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Food processing industry is a relatively new and vibrant industry. The article provides information about the food processing industry in India, government regulations and future trends.

Food Processing

Food processing would include the normal preparation of foods, the modification of a food product into another form (for e.g. manufacturing preserves from fruit) and preservation and packaging techniques.

Innovations in food processing have resulted in new products such as concentrated fruit juices, freeze dried coffee and instant foods. Food and food enhancement have also been processed from untapped sources such as oilseeds (like soybeans and cotton seeds); altered crops, leaves, grasses and aquatic plants.

Food Processing In India
India is one of the most important producers of food in the world, with the second largest arable land area. It comes first globally in the production of milk, pulses, sugarcane and tea and is the second largest producer of wheat, rice, fruits and vegetables.

Food processing in India is one of the biggest industries -it ranks fifth in terms of production, consumption, export and expected growth. Though India is one of the major producers of food globally, it accounts for only 1.7 per cent of world trade in this sector.

Food processing as such is a large sector that covers various economic works like agriculture, horticulture, plantation, animal husbandry and fisheries. The food processing industry has several segments like
  • Dairy, fruits and vegetable processing
  • Grain processing.
  • Meat & poultry processing.
  • Fisheries.
  • Consumer foods include packages foods, beverages and packaged drinking water.
Though the industry is large in terms of size in India, it is still at a budding stage in terms of development.

Strengths In Food Processing
India has plenty of natural resources that provide it a competitive advantage in the food processing industry. Due to it’s unlike climatic conditions, it has a wide ranging and large raw material base appropriate for food processing industries.

The semi processed and ready to eat packaged food segment is comparatively new and constantly changing. India's cost advantage in manpower can be used to set up large low cost production bases for domestic and export markets. If one is to add on significant investments that have come into the country, food processing industry is in a favorable position.

The well established R&D and technical expertise of Indian research institutions like Central Food Technological Research Institute, Central Institute of Fisheries, National Dairy Research Institute, National Research and Development Centre etc have been a great support for food processing sector in India.

Government Regulations
The government has introduced several steps to enhance the growth of food processing industry. In order to further enhance investment in the food processing industry, several policy initiatives have been initiated in the recent past.

The initiatives include
  • Full repatriation of profits and capital.
  • Immediate approvals for foreign investments up to 100 per cent.
  • Import duty would be zero for 100 per cent export oriented units. Reduction in customs duty on packaging machines.
  • Income tax rebate granted (100 per cent of profits for 5 year and 25 per cent of profits for next 5 years) for upcoming industries like fruits and vegetables.
  • Government gives financial aid for establishing common facilities in Agro Food Park.
  • Full duty exemption on all imports for units in export processing zones.
Processing Technology
  • At present most of the processing in India is manual. Usage of Technology like pre cooling facilities for vegetables, controlled atmospheric storage and irradiation facilities is very negligible.
  • Modernizing and bringing in state of the art technology should be given paramount importance by both existing and upcoming manufacturers.
Supply Chain Management
According to estimates nearly 20 to 25 per cent of the production is lost during various stages of cultivation. Adding to this factor are issues like poor quality of seeds, planting material and sub standard technology in increasing productivity. Hence there is an urgent need for backward linkages with the farmers with the help of techniques like contract farming to improve the quality of the produce.

Contract Farming
It is nothing but an agreement between the food processor (contractor) who would mostly be a very big organized investor and the farmer, where the farmer is under contractual agreement to plant the contractor's crop in his land, The farmer also agrees to cultivate and deliver to the contractor a portion of the produce, calculated on the basis of expected yield and contracted land usage at a pre determined price. The contractor also provides technology and training to the farmer.

This is a tremendous advantage to both the farmer and contractor. It guarantees to the farmer a regular source of income and guarantees qualitative output for the contractor.

Product Innovation
In the case of certain processed food like snack foods, the customer would look for innovation, new varieties and brand loyalty. Neat and attractive packaging would also help by making the product more visible.

Another factor to be given due importance is the pricing. Consumers are extremely price sensitive and due attention should be given to this factor.

Future Trends
  • It is believed that the food processing industry can do to the rural economy what the information technology industry has done for urban India.
  • The Indian food processing industry is forecasted to grow at 9% to 12% in the coming years.
  • The industry has set a goal of increasing its share in the global processed food trade from 1.6% to 3% within the next 8 years.
  • India having an advantage of a strong agricultural base should tap this potential favorably and become a preferred sourcing destination for food products globally.

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