The Mega Food Parks SchemeAnd

Investment Potential in Mega Food Park projects

Ministry of Food Processing IndustriesGovernment of India

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Overview of India’s Food Processing Sector

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The Context and Overview

Food processing sector critical for achieving growth in the agricultural sector which in turn a pre-requisite for healthy growth of Indian economy

Growth of sector essential to meet the twin national objectives of “inclusive growth” and “food security”.

The 11th Plan- significant progress of the sector in terms of both approach and scale of the Government programmes, with stress on appropriate backward linkages and emphasis on synergy between production and processing.

4 Source: Annual Survey of Industries

Growth of Food Processing Sector

Capital Investment in Registered Units in Food Processing Sector (Rs. in Crore)

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Contribution to GDP(% Growth)

GDP at 2004-05 PricesSource : National Accounts Statistics 2011

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Increasing Urbanisation - Lifestyle and Aspirations

Increasing Nuclear Families and Working

Women

Increasing spending on processed food

products

Food Processing Demand Drivers

Changing demographics – Rise

in disposable incomes

Demand for Functional Foods/

Neutraceuticals

Growth of Organised Retail and Private Label Penetration

Food Processing Sector– Growth Potential

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Shift in Demographic profile: A largely untapped domestic market of 1 Billion Consumers with 65% of population below 35 years of age.

Growing Middle Class- from its current size of 50 Mn to 583 Mn people by 2025 (Source: McKinsey & Co.)

Higher Disposable income: Increase in per capita income and purchasing power.

Increased consumer awareness towards quality and hygiene aspects of the Food

Food Processing Sector– Demand Advantage

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Supply Chain Institutional Gaps

(procurement dependence on APMC

markets )

Inadequate link between production and

processing (lack of processable varieties)

Supply Chain Infra Gaps (Lack of primary

processing, storage and distribution facilities)

Challenges for Food Processing

Sector

Lack of product development and

Innovation

Seasonality of operations and low capacity utilization

Inadequate focus on quality and safety

standards

Food Processing Sector– Impediments

9 Source: A study by CIPHET, 2010

Wastage of Agriculture Produce

Crop Cumulative Wastage (%)

Cereals 3.9-6.0

Pulses 4.3-6.1

Oil Seeds 6.0

Fruits & Vegetables 5.8-18.0

Milk 0.8

Fisheries 2.9

Meat 2.3

Poultry 3.7

A nation wide study on quantitative assessment of harvest and post harvest

losses for 46 agricultural produces in 106 randomly selected districts was

carried out by CIPHET.

Percentage of losses estimated for major produces-

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Mega Food Park Scheme- The Need

Food processing sector- a sunrise sector, is capital intensive with long gestation periods

Hence, incentives from the Govt. required to promote private investment in the sector

The Scheme conceptualized on an Industrial Park Model and customized to the need of food processing sector. Aim also to overcome the weakness plaguing the sector

Grant assistance to be provided to entrepreneurs for setting up common infrastructure

The common infrastructure to act as the feeder point for processing units to be set up in the periphery area

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Overview of the Mega Food Parks Scheme

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Mega Food Park Model: An Illustration

Field Collection Centers

Primary Processing Centers:

Pre-cooling, Grading pulping Sorting, waxing,

packing , Temporary storage

Central Processing Center:

Pulping, Aseptic packing, CA chamber, Cold StoreQC lab, Logistics center

etc

Mega Mega Food ParkFood Park

CPCCPC

Importer

Exporter

Value added ProductDomestic sales

Fresh ProductsPPC PPC PPC

Domestic Retail sales

Farmer Groups Self Help Groups Individual farmers

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Mega Food Park Scheme - Background

MFPs to provide state-of-the art infrastructure facilities – to enable setting up of food processing units

Setting up common facilities along with processing units in the periphery

Expected to facilitate the achievement of the ‘Vision 2015’ of the Ministry-, i.e. to raise

the processing of perishables in the country from the existing 6% to 20%,

value addition from 20% to 35% and

country’s share in global food trade from 1.5% to 3%

Scheme formed to accelerate growth of food processing industry in the country

Demand driven with focus on both backward and forward integration

30 Mega Food Parks to be set up during the11th FYP

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Envisaged Outcomes- Mega Food Parks Scheme

Envisaged outcomes-

Increased realization for farmers,

Creation of high quality processing infrastructure including efficient supply chain,

Reduction in wastage,

Capacity building of producers and processors,

Significant direct and indirect employment generation

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Salient Features of the Scheme

Enabling Infrastructure Creation along the supply chainCreation of CPC, PPCs and CCsCommon Facilities and amenities to be assistedLeverage investments in food processing units

Provision for Standard Design Factory and Plug & Play facilities for Micro and Small Enterprises

Project to be implemented through a Special Purpose Vehicle (SPV): As private led initiative

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Special Purpose Vehicle (SPV)SPV, to be a Body Corporate registered under the Companies Act,

and can be constituted by stakeholders like infrastructure developers, FIs/Banks/PE Firms, Org. retailers, Food Processors, 3PL & other service providers, Farmer Orgs. etc…

Each SPV to have

At least three entrepreneurs / business units, with the entrepreneurs being independent of each other and business units with no common directors.

At least one should be from the food processing sector with at least 26% equity in the SPV

SPVs to bring in at least 20% of the eligible project cost, including the cost of land, as their contribution- 10% in case of Difficult, hilly & ITDP notified areasEligible project cost- total project cost minus cost of land, pre-operative expenses and MMWC. Interest during Construction (IDC), a part of pre-operative expenses, shall be considered under eligible project cost.

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SPV..Contd. ..

Combined net worth of the shareholders of the SPV should not be less than Rs. 50 Cr- Food Processor should have at least Rs. 10 Cr of net worth

Each member in the SPV must have a net worth of 1.5 times of their proposed equity contribution to ensure requisite contribution for the project

Government agencies may also become shareholders in SPV, with maximum equity of 26% so as to ensure private sector character of the SPV

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Salient Features of the Scheme.. Contd.

Grant Assistance for creation of common infrastructure facilities and setting up of processing units

Typical Project Cost envisaged – Rs.125.00 Cr to Rs. 150.00 Cr.

Assistance from Ministry- 50% of the eligible project cost limited to Rs 50.00 crore in general areas 75% of eligible project cost limited to Rs. 50.00 crore in difficult & hilly

areas and ITDP notified areas Cost of land, pre-operative expenses and margin money for working capital

not eligible for grant under the Scheme

The eligible project cost- total project cost minus cost of land, pre-operative expenses and margin money for working capital. However, Interest during Construction (IDC) is a part of pre-operative expenses and shall be considered under eligible project cost.

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Eligible Project Components in MFP

Core Processing Facilities

Primary Processing Centers: Sorting and grading, dry warehouses, cold stores including pre-cooling, reefer vans, mobile pre-coolers and collection vans etc

Central Processing Center: Sorting and grading, Packaging, Dry warehouses, Specialized storage facilities, Pre-cooling and Ripening chambers etc, IQF, Cold chain infrastructure, Irradiation facilities, Steam generation & sterilization units, Food incubation-cum-development centers, QC Lab etc.

At least 35% of the eligible project cost shall be towards creation of above mentioned facilities

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Project Components in MFP.. Contd.

Factory Buildings Provision For MSEs – A maximum of 10% of total allotable area

for setting up Standard Design Factory Sheds for MSEs

Enabling Basic Infrastructure Roads, drainage, water supply, electricity supply including

captive power plant, ETP & STP, weighbridges etc

Non –core Infrastructure Admin buildings, training centers, canteen, workers hostel,

trade/display center etc: Cost of non-core infrastructure facilities, not exceeding 10% of the eligible project cost, would be eligible for grant purpose

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Investment Opportunities- Mega Food Parks

Investment through Special Purpose Vehicle (SPV) in the Mega Food parks

Opportunities to join project specific SPV as co-promoter/s: Investment in the form of equity participation

15 projects taken up in 1st and 2nd Phases and 15 projects in the 3rd phase (status detailed in later slides)

As partners in SPV, the members, collectively, would be responsible for development, implementation and management of common facilities to be created in the Project

100 percent FDI is permitted in Food Processing Sector: A USP

The MFP would have plots of varying sizes that FP companies can take on lease and make use of the common facilities to manufacture processed food

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Investment Opportunities.. Contd.

Investment in the Processing Units in the Mega Food Parks

13 Mega Food Parks under implementation– each Park shall provide developed infrastructure for setting up about 25 to 30 processing units leading to a total of about 350-400 units

17 more projects in the pipeline for approval- Shall provide for setting up of over 400 units

Given leverage of investment envisaged, these 30 Parks expected to have a combined investment of over Rs. 7000 crore.

Overall, the 30 Mega Food Parks shall provide for setting up of about 750-800 food processing including ancillary units

A unique opportunity for investors, including foreign investors, keen to engage in/enter the food processing sector

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Proposed Pattern of Assistance During 12th Plan

Mega Food ParksGeneral Areas

35% of eligible project cost subject to a maximum of Rs. 25 crore per project .

Interest subsidy @ 6% per annum subject to a maximum of Rs. 10 crore per project.

Difficult Areas

50% of eligible project cost subject to a maximum of Rs. 25 crore per project.

Interest subsidy @ 7% per annum subject to a maximum of Rs. 15 crore per project

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Proposed Pattern of Assistance During 12th Plan

Mini Food ParksGeneral Areas

35% of eligible project cost subject to a maximum of Rs. 15 crore per project .

Interest subsidy @ 6% per annum subject to a maximum of Rs. 6 crore per project.

Difficult Areas

50% of eligible project cost subject to a maximum of Rs. 15 crore per project.

Interest subsidy @ 7% per annum subject to a maximum of Rs. 9 crore per project

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Current Status

of

Mega Food Park projects

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Current Status of Projects

11th Plan proposed for setting up of 30 Mega Food Park Projects :-

10 projects approved by CCEA in 2008-09

05 projects approved by CCEA in 2010-11

15 projects approved by CCEA in 2011-12

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Current Status of Projects

Out of 30 projects, Final Approval has been accorded to 13 projects

Out of these 13 projects, 7 (Punjab, Assam, West Bengal, Tripura, Andhra Pradesh and Karnataka) are at advanced stages and rest are at different stages of implementation.

15 projects have been accorded “In-principle” approval in the month of September, 2012 whereas two projects accorded “In-principle” approval earlier are yet to complete formalities for final approval

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Location of Mega Food Parks

Projects accorded Final approval

Projects accorded In-principle Approval (1st & 2nd Phase)

Projects accorded In-principle Approval (3rd Phase)

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The National Mission on Food Processing

The Ministry has launched “National Mission on Food Processing” (NMFP) w.e.f. 1st April, 2012 in cooperation with State Governments during 12th Five Year Plan.

This is aimed at ensuring better outreach of various schemes / programmes of the Ministry and provide more flexibility to suit local needs.

Applications are being received and processed by the State Governments

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Schemes covered under the Mission (NMFP)

Scheme for technology up-gradation, setting up/modernization/expansion of food processing industries

Scheme for Modernization of Abattoirs

Scheme for Human Resource Development

Scheme for Promotional Activities

Cold chain projects for non-horticultural products

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Objectives of NMFP

To propagate significance of food processing for enhancing agricultural productivity and farmers income in the Country

To assist the State Govts. in creating requisite synergy between their agricultural plans and development of food processing sector

To assist the State Governments in addressing both institutional and infrastructural gaps along the Value Chains and thus create efficient Supply Chains for agricultural produces

To promote initiatives for skill development, training and entrepreneurship

To assist MSMEs in setting up/modernization of processing units

To assist food processing industry to meet requisite standards in terms of food safety laws and market demand, both domestic and international

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