|Saturday, 19 December, 2015, 08 : 00 AM [IST]|
|Ashwani Maindola, New Delhi|
|While the government is making serious efforts to hardsell the Make in India campaign, there is a worry amongst government officials about how much it can really sail and fast. Not only that, food processing, one of the key sectors under Make in India, in itself is facing several hurdles in recording consistent growth putting a question mark on what fillip it will get under the campaign.
The hindrances that food processing is facing are serious – ranging from infrastructure to regulatory mechanism and perhaps that has impacted the growth of the industry in the country. Some of the officials even went to the extent of terming it as ‘deceleration.’ Further, the new series of GDP (gross domestic product) has put forth numbers below expectations for the sector. According to the new series of GDP, the overall share of food processing industry in the total GDP has come down by .2% while its share in the manufacturing sector has come down by 1% in the last one year.
A senior official from MoFPI states, “When we look one year down the line as to what has happened to the sector at the GDP numbers, according to the new series, the sector is growing average at around 7.1%, while it was at 8.4%, as per earlier series, which is alright. The area of concern is that the contribution of food processing sector has come down in the manufacturing GDP and overall GDP, a little. In 2014-15, the share of food processing sector in GDP was 1.6 % while in 2011-12 it was 1.8% according to the new GDP series. It was .2% dip which is high when you analyse it in quantum. Further on manufacturing front, the share in 2014-15 was 9.1% while in 2011-12 it was 10.2%. There is 1% decline. So we’re growing but not fast enough.”
A look at the statistics in various sub-sectors shows that grain milling continues to be the single-largest homogenous sub-sector with 23% in food processing sector and its growth is roughly static around 1-2%; beverages, meat, fish, fruit, and vegetables together constitute 14% of food processing industries and growing at around 12%. There is no growth in dairy, which constitutes 6% of the food processing sector. Other food products like ready-to-eat and bakery are growing roughly at around 7.5%.
As for the background of Make in India, in 2014, the Union government launched this campaign for promotion of manufacturing in India through which it intended to seek investment and propel the growth story of the country. However, regulatory issues such as ban on Nestle’s Maggi brand of noodles by FSSAI and a not-so-industry-friendly Product Approval system have had a devastating impact on the morale of the industry as well as investments. Hence, the sector wants improvement in the regulatory framework so that the investments and possibilities in the sector could be properly tapped, according to an industry representative.
Apart from regulatory challenges, the issue of backward linkages has also been lingering for long and the industry is not going to farmers to resolve the gap. Resolving this issue is key as backward linkages would be the backbone of the sector, according to another official. Further, lack of backward linkages means there are going to be issues of traceability, which has a direct bearing on regulatory compliance.
The MoFPI official explains, “Farmers are needed to be partners in food processing sector and there is a huge issue of traceability coming up. Is industry willing to take up the issue of self-regulation? In industry chambers as well, food processing is a poor cousin. Some countries are insisting on traceability of the food product. It can only be possible through backward linkages. Somewhat industry largely doesn’t want to do that.”
Another major challenge that the industry is facing is skilled manpower crunch. Though the government is trying to create skilled manpower with the help of the industry, the fact that the latter is still developing seems to be proving a hindrance. The official states, “The job rolls weren’t available for the sector at all. We have engaged experts, consulted industry and developed the course content in the institutions. All this has to be validated by the industry. We’re finding it difficult to get validation from the industry for the job rolls and skills in different areas like packaging, processing, operations etc.”
He added, “And the laid norms were such that each job roll needed to be validated from 30 industries – 10 large, 10 medium, and 10 small. We have identified 70 but only 25 have been validated by the industry in last 8-9 months. This will only add up to the industry output. We have launched whatever course is validated.”
Interestingly, the recently-released report by PHD Chambers and Grant Thornton on food processing sector, somewhat validates the point made by government officials. According to it, inadequate skill sets at different levels in food processing industry, (especially at operator and procurement levels), lack of training infrastructure, lack of specialised training programmes also make things unworkable. Besides, on innovation front, technology transfer from research lab to the industry, demand-based innovations, and encouragement to innovation through GoI schemes are proving to be hurdles.
Strangely while regulatory challenges, backward linkages related issues and manpower crunch are hampering investments from abroad, the industry is not keen on availing the support that it is getting from the Union government. For instance, there are not many takers for the Rs 2,000 crore fund under NABARD.
The official points out, “Now the food processing sector is at par with agriculture to avail priority sector lending. Rs 2,000 crore is available with NABARD at rate of 9.25% interest for units coming up only in food parks. There are 150 designated parks notified in the country and large number of industrial areas have been marked by state governments. But since inception of this fund there have been only four applications from the individual units till now. We talk of high cost of credit but when facility is available we’re not availing that.”
But the industry is of the opinion that sluggish processing of their applications makes it difficult for them to approach for such a facility.
While this is the scenario in the country, the global food Industry is pegged at US$3.2 trillion and India has a huge potential to capture the imagination of the world with its food and processed products. The country is the largest producer of rice, wheat, pulses, and the like, but its share in the global market is very limited and only a 10 per cent of the total produce is processed. Compared to other Asian markets, food processing levels in India are a mere 6 per cent in overall terms. In China, the figure is 40 per cent. Hence, value accruals to farm and enterprise stakeholders within the country are relatively poor.
Summing up, Kunal Sood, partner, Grant Thornton India LLP, said in a statement that while there is an opportunity for growth, there is a need to focus on product conformity with global standards and quality, logistics, traceability and safety, and quality of packaging and delivery.
He stated, “There is need to ensure that value accruals and earnings to stakeholders involved in different activities of sub-sector value chains sector reflect the value-added by such stakeholders. Unfortunately, such is not the case today with producers and farmers enjoying smaller value accruals vis-à-vis marketers and input-output traders. This scenario not only hinders the growth of certain section of stakeholders but also creates a socio-economic divide. This is but one of the several constraints and challenges confronting the Indian food processing sector which merits immediate intervention.”