A change in lifestyle patterns and an increase of packaged food consumption has accelerated the Food Processing Industry in India, as more and more products need to be processed before being sold. The Indian Food Processing Industry is a major link between the producing entity and the end consumer of products. Therefore, the industry shows large growth potential. In the years of 2011-2015, processed food and related product’s exports grew at a CAGR of 23.3%. Still, only 10% of the produced amount of food is processed. Usually, it is not always assured that a processing unit is strategically located close to the producing units. This creates large amounts of food wastage, especially for perishables, which India’s Government plans to reduce significantly within the next years. So how is the outlook for the Food Processing Industry, and what are the Government’s plans?

A total of 8 Mega Food Parks already exist, and four more are expected to open this year in India. Furthermore, 42 Mega Food Parks are planned to be constructed, out of which 25 have already been allocated. The Indian Government (GoI) wants to finalize the installment of all Mega Food parks until 2019. These parks are built to facilitate the supply chain and provide services, such as creating infrastructure for farm level primary processing centres with cold chain or processing units for intermediate products. In each park, 40-50 Food Processing units can be allocated. In the last two years, the GoI has established Food Processing capacities of 3.2 million tons. The GoI’s goal is to increase the Food Processing Industry by 2.5 times until 2026. Those parks would benefit up to 1.25 million farmers in India. But it is not always assured that such a park is directly placed close to a farmer who delivers the raw materials and where one can use the facilities of cold storage, ripening chambers, and warehouses.

Therefore, the Indian Government plans to establish 250 small to medium sized agro-processing clusters around India to benefit farmers, as value addition is given to their products, and to reduce food wastage. These clusters will be close to areas where specific fruits or vegetables are produced, so these clusters are specialized to the product harvested in the specific area. The government will launch a Scheme (SAMPADA) to support the set-up of these clusters soon. The infrastructure for processing, preservation and storage of the food in the Parks will be provided and well-maintained. And if someone wants to set up such a processing cluster, the Government will financially support this entrepreneur with up to INR 50 Million under the conditions that he owns 5 units and invests INR250 Million.

With this, the Food Processing Minister of India, H. Kaur Badal, wants to increase the food processing level so that farmer’s income can be raised as well. In consequence of having the clusters close to their homes, farmers can sell more products as less of their production amount is perished during the time of transport if they don’t have a contract to sell to a bigger company who takes care of all further steps. Additionally, as the Food Processing sector is a very labour intensive one, its growth will create new jobs.

With its investments into the Food Processing sector, the Indian Government wants to explore markets locally and globally. Thus, it has set up the plan to allow 100% FDI in Food Processing, which would allow FDI in Marketing and processing of domestic food produce. Also, the Union Food Processing Minister wants to push the allowing of 100% FDI in the multi brand retail sector for Food Processing. This will help the industry to grow further and makes it a good investment opportunity for foreign companies.

To read more about the Indian Food Processing Industry, click Food Processing Newsletter.