Food Processing Industry- Linkages and Scope and significance

 Backward Linkage: It means the connectivity of the FPIs with sources of raw material supply. For example, supply of raw material like tomatoes to a ketchup manufacturer.
Forward Linkage: It means the connectivity of FPIs with the markets through distribution network comprising of physical infra like storages, road and rail network etc.

Significance of Linkages

• It encourages and enables farmers to grow products of appropriate quality.
• It helps the farmers fetch appropriate and remunerative return for their produce especially the marginal and medium farmers.
• It helps to reduce the food wastage especially of perishable products with low shelf life like fruits, vegetables, dairy products etc.
• It ensures timely delivery of food products to the consumer markets.
• High quality products and better infrastructure results in cost saving and enhanced efficiency.
• These links provide a level playing field for all stakeholders and aid in facing competition.
• Helps to improve hygiene and food safety standards leading to greater acceptability of processed food domestically and in international market.

Existing Challenges in Establishing Robust Linkages

• Small and dispersed marketable surplus due to fragmented holdings
• High seasonality of raw material production
• Large number of intermediaries
• Poor infrastructure facilities like cold storage, transport facilities, electricity etc.
• Industry is highly fragmented and is dominated by the unorganized sector
• Substandard levels of processing industries
• Inadequacy of information with farmers and small processors                                                                                                                                       • Multiplicity of legislation leads to contradictions in specifications, conflicting approach, lack of co-ordination and administrative delays.  For instance, manufacturers of packaged food products such as jams and squashes are obligated to comply with quality standards and label declarations prescribed under multiple legislations, such as The Standards of Weights & Measures (Packaged Commodities) Rules, Prevention of Food Adulteration (PFA) and Fruit Products Order (FPO)
• Anomalies in domestic food laws with international food safety standards
• Under developed food testing network

Scope and Significance of the Food Processing Sector in India

Scope of Food Processing sector encompasses the existing scale of operations/size of industry as well as the future potential to grow. The scope can be gauged from the following:

• In 2016, Food Processing industry constituted more than 8% to India’s GDP through manufacturing.
• During FY11–16, India's exports of processed food and related products (inclusive of animal products) grew at a CAGR of 11.74 per cent, reaching US$ 16.2 billion.
• The Indian food and grocery market is the world’s sixth largest, with retail contributing 70 per cent of the sales.
• It is the fifth largest industry in our country in terms of production, consumption, export and growth.
• The food industry, which is currently valued at US $39.71 billion, is expected to grow at a Compounded Annual Growth Rate (CAGR) of 11 per cent to US$ 65.4 billion by 2018.
• India's organic food market is expected to increase by three times by 2020.
• India is a country with a population of over 1.25 billion. With rising middle class having a considerable disposable income, the domestic market offers significant demand opportunities.
• 100% FDI is allowed in the sector. The Confederation of Indian Industry (CII) estimates that this sector has the potential to attract as much as US $33 billion of investment over the next 10 years and also to generate employment of nine million person-days.
• India ranks no. 1 in the world in the production of milk, ghee, ginger, bananas, guavas, papayas and mangoes. Further, India ranks no. 2 in the world in the production of rice, wheat and several other vegetables & fruits. If the surplus production of cereals, fruits, vegetables, milk, fish, meat and poultry, etc. are processed and marketed both inside and outside the country, there will be greater opportunities for the growth of the sector.

By: ABHISHEK KUMAR GARG