Food Processing Sector


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  • The Union Cabinet on 30th March 2021 approved a production-linked incentive scheme for the food processing industry with an outlay of ?10,900 crore.


  • Food Processing Industry in India accounts for only 10 per cent of total food production.
  • Despite the sector employing 11.4 per cent of the organised manufacturing workforce, India’s FPI share in manufacturing GVA is fairly low at 9.7 per cent


  • Linkages
    • It provides vital linkages and synergies between agriculture and industry.
  • Employment generation:
    • It provides direct and indirect employment opportunities, because it acts as a bridge between Agriculture and Manufacturing.
  • Crop-diversification:
    • Food processing will require different types of inputs thus creating an incentive for the farmer to grow and diversify crops.
  • Enhances consumer choices:
    • Today, food processing allows food from other parts of the world to be transported to our local market and vice versa.
    • Moreover it enhances the quality and taste of food thereby bringing more choices in food basket
  • Increase farmers’ income:
    • With the rise in demand for agri-products there will be commensurate rise in the price paid to the farmer, thereby increasing the income.
  • Reduce malnutrition:
    • Processed foods when fortified with vitamins and minerals can reduce the nutritional gap in the population.
  • Reduce food wastage:
    • UN estimates that 40% of production is wasted. Similarly, NITI Aayog estimated annual post-harvest losses of close to Rs 90,000 crore.
    • With greater thrust on proper sorting and grading close to the farm gate, and diverting extra produce to FPI, this wastage could also be reduced
  • Earns foreign exchange:
    • It is an important source of foreign exchange.
    • For example: Indian Basmati rice is in great demand in Middle Eastern countries.
  • Curbing distress migration:
    • Food Processing being a labour intensive industry will provide localized employment opportunities and thus will reduce the push factor in source regions of migration.
  • Curbing food inflation:
    • Processing increases the shelf life of the food thus keeping supplies in tune with the demand thereby controlling food-inflation.
    • For example: Frozen Safal peas are available throughout the year.


  • Gaps in supply chain infrastructure:
    • Which means inadequate primary processing, storage and distribution facilities; the insufficient connection between production and processing
  • Availability of raw materials:
    • Agricultural produce is an important factor for sustaining food processing activities.
    • Due to seasonal availability of certain crops, the sector faces delays in production resulting in low supply.
  • Lack of technological upgradation:
    • In the Indian food processing sector, we stick to traditional production processes where the quality of agricultural and food products is being inspected by human evaluators.
    • This manual inspection is time-consuming, labor intensive and prone to human error.
    • To lessen the impact of these issues, computerized inspection of these products must be implemented.
  • Issues with taxation:
    • Processed foods is taxed at a higher rate than that of raw agricultural goods >> hence disincentivizing farmers to start processing units
  • Quality issues:
    • India food products faces ban from European Union citing poor phytosanitary inspection
  • Storage constraints:
    • There has been significant progress in building individual cold storage facilities, their lack of geographical spread and tardy upgradation into integrated multi-commodity hubs are problems that persist.
  • Lack of adequate connectivity:
    • Goods produced in rural areas take a long time to reach the food processing units due to poor connectivity >> thus affecting quality and cost of products.


  • Pradhan Mantri Kisan Sampada Yojana (PMKSY):
    • It is an umbrella scheme incorporating ongoing schemes of the food processing ministry like Mega Food Parks, Integrated Cold Chain and Value Addition Infrastructure, Food Safety and Quality Assurance Infrastructure, etc.
  • FDI promotion:
    • 100% FDI through automatic route is allowed into this sector
  • Food processing fund:
    • A special fund in the NABARD worth Rs. 2,000 crore, designated as the Food Processing Fund, was set up in 2014 for providing affordable credit to food processing units in food Parks.
  • Production Linked Incentive Scheme for Food Processing Industry:
    • The objectives of the scheme were to:
      • Support creation of global food manufacturing champions
      • Strengthen select Indian brand of food products for global visibility and wider acceptance in the international markets
      • Increase employment opportunities of off-farm jobs
      • Ensuring remunerative prices of farm produce and higher income to farmers
  • Mega Food Parks Scheme:
    • It aims at providing a mechanism to link agricultural production to the market by bringing together farmers, processors and retailers to maximise value addition, minimising wastage, increasing farmers’ income and creating employment opportunities particularly in the rural sector.
    • A Mega Food Park entails an area of a minimum of 50 acres and works in a cluster based approach based on a hub and spokes model.
  • Scheme of Cold Chain, Value Addition and Preservation Infrastructure:
    • The objective of the scheme is to provide integrated cold chain and preservation infrastructure facilities, without any break, from the farm gate to the consumer.
    • It covers pre-cooling facilities at production sites, reefer vans, mobile cooling units as well as value addition centres.
  • Modernisation of Abattoirs scheme:
    • The main objective of the Scheme is a creation of processing and preservation capacities and modernisation and expansion of existing food processing units with a view to increasing the level of processing, value addition leading to reduction of wastage.
  • Make in India:
    • As part of the Make In India campaign, food processing sector was identified as one of the 25 focus areas.
    • Accordingly, the policy ecosystem has been revamped to attract financial, technological and human resources into the sector
  • Fiscal incentives:
    • Income Tax relief:
      • Section 80-IB of the Income Tax Act deals with some deductions in respect of profits and gains from certain industrial undertakings related to Food Processing Industries
      • Deduction is permitted for expenditure incurred on investment in capital for setting up of Food Processing related items.
    • Customs duty:
      • Project Import Scheme seeks to simplify the assessment in respect of import of capital goods for the installation of mechanized food grain handling systems, cold storage etc.
    • Indirect tax:
      • Rationalization of rates under GST


  • Skilling:
    • Skilling is required at two levels. First at the farm gate in promoting agricultural best practices and in processing activities.
    • Promote training institutes for upcoming entrepreneurs and it should be in all states.
    • New technology should be updated in the training institutes and skill development should be given the top most priority.
  • Improve agriculture:
    • Second Green Revolution should be updated with the diversified technologies.
    • Develop the agricultural facility with good agricultural practice which leads to the transition from staple food crops to diversification of crops.
    • Contract farming can be promoted >> This would shield farmers from price volatility
  • Integration:
    • Encourage integration of all locally available micro food processing units with nearby production clusters for enabling them to vertically integrate with big private players.
    • This can be facilitated through investor platforms like Nivesh Bandhu Portal and India Investment Grid, which can be scaled up with backward linkages to farmers/FPOs.
  • Address local capacity needs:
    • Impart basic IT training to rural youth via Common Service Centres to serve as digital links for the farmers/FPOs and food enterprises.
    • Further, upskilling of mandi labourers with key post-harvest management (PHM) skills of loading, unloading, cleaning and bagging will also improve the efficiency of FPI supply chains.
  • ‘One District One Product’ initiative
    • Government may conduct a district level crop-wise assessment of existing bottlenecks in the supply chain, mapping all strategically located stakeholders including farmers, farmer co-operatives/producer companies and private enterprises.
  • Improve the infrastructure:
    • Storage capacities and infrastructure should be increased.


Q. “A growing Food Processing sector will help to create a fair and equitable agricultural market while ensuring good remuneration for farmers”. Analyze