Food Processing
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Food Processing

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Food processing is the transformation of agricultural products into food, or of one form of food into other forms.

Primary

Secondary

Tertiary

Aimed at making food edible Turns ingredients into different forms with low-value addition. High-value addition can create a variety of food. Although such food is criticised for having too much sugar and salt and causing obesity.
Paddy to rice, removal of the husk – such as thrashing etc. Flour to Bread, 2 minute noodles.

Supply chain

A Supply Chain is the sequence of processes involved in the production and distribution of a commodity. It includes an entire system of producing and delivering a product or service, from the very beginning stage of sourcing the raw materials to the final delivery of the product or service to end users.

  • Forward linkage: A distribution chain connecting a producer or a supplier with customers.
  • Backward Linkage: Channels through which material, money flow & information are accessed by a business.
  Upstream Downstream
Direction of Movement An inward movement to the Processing centre /Plant Outward movement from Processing centre/ Plant
Stakeholders
  • Raw material supplier
  • Farmer and other supplier of raw material
  • Distributors
  • Wholesalers
  • Retailers
  • Final customers

Current Level of Processing in India

  • It accounts for ~32% of India’s food market. However, it varies hugely from sector to sector. Dairy(35%), Meat(20%), Fisheries(8%), Poultry(6%), Horticulture food(2%), Consumer foods & Grains(N/A).
  • It holds an 11.6% share of employment in the domestic food industry.
  • It accounted for2% of the total FDI inflows in India in 2020.
  • Organized v/s Unorganized: nearly 40,000 units account for 93% of the plant & machinery in the sector, in value terms. This segment accounts for 26% of employment and contributes around 90% of output and 72% of GVA. About 66% of unorganised food processing units are in rural areas and of these, 80% were family-run.

Importance of Food Processing

Economic & Social Benefits

Increasing farm income through food processing:

  • Employment generation: The food processing industry is a labour-intensive sector.
  • Infrastructure creation: forward linkage for the agriculture industry.
  • Creation of Supply Chains: a stable supply chain for raw materials helping farmers.
  • Private investment: FPI Agriculture has negligible private investment in India.
  • Establishing skilled manpower: It would lead to on job skilling of thousands of workers in India.
  • Export competitiveness: Cheaper production would give a competitive advantage in terms of exports.
  • Creation of new markets: With incentive-led low prices, expansion of the domestic market for processed food would happen.
  • Economies of Scale: Finally, with large-scale production economies of scale would set in, benefitting in the long run

Social Benefits:

  • Women Empowerment: Food processing utilizes a great portion of the women’s workforce. For example, SEWA NGO
  • Reducing regional disparities: by creating an extra source of revenue in rural areas.
  • Social Status.
  • Health & Education.
  • Dignity: Not dependent only on farm income – middlemen removed
  • Economic parity.

Opportunities for the Food Processing industry:

The Indian agricultural economy is shifting from primary to secondary agriculture where the focus is more on developing various processed foods. The Indian food processing industry promises high economic growth and makes good profits for several reasons:

  1. Quantity of raw material available: India has 52% cultivable land, compared to 11% world average. It has the largest arable land in the world, the largest livestock population, 17% of the Global milk share(largest) and 2nd largest producer of Fisheries, Fruits & Vegetables, and Cereals respectively.
  2. Variety of raw material available: 20 Agro-Climatic zones, 46 of the 60 soil types exist in India. 15 of 26 major world climates in the world. India has a great diversity in culture, customs and cuisine.
  3. Expansion potential: Only 10% of food processing happens in India where as US has 65% China has 23%), and Thailand has 30%. Further, it represents only 1/3rd of the total food market by value which is too little by the global standards. Therefore, there is a long way to go.
  4. Reputed Indian brands: There are several reputed Indian and foreign brands such as Haldiram and Amul. These can be encouraged to export processed foods globally as they can comply with the global standard of codex.
  • Large Consumption Economy: Consumer spending on food is higher in proportion to total spending. India’s retail market’s 48% is grocery which is $600 billion. It is a big market for any industry.
  • Cheap workforce: potential for cheap production and export.
  • Saving lost value:  40% of food is wasted in India. MOFPI: ₹92K Cr annual post-harvest loss. A lot of value can be saved by processing.
  • Cultural factors: India has a good Traditional knowledge of conservation.
  • Urbanization and Changing Consumer Preference: With the growing working class processed food will be in demand.
  • Export Potential: Non-vegetarian processed food acts as a forward linkage to Agriculture.

Challenges for Food Processing Industry

Poor supply chain linkage:

  1. Contract enforcement is poor: It disables the companies from reliably getting raw materials for their production.
  2. Highly regulated Market: There are legal bottlenecks such as the Mandi system and the Essential Commodities Act which gives much less freedom to the agri-processing companies.
  3. Lack of Quality and Safety adherence: neither the crops nor the finished food is graded according to the quality. This poses a challenge to high-quality processed food to compete with low-quality.
  4. Availability of raw materials becomes a major concern due to inadequate emphasis on developing appropriate varieties and extension activities.
  5. Market Intelligence: mismatch between the requirements of industry and supply of agri-produce by the farmers. The problem is often compounded by legal provisions relating to restrictions on commodity storage and movement.

Production Challenges for Food Processing Industries

  1. Infrastructure bottlenecks: FPIs need world-class storage, cold chain and logistics support to reduce wastage. This would require support from Railways as well as Airways.
  2. Unskilled manpower: The existing manpower in the farming industry needs to be trained to be employable in the FPI sector.
  3. Protection of IPR issues: Laws like Protection of Plant Varieties and Farmers’ Rights Act, 2001 limits investment in intellectual property in India
  4. Lack of Investment: Meat, Fish, Fruits and Vegetables, in particular, have recorded higher degrees of wastage and have a negligible share in food output.

Challenges for Smaller players: –

For small players, such as Cottage processors, the problems are compounded even more:

  1. Poor Credit Facility – due to the seasonal and perishable nature of the commodities – High cost and inadequate credit.
  2. Lack of awareness: Lack of awareness and absence of appropriate knowledge sharing & guidance forum adds to their problem. Schemes being implemented by different agencies add to the confusion.
  3. Bureaucratic Burden– Availing permission for Change in Land Use (CLU), environmental clearance, water and power connections. Further, the payment of fixed charges for electricity for a whole year is expensive when the Industry is seasonal.
  4. Labour Laws– compliance concerning lay-off, retrenchment and closure even though these units run seasonally.
  5. Marketing & Branding:Given the scale of operation, small units are unable to invest in marketing and branding.
  6. Economies of scale:
  7. Logistic issue: To reach to the cities.
  8. Technology

FAQs related to Food Processing

Food processing includes traditional (heat treatment, fermentation, pickling, smoking, drying, curing) and modern methods (pasteurisation, ultra-heat treatment, high pressure processing, or modified atmosphere packaging).

Food processing is the transformation of agricultural products into food, or of one form of food into other forms. Food processing takes many forms, from grinding grain into raw flour, home cooking, and complex industrial methods used in the making of convenience foods.

Techniques used in food processing include pasteurization, fermentation, canning, freezing, and dehydration. Food processing makes food products more palatable and nutritious and allows for creation of a wide range of food items from basic ingredients, supporting both food diversity and accessibility in the market.

Food processing is crucial for ensuring food safety, extending shelf life, reducing waste, and improving the nutritional value and accessibility of food, ultimately contributing to food security and economic growth. 

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