Union Budget 2020: Expectations & Reactions
The Union Budget 2020 was one of the most anticipated one in the recent history. From tweaks in long
Purpose of this research: We dive into extensive research on different business verticals with the mission to engage general audience and firms with the latest and in-depth overviews of these verticals so as to assist them in steering their businesses through a much knowledge and research-based approach. This research, we feel, connects best to SMEs looking to comprehend the sector details, its schemes, and the existing scenario. We also feel that this in-depth article diving deep into industry size, challenges, and strategic solution outlines of the issues—would also serve best to students, researchers, and other professionals belonging to the agricultural and food processing industry.
India is the world’s largest agrarian economy with 14.35% contribution to GDP. It is also the world’s 3rd largest producer of food. A bumper harvest of winter crops and higher production in livestock and fisheries sectors aided a 5.3% growth in agriculture GDP in the first quarter of 2018-19, up from 3% in the same period last year. Production of rice, wheat, coarse cereals and pulses registered growth rates of 15%, 1.2%, 15.6% and 17.3%, respectively, during the Rabi or winter season in the agricultural crop year of 2018-19. About 45% of the gross value added or GVA in the agriculture sector was contributed by livestock, forestry and fisheries, which registered a combined growth rate of 8.1% in the first quarter of 2018-19. Agriculture GDP grew at 3.4% in 2017-18, lower than 6.3% in the previous year.
Food processing sector is indispensable for the overall development of an economy as it provides a vital linkage and synergy between the agriculture and industry. It helps to diversify and commercialize farming; enhance income of farmers; create markets for export of agro foods as well as generate greater employment opportunities. Through the presence of such industries, a wider range of food products could be sold and distributed to the distant locations. The term ‘food processing’ is mainly defined as a process of value addition to the agricultural or horticultural produce by various methods like grading, sorting and packaging.
The Global Processed Food Industry is valued at US $ 3.2 trillion and accounts for over 3/4th of global food sales. Despite the large size of the industry, only 6% of the processed food is traded the world over as compared to bulk agricultural commodities where 16% of produce is traded. Growth of the sector has been the highest in developed economies, especially across Western Europe, North America, Japan and Australia. USA is the single largest consumer of processed food and accounts for 31% of global sales. The food processing sector has seen substantial growth in developing economies with increase in GDP, per capita income and the resultant changes in lifestyle.
The Indian food processing industry stands at $135 billion and is estimated to grow with a CAGR of 10 per cent to reach $200 billion by 2015. The food processing industry contributed 7% to India‘s GDP. The industry employs around 13 million workers directly and about 35 million indirectly. The industry is segmented into sectors namely, milk and allied products (dairy), meat and poultry, seafood, bakery and confectionery, fruit and vegetables, grain, pulses and oilseeds (staple) products, alcoholic and non-alcoholic products (beverages), and packaged foods. The classification is not distinct as many processed products overlaps different segments.
India has the second largest arable land of 161 million hectares and has the highest acreage under irrigation. Next to China, India ranks second largest food producer in the world and has the potential to immerge the biggest with its food and agricultural sector. India has diverse agro-climatic conditions and has a large and diverse raw material base suitable for food processing companies. Its strategic geographic location (proximity of India to markets in Europe and Far East, South East and West Asia) provides a lot of inherent advantages to the country.
In food and agro processing sector, West Bengal is one of the three front running states in India.Fruits, Vegetables and Cereals grave in abundance in West Bengal. The state accounts 30% of potatoes, 27% pineapples, 12% of bananas and 16% of India’s rice production. Additionally, fruits like mangoes, papayas, guava and jackfruit and vegetables like tomatoes, cauliflowers cabbage, eggplant and pumpkin are available in plenty. Thus, West Bengal in terms of agriculture is the largest producer of rice, pineapple, vegetables and fruits in the country, second largest producer of potatoes and lychees.
Agro and food processing industries form a very important part of the state’s economy. The West Bengal government is setting up a number of policies and plans to focus on the selected areas like vegetables, fruits, fisheries, rice, poultry, dairy and floriculture. Some of these plans includes more money involvement in agriculture, encourage private entrepreneurship for processing of fruits, vegetables & horticulture items etc. The State Govt. is encouraging the farmers for mechanization through the use of modern agriculture implements and machines form timely farm operation and reduction in the cost of production.
In the state, the main processed products in the Fruits and vegetables category are jams, jellies, pickles, sauce, canned sliced fruits and squash.
Agro Food parks are being developed in the state with the intention of providing support to small & medium entrepreneurs by assisting them financially in setting up capital intensive facilities like cold storages, warehouses, quality control labs, effluent treatment plants etc.
High level of wastage of agricultural produces is primarily on account of the inherent disadvantages faced by the sector. This sector is characterized by preponderance of small farmers, small scale & tiny processors, outdated technology, poor infrastructure and a maze of middle men. Therefore, this sector needs support in terms of creation and strengthening of infrastructure which individual farmers and processors will not be in a position to create and sustain. Further, there is also a need for strengthening R&D activities in food processing sector for innovation of technology which suits localneeds, popularization of appropriate technology, skill development and creation of an institutional framework supportive of the industry. The major challenges are investments at different points of the supply and value chain, proper research, farm and lab connectivity, upgradation of technology, increase in farm holding, skill and manpower training, backend and front-end integration and cold chain integration.
Pradhan Mantri KisanSampada Yojana is a flagship programme of the Indian Government for boosting investment in food processing. Rs 1313.08 crore has been allocated in the current budget 2018-19. This scheme is expected to benefit two million farmers and generate 530,500 direct and indirect jobs in the country by 2019-20.In 2016, the ministry had introduced an umbrella Scheme Called “Agro-Marine Processing and Development of Agro-Processing Clusters” or SAMPADA, which was proposed to be implemented with an allocation of Rs 6,000 crore for the period of 2016-20.In September 2017, the ministry released a notice on renaming SAMPADA scheme. The schemes that were to be implemented under SAMPADA will now come under “Pradhan Mantri Kisan SAMPADA Yojana”. Under SAMPADA, the general areas would get 50 per cent of the project cost as grant-in-aid and the hilly and remote areas like the north-eastern region would receive 75 per cent of the project cost.
The scheme aims at development of modern infrastructure and common facilities to encourage group of entrepreneurs to set up food processing units based on cluster approach by linking groups of producers/ farmers to the processors and markets through well-equipped supply chain with modern infrastructure. Each agro processing clusters under the scheme have two basic components i.e. Basic Enabling Infrastructure (roads, water supply, power supply, drainage, ETP etc.), Core Infrastructure/ Common facilities (ware houses, cold storages, IQF, tetra pack, sorting, grading etc) and at least 5 food processing units with a minimum investment of Rs. 25 crores. The units are set up simultaneous along with creation of common infrastructure. At least 10 acres of land is required to be arranged either by purchase or on lease for at least 50 years for setting up of Agro Processing Cluster.Agro processing clusters are set up by Project Execution Agency (PEA)/ Organisation such as Govt./ PSUs/ Joint Ventures/ NGOs/ Cooperatives/ SHGs/ FPOs/ Private Sector/ individuals etc. and are eligible for financial assistance and subsidies subject to terms and conditions under the scheme guidelines.
All states apply for creation of infrastructure under this scheme. West Bengal submitting 6 applications as on August 2018. However, none have been approved. 13 mega food parks have been operationalised in states such as Karnataka (Tumkur), Punjab (Fazilka), West Bengal (Murshidabad), etc. in the last four years. These mega food parks have generated Rs 3,34,854 jobs in four years and benefited 20,725 farmers. Additional 15 mega food parks will be operational by end of the fiscal, creating jobs for around 4 lakh persons. With regard to cold chain and value-added infrastructure, 85 projects have been operationalised during the past four years. However, the mega food park at Jangipur in Murshidabad has encountered operational challenges as a result of the state government’s apathy in investing Rs 1 crore in the project. The unit is facing some issues but intervention by the State can resolve them. Majority of the funds are being taken away by Maharashtra, Gujarat, Andhra Pradesh and Karnataka. Under the scheme we have a quota for each State. There have been so many proposals from Maharashtra, Gujarat, Andhra Pradesh and others, but none has been received from Bengal.
The NBFC, which is likely to be named Agro-Processing Financial Institution would exclusively cater to the needs of the food processing sector and is expected to be operational by the year-end. It would entail an investment of about Rs. 2,000 crores. The government will pick up 20-per cent entity and invest a seed fund of close to Rs. 400 crores. The remaining will come from the private sector. While there is a huge growth potential for the sector, access to bank funds has been difficult. This is primarily because banks fail to understand the risk assessment. Only about 10 per cent of India’s farm produce is currently processed as against 60-70 per cent globally, leading to huge wastages. Other than this, funding support is provided by NABARD.
According to NABARD, during the five-year period of 2011-12-2016-17, the ground level credit under the priority sector has grown 3 times from Rs. 28602 crores to Rs. 86045 crores. The outreach of the banking sector has been increasing including credit absorption of the State. The potential estimated for agro and food processing sector is Rs. 2896.76 crores which includes units of grain processing, fruits and vegetables processing, edible oil extraction, dairy products and fish and meat items.
Being a surplus production State for both perishable and non-perishable agricultural produces, adequate storage infrastructure facilities is very important. As of now, 459 cold storages with a combined capacity of 76 lakh MT, of which 54.45 lakh MT storage capacity is only for potatoes (400 potato cold storages and 59 multipurpose cold storage units) are operating in the State. This wide gap in storage infrastructure against the requirement opens up opportunities for both public and private investment to create post-harvest infrastructure for agricultural produces.
The State Government has identified 6 agri-export zones in the State, Malda for Mango and Litchi, Siliguri for Pineapple, Hooghly for Potato, North 24 Parganas for vegetables and Darjeeling for Tea to provide target-oriented boost to production of such crops wherein the State has inherent advantages. 12 food parks are currently being set up in the State. Packing houses and multipurpose cold storages are also being built.
West Bengal is a predominantly agrarian state with agriculture contributing 18.8% to the State’s GSDP in 2014-15. It is one of the major producers of food in India having a strong agri-horticultural resource base for a thriving food processing industry. The state is abundant in perennial rivers and large water bodies and coastal areas which is suitable for pisciculture and marine fish production. The state has favourable agro-climatic conditions with six agro-climatic zones conducive for cultivation of a multitude of crops, vegetables and fruits round the year. Paddy, wheat and jute are the major crops produced in West Bengal. The state is a major producer of fruits (such as Mango, Pineapple, Litchi, Mandarin Orange, and Guava) and vegetables (such as Tomato, Cabbage, Cauliflower, Brinjal, Cucurbits and Okra). Major spices produced are Ginger, Chilli, Turmeric, Garlic and Coriander. The state also has a large and vibrant livestock population significantly contributing towards the production of Milk, Eggs, Fish and Meat. As of 2015-16, the State has a total production of 17,776 thousand tonnes of food grains,the total production of fruit stands at 3,517 thousand tonnes. The State is the 2ndlargest producer of vegetables in India with a total production of 22,825.45 thousand tonnes. West Bengal Ranks 1 in production of Brinjal and Cabbage; Ranks 2 in production of Potato. It isthe 2nd largest producer of Fish and Meat, 2ndlargest producer of Tea and the largest producer of Jute in the country.
As per the Annual Survey of Industries- 2014-15, there are 1, 808 registered food processing units in the state.
At 5.9 mn tonnes installed capacity, the cold storage capacity in West Bengal is the 2nd largest in India. Further, the state has nine cold chain units under MoFPI, and 15 major clusters.
Thus, being such an agri-producing hub of the nation, much of it is also exported. Recently, mangoes are being considered for export to Europe. Vegetables, Tea, coffee, spices, fish cereals, are some of the exporting items. A lot of this is exported to Bangladesh. West Bengal’s top export destinations are mentioned below which covers both agricultural as well as other products.
There exists a lot more potential and opportunity for the State to expand its export market. Being an agrarian economy, it thrives in production of food items. Like various other ways, formation of clusters is an important method for enabling better production mechanisms and gathering fund support. This could further facilitate marketing and reach of the products both domestically and internationally.
Thus, we note that although Bengal has such a diverse and rich cultivation base along with the developing infrastructure for creating processing units and clusters which is a step forward in the food chain, infrastructure development for the same and awareness amongst farmers are yet quite low. The Centre provided scheme for agro-processing industries are not being explored much by West Bengal farmers and processing units. The scheme provides financial support and subsidy to encourage production. Processing of raw food into packaged ones would enable capturing an even bigger market. In this context, designing a recommendation strategy to suggest how this can be facilitated and what would be the benefits of it would be the focus area. Alongside, an export plan for agricultural produces of the State could also be prepared which would identify and highlight the potential markets and increased volumes of exports in a export earning model.
As described above, it is clear that there exists a huge scope for boosting this sector. Based on our research we identified certain areas, addressing which could help achieve better results in agro production and processing industry.
The highlight, therefore, remains to increase cultivation, reduce losses, generate revenues and capture a larger market. Alongside, identify means to provide financial assistance and credit facility to help farmers in mechanized farming with the use of infrastructural facilities. Also, look for newer options such as post-harvest management, value chain management and finally exportability of commodities with an aim to increase income utilizing central schemes and receiving input benefits like subsidies for production and cluster formation.
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