Why have food parks failed to take off in India?

While the concept has been doing the rounds for a few years, corporate interest has not been too high owing to a number of issues, including land acquisition

The Cabinet Committee on Economic Affairs (CCEA) on Thursday approved the setting up of 12 new mega food processing parks at a cost of Rs 1,714 crore.

This is the second time in recent years that the CCEA has approved a fairly huge tranche of food parks in one go. During the 11th Plan period (2007-12), some 30 mega food parks were sanctioned by the CCEA in three phases. While on paper all of this would imply the setting up of giant capacities in different parts of the country benefitting both processors and farmers, the ground reality is very different.

As of now, there are only two mega food parks (from the initial lot of 30) that have seen the light of day. One in Chittoor, Andhra Pradesh called Srini Food Park, and the other, called the Swami Ramdev Baba Food Park in Haridwar.

What happened to the rest? They are yet to get off the ground. Though four including one by the Future Group are in advanced stages of completion in Bangalore, the fact that there have been few corporate takers for food parks in general is obvious to many.

So where does the problem lie? Harsh Mariwala, chairman & managing director, Marico Ltd, puts it bluntly, "FMCG (fast moving consumer goods) companies are interested in marketing, not manufacturing. These projects make sense for B2B (business-to-business) players, those who are involved in supplying products to the food industry, restaurants or hotels. It makes no sense for us to get involved in production."

On an average, almost 50 per cent of manufacturing in the Rs 1.8-lakh crore FMCG industry in India is outsourced. The trend, according to experts, would only grow, with the proportion of in-house to outsourced production expected to rise in the coming years.

The challenges
Like most other infrastructure projects, the key challenge in setting up food parks lies in land acquisition, says Anand Ramanathan, associate director, KPMG Advisory. Most projects, according to persons in the know, have failed to take off mainly because of the bottlenecks involved in land acquisition.

The other challenge is in being able to attract the right set of tenants, basically, manufacturers and ancillary players, who can come forward and set up base in a food park. Kishore Biyani, chief executive, Future Group, while declining to get into specifics said his group had managed to ink tie-ups with 40 national and international players who would work out of the 115-acre food park his group company Future Ventures was setting up. "This park would get operational by December this year," he said. "It would be involved in collection of food items from different centres around the food park. Once brought into the food park, it would be further processed," he says.

Companies such as LT Foods, the maker of Daawat Basmati Rice, according to persons in the know, have already inked a joint venture with Future to utilise its food park for manufacturing and processing rice and other staple items besides snack foods.

Biyani claims the initial investment by his group to set up the food park has been to the tune of Rs 300 crore. The manufacturers and ancillary players who would work out of the food park are expected to bring in an additional Rs 700 crore, taking the total figure to Rs 1,000 crore, he claims.

But while Future is on course to get its food park up and running, the same cannot be said about the other projects that the government had given the nod to in the 11th plan. Details remain sketchy about these projects.

The bigger challenge also is the lack of agriculture sector reforms that many believe should run concurrently even as infrastructure for food processing is set up in the country. "For instance, 70 per cent of agri business in India happens through co-operatives. How can they be integrated into this scheme of mega food parks? If that is addressed, it could help in giving food parks a huge fillip," Ramanathan says.