FOOD PROCESSING INDUSTRY OF INDIABy Group 2:NehaSouvikBobyRahulVipul
FLOW OF PRESENTATION Introduction Structural analysis of the industry Reforms 10th and 11th Five year Plans Budgets
INTRODUCTION India -One of the largest food producers of the world Output of the organized segment -US$ 34,827 million Marine and Spices together contribute more than 70% of export earnings Investment requirement is around US$ 15 billion India is looking for investment in infrastructure, packaging and marketing The Indian scientific and research talent -a knowledge source that can be tapped for advantage
INTRODUCTION (CONTD..) Increase in per capita income and purchasing power. A largely untapped domestic market of 1210 Million Consumers 300 Million Upper and Middle Class consume processed food Increasing number of working women. Well developed infrastructure and distribution network. Fast expansion of electronic and print media. Annual growth rate of the industry is around 9-12%. Employs around 2 million people (as of 2005)
CLASSIFICATION OF INDIAN FOOD AND AGROPROCESSING INDUSTRY
PROSPECTS OF FOOD PROCESSING Presently, a small percentage of farm produced processed into value added products India needs US $ 28 Billion of investment to raise food processing levels by 8-10 %. Rapid urbanization, increased literacy, changing life style, more and more women in workforce, rising per capita income leading to rapid growth and new opportunities in food and beverages sector Indians spend about 50% of household expenditure on food items
POLICY INITIATIVES AFTER LIBERALIZATION Regulation and Control Most of the Processed food items exempted from the purview of licensing. FDI up to 100% permitted under automatic route in the food infrastructure. FDI permitted only in single brand product retailing. No industrial license required for almost all of the food and agro processing industry. Use of foreign brand names freely permitted by the government. MRTP rules and FERA regulations have been relaxed. Most of the items can be freely imported and exported.
POLICY INITIATIVES AFTER LIBERALIZATION(CONTD..) Fiscal Policy and Taxation Reduction of custom duty rates . Excise and import duties substantially reduced. Reduction of corporate taxes and a shift towards market related interest rates. Tax incentives for new manufacturing units for certain years. India currency now fully convertible on current account. Repatriation of profits freely permitted in most of the industries
FISCAL INCENTIVES FOR FPI Excise Duty rates On ice cream, pasta, yeast, etc abolished which was 16% earlier. On ready to eat packaged food reduced from 16% to 8% On food mixes reduced from 8% to 0%. On meat, fish and poultry products reduced from 16% to 8%. On aerated drinks reduced from 24% to 16%. On Reefer Vans (refrigerated motor vehicles) reduced from 16% to 8%. Dairy machineries completely exempted. On unbranded edible preparations of oil increased from nil to 8%.
FISCAL INCENTIVES FOR FPI(CONTD..) Custom Duty Rates On food processing machinery and their parts reduced from 7.5% to 5%. On Packaging Machine to be reduced from 15% to 5%. On refrigerated vans reduced from 20% to 10%. Income tax relief: Rebate allowed - 100% of profits for 5 years and 25% of profits for the next 5 years, for new industries.
POLICY INITIATIVES AFTER LIBERALIZATION(CONTD..) Export Promotion Setting up of FTZ and EPZ with all infrastructures. Setting up of 100% EOU is encouraged. Capital goods may be imported at concessional rate of import duty. Export linked duty free imports are also allowed. Units in EPZ/FTZ and 100% EOU can retain 50% of foreign exchange receipts in foreign currency account. 50% of the production of EPZ/FTZ and 100% EOU unit saleable in domestic tariff areas.
FINANCIAL AND BANKING REFORMS (CONTD..) Direct finance to companies for agriculture and allied activity of up to Rs1crore as PSL exposure as against the earlier exposure of Rs20 lakh. Loans up to Rs.20 lakh to individuals for purchase/construction of dwelling unit per family Provision of credit and other financial services and products of very small amounts not exceeding Rs.50,000 per borrower. Education loans of up to Rs.10 lakhs for studies in India and Rs. 20 lakhs for studying abroad.
FINANCIAL AND BANKING REFORMS The following items are eligible for classification as priority sector for lending by banks: - Fruit and vegetable processing industry· Food grain milling industry Dairy products Processing of poultry and eggs, meat products Fish processing· Bread, oilseeds, meals (edible), breakfast foods, etc Aerated water/soft drinks and other processed foods· Special packaging for food processing industries Technical assistance and advice to food processing industries
FINANCIAL AND BANKING REFORMS(CONTD..) Indirect finance to small enterprises shall include finance to any person providing inputs or marketing the output. Direct finance to individual farmers, SHGs or JLGs of individual farmers without limit.
RECENT INITIATIVES TO ATTRACT FDI National Highways Development Project underway to convert 14279 km of highways to 4/6 –lanes connecting: Four major cities of Delhi, Mumbai, Chennai and Kolkata North - South (Srinagar to Kanyakumari) and East–West (Silchar to Porbandar) corridors Ports Infrastructure for post harvest management, logistics (including cold chain), markets, retailing, are priority areas. Plan to set up modern markets with auction centers. Attracting FDI & private sector investment in infrastructure
AGRI EXPORT ZONES & FOOD PARKS 60 Agri Export Zones set up for end-to-end development for export of specific product from geographically contiguous areas 53 Food Parks approved to enable small and medium food and beverage units to set up and to use capital intensive common facilities such as cold storage, ware house, quality control labs, effluent treatment plant, etc.
INFRASTRUCTURE DEVELOPMENT Value Added Food Parks Centre Integrated Irradiation Cold Chain Facilities Facilities Modernized Abattoir
QUALITY ASSURANCE, CODEX STANDARDS, R&DSetting Up/ Up gradation • Grant In Aid to Central/State Organizations, IITs, Centralof Quality Control/ Food Universities, Etc. Testing Laboratory • Focus On following Standards: HACCP, ISO 9000, TQM ISO14000, Good Manufacturing, Practices (GMP) and Good Hygienic Practices • Following National/ International standards Bar Coding • encourage food processors to affix bar codes on their processed food packages • Establishing center of excellence around problem areas of Codex Cell Codex Standards • Grant In Aid to Central/State Organizations, IITs, Central R&D Universities, Etc
HUMAN RESOURCE DEVELOPMENT Creation of Infrastructure TrainingSetting up of Facilities for Programmes Food Entrepreneurs running sponsored byProcessing hip Degree/ Ministry ofand Training Development Diplomas Food Centre programme Courses and Processing (FPTC) Training Industries Programmes
SUPPLY CHAIN IMPROVEMENT & PROMOTION Backward • regular supply of raw material through contract farming Linkage • incentives in the form of reimbursement • ensuring regular market for their products by Forward establishing linkages with the market • Assistance for market survey, test marketing, Integration brand building etc Generic • marketing promotion campaign for new products mix and brand name support Advertisement • publications, journals, press advertisements • seminars/workshops/symposiums • studies/ surveys/ feasibility reports to assess the Promotional potential and other relevant aspects • association with APEDA, CFTRI, Industry Activities Associations etc. participation in national/ international exhibitions/ fairs
ROOT CAUSE ANALYSISLack of entrepreneurial Awareness and wrong selection of projectsDelay in Financial assistanceDelay in providing basic infrastructure facilities like Power, Water, Road etc.Weak forward linkages and lack of a developed marketLack of strong project management capacityUnrealistic project planning and appraisalLack of attention to integrating the supply chainNeglect of marketing and brand buildingInability to synergize the potential private investments within the rural sector
Taking various schemes into consideration, a paradigm shift was needed in implementation methodology for targets under VISION 2015. Fruits & Infrastructure Vegetables, Sub-group on Wine and Taxation & Beer Finance Meat, R&D, HRD, poultry, Labs & fisheries & MoFPI Standards dairy identified areas for growth.
Proposals for the 11th Five Year Plan Continued 10th Plan scheme’s would be restructured in a PPP mode.Integrated • Financial Assistance, • Skill Development, approach • Entrepreneurship,addresses • Institutional Development. While providing an environment which stimulates growth.
10th v/s 11th plan Parameter 10th plan 11th plan Integrated food zones Supply Driven, Demand driven, Increased integration, FA, PPP. Abattoirs Lessor FA Increased FA, Eligibility & project management agencies. Cold Chain, Value Addition & Lessor FA Increased FA + Inclusion of cold Preservation Infrastructure storage & horticulture produce. Adoption of Lessor FA, only grants Increased FA, reimbursement & TQM, ISO Standards, GMP, etc. grants.R&D in the processed food sector Lessor FA Increased FA Food Corner / Food Court NA FA + IA Safe food towns NA FA + IAFA: Financial Assistance; IA: Implementation Agencies
Estimated Impact on Employment & Growth Rs. 7,400 cr in The proposal Rs. 20,000 cr infrastructure can envisages a total investment would lead to Rs. 20,000 croutlay of about Rs. lead to 2,800,000 of investment in 8,700 cr additional jobs. processing units.An investment of Rs. Growth rate of the The income levels of 20,000 cr would Industry would the affected farmerslead to an aggregate increase from 7% to are also expected to production value of 10.01%. go up by 20% Rs. 40,000 cr.
MINISTRY OF FOOD PROCESSING INDUSTRIES 500.0 400.0 300.0 200.0 100.0 0.0 BudgetMOFPI:- SET UP IN THE YEAR1988UNION MINISTER:-SHRI SHARAD PAWAR11 SUB- DIVISIONSSTRATEGIC ROLE AND FUNCTIONS ARE FALL UNDER THREE CATEGORIES
IMPACT OF UNION BUDGETS ON FPI • 2001-02, excise duty reduced to 0 from 16%Fruits and vegetable • 2004-05, 100% tax reduction on profit for 5 yearsprocessing industry and 25% for next 5 years Food grain milling • 2007-08, grant up to 33.33% on Plant & Machinery industry (maximum of Rs.75 lakhs ). • 2004-05, Excise duty on fish processing has been Marine product reduced from 16% to 8%. industry • 2006-07, Excise Duty has been waived on fish processing.
IMPACT OF UNION BUDGETS ON FPI poultry and • 2004-05, Excise duty on meat and poultry has been reduced from 16% to 8% eggs, meat and • 2006-07, Excise Duty has been waived on meat and poultry meat products • 2004-05, Excise duty of 16% on dairy machinery has been reduced to 0% Dairy products • 2006-07, Excise Duty has been waived on condensed milk and ice cream industry • 2008-09, Customs duty on bactofuges reduced from 7.5 % to 0% Bread, biscuits • 2003-04,excise duty on biscuits, boiled sweets, etc has been reduced from 16% to 8%and other ready to • 2007-08,Excise duty on biscuits reduced from 8% to 0% (< Rs100/1kg)eat food products • 2007-08, ready to eat packaged foods fully exempt from excise duty. • 2004-05, Excise duty on food-grade hexane has been reduced from 32% to 16%. Edible oil industry • 2005-06, Excise duty of Re 1/kg on refined edible oil abolished. • 2007-08, Custom duty on sunflower oil (crude) reduced from 65% to 50% .
IMPACT OF UNION BUDGETS ON FPI Aerated waters / • 2003-04, excise duty reduced from 32% to 24% soft drinks. • 2006-07, Excise Duty reduced from 24% to 16%Packaging for food • 2006-07, duty on packaging machines is reduced from 15 % to 5 %. processing • 2008-09, Excise duty reduced on specified packaging material and packing paper to 8% industries • 2001-02, Automatic approval for foreign equity upto 100% is available • 2003-04, customs duty on refrigerated truck has been reduced from 25% to 20% • 2005-06, Customs duty on refrigerated vans reduced from 20% to 10% • 2005-06,To ensure availability of credit:- FPI included in the list of priority sector for Assistance to bank lending food processing • 2005-06, NABARD has created a refinancing window with a corpus of Rs.1000 crore industry • 2007-08, Custom duty on food processing machinery reduced from 7.5% to 5% • 2008-09, fund of Rs 5, 000 cr in NABARD to enhance its refinance operations • 2010-11, External commercial borrowing facility available to the food processing industry