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

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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 https://www.thedollarbusiness.com/magazine/issue/may-2016-issue/57/html analyses.

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

  1. 1. 28 THE DOLLAR BUSINESS II MAY 2016 COVER STORY FOOD PROCESSING
  2. 2. 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
  3. 3. 30 THE DOLLAR BUSINESS II MAY 2016 COVER STORY FOOD PROCESSING 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
  4. 4. MAY 2016 II THE DOLLAR BUSINESS 31 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
  5. 5. 32 THE DOLLAR BUSINESS II MAY 2016 COVER STORY FOOD PROCESSING 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 InterviewbySisirKumarPradhan
  6. 6. MAY 2016 II THE DOLLAR BUSINESS 33 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.
  7. 7. 34 THE DOLLAR BUSINESS II MAY 2016 COVER STORY FOOD PROCESSING 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
  8. 8. MAY 2016 II THE DOLLAR BUSINESS 35 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
  9. 9. 36 THE DOLLAR BUSINESS II MAY 2016 COVER STORY FOOD PROCESSING 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
  10. 10. MAY 2016 II THE DOLLAR BUSINESS 37 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
  11. 11. 38 THE DOLLAR BUSINESS II MAY 2016 COVER STORY FOOD PROCESSING 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
  12. 12. MAY 2016 II THE DOLLAR BUSINESS 39 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. InterviewbySisirKumarPradhan
  13. 13. 40 THE DOLLAR BUSINESS II MAY 2016 COVER STORY FOOD PROCESSING 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
  14. 14. MAY 2016 II THE DOLLAR BUSINESS 41 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. InterviewbyAhmadShariqKhan
  15. 15. 42 THE DOLLAR BUSINESS II MAY 2016 COVER STORY FOOD PROCESSING 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
  16. 16. MAY 2016 II THE DOLLAR BUSINESS 43 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 InterviewbySisirKumarPradhan
  17. 17. 44 THE DOLLAR BUSINESS II MAY 2016 COVER STORY FOOD PROCESSING 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
  18. 18. MAY 2016 II THE DOLLAR BUSINESS 45 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. InterviewbyAhmadShariqKhan
  19. 19. 46 THE DOLLAR BUSINESS II MAY 2016 COVER STORY FOOD PROCESSING 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
  20. 20. MAY 2016 II THE DOLLAR BUSINESS 47 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. InterviewbySisirKumarPradhan
  21. 21. 48 THE DOLLAR BUSINESS II MAY 2016 COVER STORY FOOD PROCESSING 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 InterviewbySisirKumarPradhan
  22. 22. MAY 2016 II THE DOLLAR BUSINESS 49 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 InterviewbySisirKumarPradhan

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