Food processing sector may fail to meet growth target

The $70-billion food processing industry is unlikely to achieve the ambitious growth target of 20 per cent due to lack of awareness, inadequate infrastructure and use of outdated technology at farms.

The Ministry of Food Processing set this target about two years ago and thereafter allowed 100 per cent foreign direct investment (FDI) in the sector. “But very less FDI has been attracted so far,” said Bipin Sinha, project director of UBM India, an organiser of trade shows on food ingredients in India.

Large farmers in remote India are unaware of the incentives for importing food processing machinery. Even if they are aware, they do not feel comfortable in placing orders from the faroff European countries, the largest supplier of food processing machinery and technology in the world, according to Sinha.

Most small and medium farmers also lack funds as banks refuse to lend to them due to improper income and expense managent. About 90 per cent loan applications of such farmers are rejected while the remaining get just 60-70 per cent of the amount applied for.

So far, large companies have also not evinced an interest due to lack of infrastructure, including cold-chain transport and storing systems. Due to this, about 21 per cent of the total produce is lost during transport from farms to consumption or processing centres.

If preventive care was taken, the total loss due to improper handling, rotting, etc, might come down by at least 4 per cent, said Sinha.

In September 2008, the food processing ministry estimated that the Indian food industry is expected to grow to $310 billion by 2015, a growth rate of less than 10 per cent. Given the fact that innovation needed to reach the grassroots, the sector might not achieve the growth target of 20 per cent, said analysts.

The government’s proposal to set up food processing parks in various centres, including Punjab, Kerala and Ranchi, has also not yet encouraged investors to set up units.