrastructure building programs that also address supply chain problems. Additionally, the ministry should also take necessary steps to produce trained and competent industry workers and leaders. Currently, the ministry only focuses on entrepreneurial training. The FICCI report suggests setting up an Inter-Ministerial Working Group to understand and tackle existing problems from all angles. In summation, a reform of management policies is required if the food processing sector is to realize its potential.
Subodh Kant Sahai
Subodh Kant Sahai was the former Union Minister for Food Processing Industries. He is a native of Jharkhand and received his B.Sc. and LL.B. from A.N. College of the Patna and Ranchi University. He began his political career as a member of the Bihar Legislative Assembly. Elected to Lok Sabha in 1989, he has since also served as the Union Minister of State for Home Affairs, Union Minister of State for Information & Broadcasting, and Union Minister of State for Food Processing Industries. He currently serves as the Union Cabinet Minister for Tourism.
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