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BY:

MR. SUMAN JYOTI KHAITAN

MANAGING PARTNER

KHAITAN & PARTNERS

ADVOCATES & NOTARIES

W-13, WEST WING GREATER KAILASH

PART-IINEW DELHI-110048,

INDIAPH.: +91-11-4950 1500,

4053 6944FAX: +91-11-4950

1599, 2921 7108E-MAIL:

delhi@khaitanpartners.in

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TABLE OF CONTENTS

1. Introduction and Overview ……………………………………….32. Policy and Promotion Measures …………………………………4-63. Schemes for Food Processing Industry ……………………….....7-84. Government Promoting Skill Development and Research in Food

Processing Sector …………………………………………….....9-105. Food Safety and Standard Act, 2006 ………………………….11-126. National Mission on Food Processing (NMFP) …………….…13

- Objectives of NMFP ……………………………………...…14-15- Five Guiding Principles of the NMFP ……………………….16

7. Advantages …………………………………………………….17-198. Conclusion …………………………………………………….20-229. Sources and Acknowledgment ………………………………...23

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• The Indian food processing industry accounts for 32% of the country’s total food market and is one of the largest industries in India. It is ranked fifth in terms of production, consumption, exports and expected growth

• Currently, the Indian food processing industry is estimated to be worth USD 121 billion

• The Industry contributes 14% of manufacturing GDP, and accounts for around 13% of India’s exports and 6% of total industrial investment

• An integrated strategy for promotion of agribusiness Vision, Strategy an Action Plan for the Food Processing Sector has also been approved by the Government

• It is acknowledged that there is immense potential in the Indian food processing sector, largely because of the small base that it occupies at the moment.

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• The Ministry of Food Processing Industries (MoFPI) formulated Vision 2015 action plan –- trebling the size of the food processing industry, raising the level of

processing of perishables from 6% to 20%,- increasing value addition from 20% to 35%, and enhancing India’s

share in global food trade from 1.5% to 3%.

• Automatic approvals are provided for foreign investment and technology transfer in most cases.

• Units based on agri-products that are 100% export-oriented are allowed to sell up to 50% in the domestic market.

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• There is no import duty on capital goods and raw material for 100% export-oriented units.

• Earnings from export activities are exempt from corporate tax.• FDI in Indian food processing industry is allowed under automatic

route in agri-products, milk and milk products, and marine and meat products, except in the following cases :-

- Proposals requiring industrial license and cases where foreign investment exceeds 24% equity in units that manufacture items reserved for small-scale industries.

- Proposals in which foreign collaborator has a previous venture or tie-up in India as on January 12, 2005.

• The Government of India is actively promoting the concept of mega food parks and is expected to set up 30 such parks across the country to attract FDI

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• The Government of India has released total assistance of USD 23 million to implement the Food Parks Scheme.

• The Government of India, until now, approved 50 food parks for assistance across the country. The Centre has also planned for a subsidy of USD 22 billion for mega food processing parks.

• The Government of India has established 60 fully equipped Agri-Export Zones (AEZs), in addition to food parks, to provide a boost to agricultural and food processing exports.

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• Besides attracting FDI through schemes like Mega Food Park, the Government has also extended several fiscal incentives to enhance FDI in food processing sector like:-– Full exemption from excise duty been given to specified

equipments for preservation, storage or transport of apiary, horticultural, dairy, poultry, aquatic & marine produce and meat and processing thereof.

– Project imports status, with concessional rate of basic customs duty of 5% has been granted to initial setting up or substantial expansion of cold storage, cold room (including farm pre-coolers) for preservation or storage or an industrial unit for processing of agricultural, apiary, horticultural, dairy, poultry, aquatic & marine produce and meat. 

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– Truck Refrigeration units manufacturing refrigerated vans/trucks have been fully exempted from basic customs duty. 

– Exemption from service tax has been provided to services relating to Erection, Commission or installation' of

• Mechanized Food Grain Handling Systems etc. • Equipment for setting up or substantial expansion of

cold storage; and• Machinery/equipment for initial setting up or

substantial expansion of units for processing of agricultural, dairy, poultry, aquatic, marine or meat products.

– The scope of exemption of service tax has been expanded to include food grains and pulses in addition to fruits, vegetable, eggs and milk.

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• Rapidly growing food processing industry in the country requires availability – matching number of skilled manpower to sustain it on

a continuous basis– application-based research to meet the ever increasing

industry and the consumer demand. • The Ministry of Food Processing Industries through its

scheme is assisting application-based projects, which would directly benefit the food processing sector.

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• The Ministry provides financial assistance as grant-in-aid under its scheme of Human Resource Development for – Creation of Infrastructure facilities for running

degree/diploma curses in food processing sector, – Entrepreneurship Development Programme, – Setting up of Food Processing Training Centres and – Training at Recognised National/State Level Institutions

sponsored by Ministry of Food Processing Industry (MoFPI)• For promoting research work in the sector, Ministry provides

financial assistance as grant-in-aid under its scheme for Research and Development in Processed Food Sector. The Financial Assistance is given as grant-in-aid to various Universities, IITs, Central/State Government Institutions, Public Funded Organizations etc.

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• Till the year 2005, thirteen different laws were applicable on the food and food processing sector.

• In order to rationalize the multiplicity of food laws, a Group of Ministers (GoM) was set up to suggest legislative and other changes to formulate integrated food law, to be a single reference point in relation to regulation of food products

• Based on the recommendations of the GoM the ministry of food processing enacted the Food Safety & Standards Act (FSSA), 2006.

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• Salient features of the act: – FSSA will be aided by several scientific panels and a central

advisory committee to lay down standards for food safety. These standards will include specifications for ingredients, contaminants, pesticide residue, biological hazards and labels

– The law will be enforced through State Commissioners of Food Safety and local level officials

– Everyone in the food sector is required to get a license or a registration which would be issued by local authorities.

– Every distributor is required to be able to identify any food article to its manufacturer, and every seller to its distributor. Anyone in the sector should be able to initiate recall procedures if he finds that the food sold had violated specified standards.

• Agriculture Produce Marketing Act Agriculture Produce Marketing Act is enacted by different states.

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• The most significant initiative being proposed during 12th Plan is launching of a National Mission on Food Processing (NMFP).

• This would be decidedly a paradigm shift in the Ministry’s approach and is driven by the need to make food processing truly a national initiative.

• The proposed structure of the mission would be a three-tier structure at National, State and District levels.

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• Objectives of NMFP are as follows:-– To spread the message of significance of food processing

for enhancing agricultural productivity and farmers income in the country.

– To assist the state governments in creating requisite synergy between their agricultural plans and development of food processing sector.

– To assist the state governments in addressing both institutional and infrastructural gaps along the Value Chains and thus create efficient Supply Chains for agricultural produces.

– To promote initiatives for skill development, training and entrepreneurship which would meet needs of both post-harvest management and food processing industry.

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– To assist MSMEs in setting up/modernization of food processing units by providing need based support in terms of capital/technology/skill etc.

– To assist food processing industry to meet requisite standards in terms of food safety laws and market demand, both domestic and international.

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• Five Guiding Principles of the NMFP– Organizing the unorganized food processors, including

Self-Help Groups, to help them reap advantages of Mission initiatives.

– Ensuring advantages of programmes/schemes/ institutions/ infrastructure of NMFP reach Micro and Small Enterprises on preferential basis.

– Dedicated, professional, sensitive and accountable support structure to initiate and implement the Mission initiatives in a transparent manner.

– Mission initiatives to be shaped and driven by proposed beneficiaries.

– Adoption of best practices for scaling up programmes/initiatives.

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• The Indian food processing industry is divided into agri products, milk and milk products, and meat, poultry and marine products.

• In agri products - India is the largest producer of several fruits in the world such as banana, mango and papaya etc. It is also the second-largest producer of vegetables such as brinjal, cabbage and onion. India is also the second-largest producer of rice, wheat, sugar and cotton.

• In milk and milk products - India is the largest producer, accounting for 20% of the global production of these. In terms of livestock, the country has the largest livestock population in the world, with 98.7 million buffaloes and 176 million cows, as per 2008 estimates.

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• Many big Indian players have invested in the food processing sector. Some of them include ITC, HLL, Cargill, Venky’s India, Godrej, Marico, Priya Foods, MTR, Surya Food & Agro and Haldiram’s.

• Some of the companies that are active in the organised food retail domain include ITC, Bharti, Reliance, Aditya Birla Group, Subhiksha and the Future Group. Almost 70% of the sector is dominated by the unorganised and small-scale players, indicating the huge potential inherent in the Indian food processing sector

• The major products produced in this industry comprises of canned juices, chips, chocolates, aerated drinks, etc.

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• There are 12 products reserved for manufacturing by the small-scale sector. These products include bread, pastries, confectioneries, rapeseed oil, mustard oil, sesame oil, groundnut oil, sweetened cashew nut products, ground and processed spices other than spice oil and oleo resin spice, tapioca sago and tapioca flour.

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• The future of the Indian farmer depends on the success of the food industry as India’s prosperity is predominantly linked to the growth of incomes in the agrarian sector of the economy.

• Increasing liberalization of the economy has tried to the lift the protection that the food and agriculture sector once enjoyed in the country, exposing the sector both to the opportunities and challenges of the global food economy.

• The market forces are compelling the Indian agriculture producers to increase the quality of their farm produce while continuing to maintain their cost competitiveness in order to be table to compete effectively in the global food market.

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• Even in the domestic market, rising per capita for processes and convenience foods. Increasing consumer awareness about health and hygiene has shifted the focus of the market to “safe” foods.

• The Indian food-processing sector is undergoing a veritable revolution – all the way from the place to the plough

• Indian food processing industry has seen significant growth and changes over the past few year, driven by changing trends in market’s consumer segments and regulations.

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• These trend, such as changing demographics, growing population and rapid urbanization are expected to continue in the future and, therefore, will shape the demand for value added products and thus for food processing industry in India.

• The Government of India’s focus towards food processing industry as a priority sector is expected to ensure policies to support investment in this sector and attract more FDI.

• India, having access to vast pool of natural resources and growing technical knowledge base, has strong comparative advantages over other nations in this industry.

• The food processing sector in India is clearly an attractive sector for investment and offers significant growth potential to investors.

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• Economic Survey of India-2010-2011• http://www.cci.in/pdf/surveys_reports/food-processing-

india.pdf• http://www.indiainbusiness.nic.in/industry-infrastructure/

industrial-sectors/food-process.htm• http://www.investindia.gov.in/?q=food-processing-sector• http://www.cci.in/pdf/surveys_reports/food-processing-

india.pdf• http://dipp.nic.in/English/default.aspx• http://dipp.nic.in/English/Policies/FDI_Circular_01_2012.pdf