A Presentation On

“Opportunities in Agro-Processing Sector in India ”

By

Prof. Vinod Malkar

 Sanjivani Rural Education Society,College of Engineering, Dept. of MBA,

Kopargaon, Dist: Ahmednagar, Maharashtra, India 1

Introduction• India is one of the biggest emerging markets, with over 1.2

billion population and a 300 million strong middle class. • India with a land area of 2.97 million sq. km., 180 million

hectares of arable land (one tenth of the world), 56 million hectares irrigated land.

• India is the second largest food producer in the world and having potential to become first.

• But fruits and vegetables just about 2.2 per cent of the production is processed compared to 30 per cent in Thailand and close to 80 per cent in Philippines and Malaysia.

• It is estimated that a one per cent growth in food processing has the potential to generate an additional direct employment for five lakh people, and indirect employment for 15 lakh individuals (Rana kapoor 2010)

• This Research will give roadmap for development of food and Agrobase industries.

3

MilkLargest Producer91 Mn T

F & V#2 in the world151 Mn T

Food Grains#2 in the world(220 Mn T)

Cattle / buffaloesLargest in the world283 million

TeaLargest Producer(0.85 Mn T)Sugarcane

# 2 in the world(245 Mn T) Goat & Sheep

182 million

FisheriesMarine: 2.7 Mn TInland : 3.1 Mn T

India is the front ranking producer of many perishable commodities

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Food Processing Sector in India India has huge supply advantages due to diverse agro-

climatic conditions and wide ranging raw material base…

• 52% cultivable land compared to 11% world average

• All 15 major climates in the world exist in India

• 46 out of 60 soil types exist in India

• 20 agri-climatic regions

• Among the top five producers worldwide of rice, wheat, groundnuts, tea, coffee, tobacco, spices, sugar and oilseeds.

• Sunshine hours and day length are ideally suited for round the year cultivation

Significant Opportunity

India as a global sourcing hub

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Food Processing Sector in India Huge wastage across the supply chain leads to lower level of processing and hence low value addition…

Field Losses (Pest, Diseases, Rodents etc))

Pre-Processing(e.g. inefficient harvesting, drying, milling)

Transport(e.g. spillage, leakage)

Storage(e.g. technical deficiencies)

Processing & Packaging

(e.g. excessive peeling, washing)

Marketing(e.g. spoilage, rotting in stores)

Rich Countries – High losses at a later stage in the food chain

Co

nsu

mer

Pro

du

cer

Field Fork

Wastage by Consumer(e.g. overeating, food wastage)

Developing Countries – Relatively high losses in the initial parts of the value chain

Britt-Louise Andersson, SIWI

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Some Identified problems …

Infrastructure for marketing of perishables Primary grading/ collection centers - non existent

Warehousing and cold storage - inadequate

Cold chain - non existent

Quality certification system - non existent

Transportation for perishables - non existent

Rural markets - complete lack of infrastructure

Wholesale markets - in government control, lack modern facilities

Private / direct markets - not permitted

Post harvest losses: 25 to 30 % in perishables

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Level of Processing across Segments

Segment

India

Other Countries

Fruits and Vegetables

2.2%US A (65 %), Philippines (78%)

China (23)%;

Marine 26%

60-70% in developed countries

Poultry 6%

Buffalo Meat

20%

Milk 35%60-75% in developed countries

15%

11%

0% 5% 10% 15% 20%

Fruits

Vegetables

India's share in global production (2001-03)

63%

53%

0% 20% 40% 60% 80% 100%

Fruits

Vegetables

Indian prices as a % of world prices (2001-03)

0.5%

1.7%

0.4%

2.1%

0% 2% 4% 6% 8% 10%

Fruits

Vegetables

India's share in global exports

(2001-03)

(1991-93)

Source: UN COMTRADE Statistics, World Bank Staff Estimates

India’s competitiveness in global markets

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Indian Food Trade Supported by a committed government in improving the food trade and providing a

conducive atmosphere for agriculture, India is a net exporter of agricultural products. …India’s Position in Global Trade

• India stands a distant 21st for the year 2007, with a 1.4% share in the global trade.

• During the period 1980-2007, India’s share in the global exports have increased from 1.1% to just 1.4%, the majority of the increase happening in this decade.

• However, Export of Processed Food and Beverages is growing faster than the overall Food and Beverages…

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34%

29%

17%

10%

7%

1%1%0%

5%

10%

15%

20%

25%

30%

35%

40%

0 2000 4000 6000 8000 10000 12000 14000

Distance (Kms)

Share

of Tra

de

South Asia

Middle East

East Asia

Western Europe

Rest of the WorldUSA & CanadaAfrica

Indian Food Trade India exports mostly to the proximate

countries…

India’s geographical situation gives it the unique advantage of connectivity to Europe, the Middle East, Japan, Singapore, Thailand, Malaysia and Korea.

Globally, most of the countries import from countries that are geographically closer.

• For example, 45% of USA imports are from Canada and Mexico.• EU imports 50% from Spain, Netherlands, France, Italy, Belgium and Germany

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Industry Growth Drivers - DemandUrbanisation, rise in disposable incomes and changing

lifestyle and aspirations are leading to significant demand for processed food…

Increasing Urbanisation – Lifestyle and Aspirations

Increasing Nuclear Families and Working Women

Increasing spends on health foods

Food Processing Demand Drivers

Changing demographics – Rise in disposable incomes

Demand for Functional Foods

Organised Retail and Private Label Penetration

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Challenges in the Sector Challenge 1: Productivity Issues

India's overall agriculture productivity is still low…Source: Innovative technology to ensure food security, UNI (United News of India), 25 March 2009

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Challenges in the Sector Challenge 2: R&D

Commodity-centric R&D Lack of a holistic approach involving a matrix of farm enterprises

Compartmentalization of R&D agencies

Lack of effective bilateral flow of information amongst research, extension, and implementation departments

Poor validation and feedback mechanisms

Lack of large-scale on-farm validation of techniques and feedback thereon, leading to practically no scope for enhancement

Key Problems in Indian R&D

A seven-step mechanism is required to set-up a research-development-technology transfer continuum involving all stakeholders

1. Problem identification and prioritization

2. Convergence of existing technologies to match the need

3. Generation of need-based viable technologies using the holistic farming system approach

4. On-farm assessment and evaluation

5. Feedback on the technologies

6. Refinement of technologies, if necessary

7. Ensuring timely availability of inputs

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Challenges in the Sector Challenge 3: Human Resource

Development

Warehousing & Distribution

Industry level

Enforcement

Regulatory and trade issues

Food production• Food safety awareness

• Auditing and inspection skills

• Process development

• Managerial and Operational level HRD

• Institutional Development

• Focus on packaging techniques, storage and safe transportation

• Platform to make policy decisions

• Inclusion in academic curriculum

• Emphasize food safety in storage conditions

• Training in Warehousing and Distribution

The industry is in direct need of highly skilled/trained manpower across different levels to handle various operations

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Challenges in the Sector Challenge 4: Supply Chain Hindrances

Necessity for a Strategic focus on Supply Chain in FPI

• This situation discourages processing units to reach optimum size and achieve economies of scale.

• Additionally, lack of consistent quality hinders small scale units to build brand equity for themselves in international and domestic markets.

Seasonality

Perishability

Variability

Seasonal production Vs Year-round Processing Operations

Highly perishable nature of raw materials

Variable quality of raw materials due to cyclic variations and changing weather conditions

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Challenges in the Sector Challenge 5: Low Adherence to Quality

Standards

Increasing need for food processors to adhere to quality standards for both domestic as well as export market

Increasing GlobalisationStringent Safety Norms Rising Customer awareness on Quality and Health

• Lack of requisite controls across the agri-value chain-from farm inputs to storage of produce to food processing techniques

• Poor compliance to requisite food standards in export countries

• Absence of basic standardization and certification infrastructure

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Opportunities Food Processing sector has strong synergies with the inclusive growth mandate of the government

and also provides a platform to significantly transform the face of rural India…

A developed Food Processing sector will help overcome the biggest challenges in front of India:

• Low farmer income and high subsidies

• High wastage along the value chain

• Poor hygiene and safety standards

Given the huge potential opportunity, players should consider the constraints as opportunities waiting to be exploited and make investments for the overall growth of the industry.

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Opportunities High domestic demand and supportive policy provides

significant opportunities across the Food Processing value chain…

Financial & Business Services

Farm Inputs FarmingMarketing/ Aggregator

ProcessingLogistics (Food)

Retail/ Food

ServicesConsumer

Product Design

Distribution

MarketingTransport Services/ Infrastructure

Quality Control Market Intelligence

Policy Support

Financial & Business Services

Farm Inputs FarmingMarketing/ Aggregator

ProcessingLogistics (Food)

Retail/ Food

ServicesFarm Inputs Farming

Marketing/ Aggregator

ProcessingLogistics (Food)

Retail/ Food

ServicesConsumer

Product Design

Distribution

Marketing

Product Design

Distribution

MarketingTransport Services/ Infrastructure

Quality Control Market Intelligence

Policy Support

Key Opportunities

Mega Food Parks

Integrated Cold Chain

Backward and Forward Integration

Food Safety Management Systems

Training Facilities

B2B Sales

Quality Control Labs

Joint Research Facilities

Customised Farm Equipment

Thanks for your attention!

This is not an end ……This is not an end ……