FOOD PROCESSING INDUSTRY OF INDIA

By Group 2:

Neha

Souvik

Boby

Rahul

Vipul

FLOW OF PRESENTATION

Introduction Structural analysis of the industry Reforms 10th and 11th Five year Plans Budgets

INTRODUCTION

India -One of the largest food producers of the world

Output of the organized segment -US$ 34,827 million

Marine and Spices together contribute more than 70% of export earnings

Investment requirement is around US$ 15 billion

India is looking for investment in infrastructure, packaging and marketing

The Indian scientific and research talent -a knowledge source that can be tapped for advantage

INTRODUCTION (CONTD..) Increase in per capita income and purchasing

power. A largely untapped domestic market of 1210

Million Consumers 300 Million Upper and Middle Class consume

processed food Increasing number of working women. Well developed infrastructure and distribution

network. Fast expansion of electronic and print media. Annual growth rate of the industry is around 9-

12%. Employs around 2 million people (as of 2005)

CLASSIFICATION OF INDIAN FOOD AND AGRO PROCESSING INDUSTRY

PROSPECTS OF FOOD PROCESSING

Presently, a small percentage of farm produced processed into value added products

India needs US $ 28 Billion of investment to raise food processing levels by 8-10 %.

Rapid urbanization, increased literacy, changing life style, more and more women in workforce, rising per capita income leading to rapid growth and new opportunities in food and beverages sector

Indians spend about 50% of household expenditure on food items

STRUCTURAL ANALYSIS OF THE INDUSTRY

REFORMS

POLICY INITIATIVES AFTER LIBERALIZATION

Regulation and Control Most of the Processed food items exempted from the

purview of licensing. FDI up to 100% permitted under automatic route in

the food infrastructure. FDI permitted only in single brand product retailing. No industrial license required for almost all of the food

and agro processing industry. Use of foreign brand names freely permitted by the

government. MRTP rules and FERA regulations have been relaxed. Most of the items can be freely imported and

exported.

POLICY INITIATIVES AFTER

LIBERALIZATION(CONTD..) Fiscal Policy and Taxation

Reduction of custom duty rates . Excise and import duties substantially reduced. Reduction of corporate taxes and a shift towards

market related interest rates. Tax incentives for new manufacturing units for certain

years. India currency now fully convertible on current

account. Repatriation of profits freely permitted in most of the

industries

FISCAL INCENTIVES FOR FPI

Excise Duty rates On ice cream, pasta, yeast, etc abolished which

was 16% earlier. On ready to eat packaged food reduced from 16%

to 8% On food mixes reduced from 8% to 0%. On meat, fish and poultry products reduced from

16% to 8%.  On aerated drinks reduced from 24% to 16%. On Reefer Vans (refrigerated motor vehicles)

reduced from 16% to 8%. Dairy machineries completely exempted. On unbranded edible preparations of oil increased

from nil to 8%.

FISCAL INCENTIVES FOR FPI(CONTD..)

Custom Duty Rates On food processing machinery and their parts

reduced from 7.5% to 5%. On Packaging Machine to be reduced from 15%

to 5%. On refrigerated vans reduced from 20% to 10%.

Income tax relief: Rebate allowed - 100% of profits for 5 years and

25% of profits for the next 5 years, for new industries.

POLICY INITIATIVES AFTER

LIBERALIZATION(CONTD..) Export Promotion

Setting up of FTZ and EPZ with all infrastructures.

Setting up of 100% EOU is encouraged. Capital goods may be imported at concessional

rate of import duty. Export linked duty free imports are also allowed. Units in EPZ/FTZ and 100% EOU can retain 50%

of foreign exchange receipts in foreign currency account.

50% of the production of EPZ/FTZ and 100% EOU unit saleable in domestic tariff areas.

FINANCIAL AND BANKING REFORMS (CONTD..) Direct finance to companies for agriculture and

allied activity of up to Rs1crore as PSL exposure as against the earlier exposure of Rs20 lakh.

Loans up to Rs.20 lakh to individuals for purchase/construction of dwelling unit per family

Provision of credit and other financial services and products of very small amounts not exceeding Rs.50,000 per borrower.

Education loans of up to Rs.10 lakhs for studies in India and Rs. 20 lakhs for studying abroad.

FINANCIAL AND BANKING REFORMS

The following items are eligible for classification as priority sector for lending by banks: - Fruit and vegetable processing industry· Food grain milling industry Dairy products Processing of poultry and eggs, meat products Fish processing· Bread, oilseeds, meals (edible), breakfast foods, etc Aerated water/soft drinks and other processed foods· Special packaging for food processing industries Technical assistance and advice to food processing

industries

FINANCIAL AND BANKING REFORMS (CONTD..) Indirect finance to small enterprises shall

include finance to any person providing inputs or marketing the output.

Direct finance to individual farmers, SHGs or JLGs of individual farmers without limit.

RECENT INITIATIVES TO ATTRACT FDI

National Highways Development Project underway to convert 14279 km of highways to 4/6 –lanes connecting: Four major cities of Delhi, Mumbai, Chennai and Kolkata North - South (Srinagar to Kanyakumari) and East–West

(Silchar to Porbandar) corridors Ports

Infrastructure for post harvest management, logistics (including cold chain), markets, retailing, are priority areas.

Plan to set up modern markets with auction centers.

Attracting FDI & private sector investment in infrastructure

AGRI EXPORT ZONES & FOOD PARKS

60 Agri Export Zones set up for end-to-end development for export of specific product from geographically contiguous areas

53 Food Parks approved to enable small and medium food and beverage units to set up and to use capital intensive common facilities such as cold storage, ware house, quality control labs, effluent treatment plant, etc.

10TH 5 YEAR PLAN

INFRASTRUCTURE DEVELOPMENT

Food Parks Value Added Centre

Integrated Cold Chain Facilities

Irradiation Facilities

Modernized Abattoir

QUALITY ASSURANCE, CODEX STANDARDS, R&D

• Grant In Aid to Central/State Organizations, IITs, Central Universities, Etc.

Setting Up/ Up gradation of Quality Control/ Food

Testing Laboratory

• Focus On following Standards:• HACCP, ISO 9000, ISO14000, Good Manufacturing,

Practices (GMP) and Good Hygienic Practices

Total Quality Management

• Following National/ International standards• encourage food processors to affix bar codes on their

processed food packagesBar Coding

• Establishing center of excellence around problem areas of Codex StandardsCodex Cell

• Grant In Aid to Central/State Organizations, IITs, Central Universities, EtcResearch and

Development

HUMAN RESOURCE DEVELOPMENT

Setting up of Food Processing

and Training Centre (FPTC)

Creation of Infrastructure Facilities for

running Degree/ Diplomas

Courses and Training

Programmes

Training Programmes sponsored by

Ministry of Food Processing Industries

Entrepreneurship Development

programme

SUPPLY CHAIN IMPROVEMENT & PROMOTION

• regular supply of raw material through contract farming

• incentives in the form of reimbursement

Backward Linkage

• ensuring regular market for their products by establishing linkages with the market

• Assistance for market survey, test marketing, brand building etc

Forward Integration

• Build awareness among the consumers• encourage marketing promotion campaign for

new products mix and brand name support• Dissemination of information: publications,

journals, press advertisements

Generic Advertisement

• seminars/workshops/symposiums• studies/ surveys/ feasibility reports to assess the potential and other relevant aspects

• association with APEDA, CFTRI, Industry Associations etc. will participate in national/ international exhibitions/ fairs

Promotional Activities

ROOT CAUSE ANALYSIS

Lack of entrepreneurial Awareness and wrong selection of projects

Delay in Financial assistance

Delay in providing basic infrastructure facilities like Power, Water, Road etc.

Weak forward linkages and lack of a developed market

Lack of strong project management capacity

Unrealistic project planning and appraisal

Lack of attention to integrating the supply chain

Neglect of marketing and brand building

Inability to synergize the potential private investments within the rural sector

The 11th Five year

plan.

MoFPI identified areas for growth.

Meat, poultry, fisheries & dairy

Fruits & Vegetables, Wine and Beer

Infrastructure Sub-group on Taxation &

FinanceR&D, HRD, Labs & Standards

Taking various schemes into consideration, a paradigm shift was needed in implementation methodology for targets under VISION 2015.

Continued 10th Plan scheme’s would be restructured in a PPP mode.

While providing an environment which stimulates growth.

• Financial Assistance, • Skill Development,• Entrepreneurship, • Institutional Development.

Integrated approach addresses

Proposals for the 11th Five Year Plan

Comparative summary of the

10th & 11th plan:

Parameter 10th plan 11th plan

Integrated food zones Supply Driven, Demand driven, Increased integration, FA, PPP.

Abattoirs Lessor FA Increased FA, Eligibility & project management agencies.

Cold Chain, Value Addition &Preservation Infrastructure

Lessor FA Increased FA + Inclusion of cold storage & horticulture produce.

Adoption ofTQM, ISO Standards, GMP, etc.

Lessor FA, only grants Increased FA, reimbursement & grants.

R&D in the processed food sector Lessor FA Increased FA

Food Corner / Food Court NA FA + IA

Safe food towns NA FA + IA

FA: Financial Assistance; IA: Implementation Agencies

10th v/s 11th plan

Estimated Impact on Employment & Growth

The proposal envisages a total

outlay of about Rs. 8,700 cr

Rs. 7,400 cr in infrastructure can

lead to Rs. 20,000 cr of investment in processing units.

Rs. 20,000 cr investment would lead to 2,800,000 additional jobs.

An investment of Rs. 20,000 cr would

lead to an aggregate production value of

Rs. 40,000 cr.

Growth rate of the Industry would

increase from 7% to 10.01%.

The income levels of the affected farmers are also expected to

go up by 20%

BUDGETS

MOFPI:- SET UP IN THE YEAR1988UNION MINISTER:-SHRI SHARAD PAWAR11 SUB- DIVISIONSSTRATEGIC ROLE AND FUNCTIONS ARE FALL UNDER THREE CATEGORIES

1999-00

2000-01

2001-02

2002-03

2003-04

2004-05

2005-06

2006-07

2007-08

2008-09

2009-10

2010-11

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

450.0

MINISTRY OF FOOD PROCESSING IN-DUSTRIES

Budget

IMPACT OF UNION BUDGETS ON FPI

•2001-02, excise duty reduced to 0 from 16% •2004-05, 100% tax reduction on profit for 5 years and 25% for next 5 years

Fruits and vegetable processing

industry

•2007-08, grant up to 33.33% on Plant & Machinery (maximum of Rs.75 lakhs ).

Food grain milling industry

•2004-05, Excise duty on fish processing has been reduced from 16% to 8%.•2006-07, Excise Duty has been waived on fish processing.

Marine product industry

•2004-05, Excise duty on meat and poultry has been reduced from 16% to 8%•2006-07, Excise Duty has been waived on meat and poultry

poultry and eggs, meat and meat

products

•2004-05, Excise duty of 16% on dairy machinery has been reduced to 0%•2006-07, Excise Duty has been waived on condensed milk and ice cream•2008-09, Customs duty on bactofuges reduced from 7.5 % to 0%

Dairy products industry

•2003-04,excise duty on biscuits, boiled sweets, etc has been reduced from 16% to 8%•2007-08,Excise duty on biscuits reduced from 8% to 0% (< Rs100/1kg)•2007-08, ready to eat packaged foods fully exempt from excise duty.

Bread, biscuits and other ready to eat food products

•2004-05, Excise duty on food-grade hexane has been reduced from 32% to 16%. •2005-06, Excise duty of Re 1/kg on refined edible oil abolished.•2007-08, Custom duty on sunflower oil (crude) reduced from 65% to 50% .

Edible oil industry

IMPACT OF UNION BUDGETS ON FPI

•2003-04, excise duty reduced from 32% to 24%•2006-07, Excise Duty reduced from 24% to 16%

Aerated waters / soft drinks.

•2006-07, duty on packaging machines is reduced from 15 % to 5 %. •2008-09, Excise duty reduced on specified packaging material and packing paper to 8%

Packaging for food processing industries

•2001-02, Automatic approval for foreign equity upto 100% is available •2003-04, customs duty on refrigerated truck has been reduced from 25% to 20%•2005-06, Customs duty on refrigerated vans reduced from 20% to 10%•2005-06,To ensure availability of credit:- FPI included in the list of priority sector for bank lending•2005-06, NABARD has created a refinancing window with a corpus of Rs.1000 crore•2007-08, Custom duty on food processing machinery reduced from 7.5% to 5%•2008-09, fund of Rs 5, 000 cr in NABARD to enhance its refinance operations•2010-11, External commercial borrowing facility available to the food processing industry

Assistance to food processing

industry

IMPACT OF UNION BUDGETS ON FPI

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