The processing of fruits and vegetables is estimated to be around 2.2 per cent of the total production in the country. More than FDI, our farmers need more and more processing facilities for their produce. Need for processing industry to gear up is not only because of the need for farmers but various other reasons, which would surface after the advent of Walmart and other big retailers.
The Indian food processing industry values at $135 billion and is expected to become a $200 billion industry, majority of which is expected to be in foreign hands and hence the final margin of profit will go outside India. As of now the industry is segmented into sectors namely, milk and allied products (dairy), meat and poultry, seafood, bakery and confectionery, fruit and vegetables, grain, pulses and oilseeds (staple) products, alcoholic and non-alcoholic products (beverages) and packaged foods. The rising disposable income has resulted in huge demands for processed foods. This is where the retailers need to pull up their socks and meet the demands before the public shifts to the foreign brands.
Another reason for a rapid growth of the industry comes from the fact that the distance between the produce and consumers is ever increasing. The increasing disposable income and per product expenditure has increased but the margin given to farmers is still the same. Processing would bring in a lot of changes discussed below.
Innovative practices like contract farming in wheat practiced in Madhya Pradesh by Hindustan Lever Ltd. and by Pepsi Foods Ltd. in Punjab for tomatoes, food grains, spices and oilseeds are some successful examples of contract farming in India, which changed the farming landscape and promoted the cultivation of process-able variety of farm produce. This will certainly power the fruits, vegetables and grain-processing industry. Besides such initiatives, fiscal incentives and tax concessions will also give impetus to the sector.
The need to establish enterprise and provide worthwhile employment has been spoken about for years. Food-processing industry is most suited to be close to the farming sights; this would develop the infrastructure of the rural land and will check migration as there will be a lot of opportunities for the locals there. This is the best possible way if the lives of the huge population in villages are to be made sustainable.
Competition with giants
Retail giants like Walmart rely a lot on processed food. Their business comes from the cheap raw material they get from the locals and a dear price they receive for the processed food. The quality of the produce is also made better as they reduce sodium, sugars and trans fat in hundreds of food products.
India is a country which has huge potential of farm produce and it can meet world’s requirements by processing and packaging. Export can increase and much-needed foreign exchange will come to the Indian market.
The domestic industry has to change its preference in favour of processed foods. Consumption of value-added fruits and vegetables are low compared to the primary processed foods and fresh fruits and vegetables. The inclination towards processed food in the urban areas and neighboring countries like Sri Lanka and Burma seems to be an opportunity for the small and medium entrepreneurs to link with farmers to tap the huge potential this sector promises.