UPDATED VALUE ADDITION MATERIAL 2024

INDIAN ECONOMY

FOOD PROCESSING AND RELATED INDUSTRIES IN

INDIA–SCOPE AND SIGNIFICANCE, LOCATION,
UPSTREAM AND DOWNSTREAM REQUIREMENTS,
SUPPLY CHAIN MANAGEMENT

AHMEDABAD BENGALURU BHOPAL CHANDIGARH DELHI GUWAHATI HYDERABAD JAIPUR JODHPUR LUCKNOW PRAYAGRAJ PUNE RANCHI
 CONTENTS
1. Food Processing Industry ������������������������� 2 8. Policy Initiatives and Measures taken by
the Government ����������������������������������������� 9
2. Evolution of the Food Processing Sector
in India ��������������������������������������������������������� 3 8.1. Schemes related to Food Processing
Industries ���������������������������������������������������� 10
3. Location of food processing industries in
India ������������������������������������������������������������� 3 8.2. Recent Developments ��������������������������� 15

4. Supply Chain of the Food Processing 8.3. Challenges that still remain despite
Sector ����������������������������������������������������������� 3 Government Initiatives �������������������������16

4.1. Upstream and Downstream 8.4. Suggestions and Way Forward ��������� 17
Requirements �������������������������������������������� 4
9. SWOT Analysis of the Food Processing
4.2. Backward and Forward Linkages ������ 4 Industry in India ��������������������������������������� 18

5. Scope and Significance of the Food 10. Previous Year UPSC Mains Questions �� 18
Processing Sector in India ������������������������ 6
11. Previous Year Vision IAS GS Mains Test
6. Potential of Processed Food Sector in Series Questions �������������������������������������� 19
India ������������������������������������������������������������� 6

7. Challenges faced by Food Processing

Industry in India ����������������������������������������� 8

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1. Food Processing Industry Student Notes:

The food processing industry involves the transformation of raw agricultural products into
consumable food items through various physical, chemical, and mechanical processes. This
sector plays a crucial role in enhancing the shelf life, safety, and quality of food, thus meeting the
demands of a growing global population.

Why Food Processing Industry?

The Food Processing Industry all over the world provides vital linkages between the two
important pillars of the economy- agriculture and Industry. Thus, it has a direct impact on the
lives of the people as well as the environment. The significance of FPI can be understood through
the following points:
• Reducing food wastage: By utilizing surplus or imperfect produce, food processing helps
reduce food wastage, contributing to sustainable agricultural practices and resource
conservation. UN estimates that more than one-third of food is wasted globally. Similarly,
NITI Aayog estimated annual post-harvest losses of close to Rs. 90,000 crore in India.
• Reduce malnutrition: Fortification of processed foods with vitamins and minerals raises the
nutrition levels of the population.
• Preservation: Food processing techniques such as canning, freezing, and dehydration help
in preserving perishable foods for extended periods and prevent the spoilage due to fungus,
bacteria and pests.
• Employment generation: The FPI sector provides direct and indirect employment
opportunities as it is labor as well as technology-intensive sector.
• Increasing farmer income: As the demand for processed food increases, so will the demand
for raw farm materials, and thus the income of the farmers will increase.
• Enhanced Food Safety: Food processing involves various safety measures like pasteurization
and sterilization, which eliminate or reduce harmful microorganisms, ensuring food safety
and minimizing the risk of foodborne illnesses.
• Crop Diversification: With a growing market, farmers will be incentivized to grow a variety
of crops, practice mixed farming etc.

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2. Evolution of the Food Processing Sector in India Student Notes:

3. Location of food processing industries in India

There are estimated 25-lakh unorganized and unregistered micro foods processing enterprises in
the country, With 7% of investment in plant & machinery, the unorganized enterprises contribute
of 74.3% of employment (a third of which are women), 10% of output and 27% of value addition
in the sector. Nearly 66 per cent of these units are located in rural areas and about 80 per cent
of them are family-based enterprises.
The organized sector with nearly 40,000 units accounts for 93% of the plant & machinery in the
sector, in value terms. This segment accounts for 26% of employment and contributes around
90% of output and 72% GVA.
Most of the food processing factories are concentrated in the coastal states due to accessibility
to marine food processing. Major coastal states include: Andhra Pradesh, Maharashtra, Karnataka,
Gujarat, West Bengal etc. Major non-coastal states include: UP, Punjab, Haryana etc.

4. Supply Chain of the Food Processing Sector

A supply chain is a network between suppliers (farmers) of raw material, company (food
processor) and distribution network to market the finished products. Supply chain represents the
steps it takes to get the product or service to the customer.

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The different stages of processing of manufactured food products are as follows: Student Notes:

4.1. Upstream and Downstream Requirements

Upstream operations: It refers to the initial stages of the supply chain, where raw materials are
sourced, acquired and transported to manufacturing facilities. This stage involves activities such
as supplier selection, procurement and inventory management. Efficient upstream operations
play a vital role in ensuring a continuous and reliable supply of raw materials.
Upstream requirements include:
• Accessibility to raw materials.
• Modern extraction techniques.
• Good linkages with farmers.
• Storage facilities for raw materials like Grains, Meat, and Fish.
• Quality testing facilities.
• Transport facilities.
• Work force
Downstream operations: It encompass the final stages of the supply chain, where finished
products are distributed to customers. This stage involves activities such as warehousing,
transportation and order fulfillment. Efficient downstream operations are crucial for maintaining
timely product delivery, customer satisfaction and a competitive edge in the market.
Downstream requirements include:
• Latest processing techniques.
• Latest processing machinery.
• Quality testing facilities.
• Organized retail stores for faster distribution.
• Work force.

4.2. Backward and Forward Linkages

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.

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Forward Linkage: It means the connectivity of FPIs with the markets through distribution network Student Notes:
comprising of physical infra like storages, road and rail network etc.

Sideways Linkage: Sideways linkages are mostly derived from the use of by-products and waste products
of the main base industrial activity. E.g.- Many food processing industries using agricultural raw materials
produce waste that can be used further in production of fuel, bio-fuels, paper pulp and fertilizer.

Significance of Linkages:
For farmers:
• It helps farmers fetch remunerative return for their produce especially the marginal and
medium farmers.
• It encourages and enables farmers to grow products of appropriate quality.
For consumers:
• It ensures timely delivery of food products to the consumers.
For Industry:
• It helps to reduce food wastage especially of perishable products like fruits, vegetables, dairy
products etc.
• 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.
• Under developed food testing network.

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5. Scope and Significance of the Food Processing Sector in Student Notes:

India
With India moving from a position of scarcity to surplus in terms of food production, the
opportunities for increasing food processing levels are innumerable.
The scope can be gauged from the following:
• The Food Processing sector constituted nearly 10.54 per cent and 11.57 per cent of GVA in
Manufacturing and Agriculture sector respectively in 2020-21 (at 2011-12 prices).
• India is a country with a population of over 1.4 billion. With rising middle class having a
considerable disposable income, the domestic market offers significant demand
opportunities.
• 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 is one of the largest food producing countries in the world (refer to the infographics). It
presents huge opportunity to the FP sector.

6. Potential of Processed Food Sector in India

The food processing market in India is a sunrise Industry with high potential for growth, which
can be witnessed through following:
• Demand: With a population of more than 1.34billion individuals and food constituting a
major part of the consumer’s budget, this sector has huge growth potential. sIndia’s
consumer spending to grow to $6 Tn by 2030.
• Export Competitiveness: We have a comparative advantage in exports because the cost of
raw materials is cheap in India as compared to other countries.
o The share of processed food exports in agri-exports has increased substantially from 13.7%
in 2014-15 to 25.6% in 2022-23.
• Raw material: Being an agrarian economy, there is sufficient supply of raw material in India.
India has emerged as world leader in the production of a variety of fruits like mango, banana,
guava, papaya, sapota, pomegranate, Lime & aonla and is the second largest producer of
fruits and vegetables.
• Favourable Government Initiatives: The Indian government has been actively promoting the
FPI through various schemes
and policies such as such as
Production Linked Incentive
Scheme for Food Processing
Industry (PLISFPI), Pradhan
Mantri Formalisation of Micro
Food Processing Enterprise
(PM FME).
• Scope for development: While
the industry is large in terms of
size, it is still at a nascent stage
in terms of development.
o According to a Deloitte
study on Level of Food
Processing in India,
processing levels were at
2.7% for vegetables, 4.5% for fruits, 15.4% for fishery, 21.1% for milk, and 34.2% for meat
in 2020-21.

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• Employment generation: It has the potential to generate non-farm employment, especially Student Notes:
in rural areas. It would reduce disguise unemployment by providing productive employment
opportunities. This industry is expected to add 9 million jobs by 2024.
• Investments: With 100 per cent FDI allowed into the sector through the automatic route by
Government of India & ease of doing business, India's food processing sector is attracting
global investors, which serve as a catalyst to boost agricultural income and employment.
o The total FDI received in the food processing sector from Apr 2000 till Dec 2023 was
$12.46 Bn which is 1.87% of the total FDI Equity inflow.
• Forward-Backward Linkages: FPI has potential to drive the rural economy as it brings about
synergy between consumer, industry and agriculture. A well-developed food processing
industry is expected to increase farm gate prices, reduce wastages, ensure value addition,
promote crop diversification, generate employment opportunities as well as export earnings.
• Food security: FPI sector is capable of addressing critical issues of food security and providing
wholesome, nutritious food to our people.

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7. Challenges faced by Food Processing Industry in India Student Notes:

• In formalization in Food Processing Industry: The food processing industry has a high
concentration of unorganized segments, representing almost 75% across all product
categories. This causes the inefficiencies in the existing production system.
• Lack of efficient supply chain infrastructure: Inadequate expansion of processing and
storage capacity commensurate with agriculture production have been identified as the
main reasons for higher wastages, higher cost of production, lower value addition in food
processing sector.
• Lower Value addition: India despite being one of the major producers of agri-commodities,
the level of food processing and value addition continues to remain low affecting
competitiveness & export performance and income of farmers.
• Private Participation:Cold Chain infrastructure involves heavy investment with long payback
period which is beyond the capacity of individual food processors. High cost and inadequate
credit impact investment from private players in food processing sector.
• Inadequate linkage of processors, exporters and bulk purchasers with farmers: Lack of
coordination results in mismatch between the requirements of industry and supply of agri-
produce by the farmers.
• Formal Credit Facility: Food processing units, largely operating in MSME segment, face
problem in their access to bank credit due to seasonal and perishable nature of the
commodities handled by these units.
• Bureaucratic hurdles: Multiple clearances are required for setting up of food processing
units. The small processors are also required to go through the same processes as is
applicable to larger units. Availing permission for Change in Land Use (CLU), environmental
clearance, water and power connections are not only time consuming but also costly.
• Labour Laws: Food processing units are required to comply with labour laws in relation to
lay-off, retrenchment and closure even though these units run seasonally which adversely
affects the commercial viability of the processing units.

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• Marketing of processed food: It is a major problem faced by food processors particularly for Student Notes:
the micro and small processors. Given the scale of operation, individual units are unable to
invest in marketing and branding impacting performance of the sector.
• Lack of awareness: Processors face difficulty in availing benefits under schemes being
implemented by different agencies of central and state governments Due to lack of
awareness and absence of appropriate knowledge sharing & guidance forum.
• Inadequate training: Sector specific Entrepreneurship Development training and Incubation
Services are weak inhibiting growth of the sector.
• Seasonality Of operations- These industries do not operate the entire year due to seasonality
of agriculture. But in developed countries, industries run all year round due to technological
advancement which enables storage of produce.
• Co-ordination in Research: A number of research institutes are undertaking R&D for
product, process, and technology improvement & development, however,there is lack of
coordinated action on research and information dissemination of research output to the
industry.
• Limited ability to control quality and safety: The sheer number of players, especially in the
large unorganized segment, involved in the food value-chain, makes implementation of
quality and safety norms difficult. This has led to practices such as milk adulteration and use
of carbide for fruit ripening etc.

8. Policy Initiatives and Measures taken by the Government

In order to facilitate and harness the growth potential of this sector, the government has initiated
extensive reforms.
• Most of the processed food items have been exempted from the purview of licensing under
the Industries (Development and regulation) Act, 1951, except items reserved for small-scale
sector and alcoholic beverages.
• Food processing industries were included in the list of priority sector for bank lending in 1999.
• The Government of India has relaxed foreign direct investment (FDI) norms for the sector,
allowing up to 100 per cent FDI in food product e-commerce through automatic route.
o Automatic approval for foreign equity up to 100 per cent is available for most of the
processed food items except alcohol, beer and those reserved for small-scale sector
subject to certain conditions.
• Full repatriation of profits and capital has been allowed.
• Zero duty import of capital goods and raw material for 100 per cent export oriented units.
• Full duty exemption on all imports for units in export processing zones has been done.
• In the Interim Budget 2024-25, the Ministry of Food Processing Industries was allocated a
total Budget of Rs. 3,290 crores (~US$ 396 million), an increase of ~13% over revised
estimates for fiscal year 2024.
• Food map of India has been uploaded on the website of the ministry of FPI to indicate surplus
and deficit areas. Further, Investor’s portal has been launched by the ministry to promote
investment in FPI to give information about potential areas.
• APMC Reforms have been brought for promotion of contract farming which subsequently
will boost supply of raw materials to the FPIs.
• Agriculture Export Zones are being established since 2001. They will function similar to
Special Economic Zones (SEZs) but only for agriculture products. 16 AEZs have been
established with an objective to export agri-products. Tax rebates are more in AEZs as
compared to in Mega Food Parks.o In all 60 Agri Export Zones (AEZ) were notified
by the Government till 2004 - 05.
• The Food Safety and Standards Authority of India (FSSAI) is investing to strengthen the food
testing infrastructure in India, by upgrading 59 existing food testing laboratories and setting
up 62 new mobile testing labs across the country.

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 o FSSAI under the Ministry of Health and Family Welfare has issued the Food Safety and Student Notes:
Standards (Food Product Standards and Food Additives) Regulations, 2011 and the Food
Safety and Standards (Contaminants, Toxins and Residues) Regulations, 2011 which
prescribe the quality and safety standards respectively for food products.
o Also, it has issued new rules for importing products, to address concerns over the entry
of sub-standard items and simplify the process by setting shelf-life norms and relaxing
labeling guidelines.
• The Indian Council for Fertilizer and Nutrient Research (ICFNR) has adopted international best
practices for research in fertilizer sector, which will enable farmers to get good quality
fertilizers at affordable rates and thereby achieve food security for the common man.

8.1. Schemes related to Food Processing Industries:

PM Kisan SAMPADA Yojana
It is a comprehensive package which will result in creation of modern infrastructure with efficient
supply chain management from farm gate to retail outlet. It will not only provide a big boost to
the growth of food processing sector in the country but also help in providing better returns to
farmers and is a big step towards doubling of farmers income, creating huge employment
opportunities especially in the rural areas, reducing wastage of agricultural produce, increasing
the processing level and enhancing the export of the processed foods.
The following schemes will be implemented under PM Kisan SAMPADA Yojana:
• Mega Food Parks
• Integrated Cold Chain and Value Addition Infrastructure
• Creation / Expansion of Food Processing & Preservation Capacities
• Infrastructure for Agro-processing Clusters
• Creation of Backward and Forward Linkages
• Food Safety and Quality Assurance Infrastructure
• Human Resources and Institutions
• Operation Greens
The Agro Processing Cluster Scheme under PMKSY
It is aimed at developing modern infrastructure and common facilities to facilitate the
establishment of food processing units based on a cluster approach. This involves connecting
groups of producers/farmers with processors and markets through a well-equipped supply chain.
Each agro-processing cluster includes Basic Enabling Infrastructure (such as roads, water supply,
power supply, drainage, ETP) and Core Infrastructure/Common facilities (including warehouses,
cold storages, IQF, tetra pack, sorting, grading) along with at least 5 food processing units
requiring a minimum investment of Rs. 25 crore (-US$ 3 million). The units are established
simultaneously with the creation of common infrastructure, requiring at least 10 acres of land
arranged either through purchase or lease for a minimum of 50 years.
Integrated Cold Chain and Value Addition Infrastructure" Scheme under PMKSY
It was launched to establish uninterrupted cold chain facilities from farm to consumer, including
pre-cooling, storage, and distribution. It encompasses various temperature-controlled storage,
packing, and transportation facilities for diverse products like horticulture, dairy, and meat.
Operation Greens
In the Union Budget 2018-19, a new initiative called "Operation Greens" was introduced,
modeled after "Operation Flood," with a budget of Rs. 500 crore (US$ 71.5 million). This scheme
was launched to boost Farmer Producers Organizations (FPOs), agri-logistics, processing facilities,
and professional management, focusing initially on Tomato, Onion, and Potato (TOP) value chains
since November 2018.

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As part of the "Aatmanirbhar Bharat Package" to revive the economy post the COVID-19 supply Student Notes:
chain disruptions, short-term measures under the scheme were extended from TOP crops to all
fruits and vegetables (TOTAL). Furthermore, in the Union Budget 2021-22 speech, the coverage
of long-term interventions, specifically Integrated Value Chain Development Projects initially
targeting TOP crops, was expanded to include 22 perishable crops.
Mega Food Park Scheme:
• Mega Food Parks Scheme was launched by the government in 2008. It provides financial
assistance up to 50 crores to setup modern infrastructure facilities for food processing
called Mega Food Parks. The primary objective of the Scheme is to provide modern
infrastructure facilities for the food processing along the value chain from the farm to the
market with a cluster based approach based on a hub and spokes model.
• It has 3 layers:
o At the centre, there is central processing centre (CPC) which is 80-100 acres. From here
the value-added product will either go to the domestic market or for exports.
o Around CPC, there are PPC (Primary Processing Centre) where works like sorting, grading,
pre-cooling, packaging etc. are done.
o Around PPC, CCs (Collection centres) are there working as aggregation and storage
centres which collect from farmers, middle-men, mandis etc.
• The Mega Food Park project is implemented by a Special Purpose Vehicle (SPV), which is a
Body Corporate, registered under the Companies Act. The government has sanctioned 41
food parks funded under the Mega Food Parks Scheme, 24 are operational and 17 are under
implementation as of Dec 2023.
However, the Mega Food Park Scheme has, however, been discontinued w.e.f. 01.04.2021
with provision for committed liabilities only.

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 Student Notes:

Scheme for formalization of Micro Food Processing Enterprises

The Union Cabinet has given its approval to a new Centrally Sponsored Scheme – “Scheme for
Formalization of Micro food processing Enterprises” for the Unorganized Sector on All India basis.
The Union Cabinet has sanctioned an outlay of Rs.10000 crore.
• The objective of the scheme is to
o Support the creation of global food manufacturing champions;
o Promote Indian brands of food products; I
o Increase employment opportunities for off-farm jobs;
o Ensure remunerative prices of farm produce and higher income to farmers.
• Features of the scheme
o Expenditure to be shared by the Government of India and States at 60:40.
o 2 lakhs of micro-enterprises are to be assisted with credit linked subsidy.
o The scheme will be implemented over a 5 year period from 2020-21 to 2024-25.
o It will follow a cluster approach.
o It will have special focus on perishables.
• Support for Individual micro-units:
o Micro enterprises will get credit-linked subsidy @ 35% of the eligible project cost with a
ceiling of Rs.10 lakh.
o The beneficiary contribution will be a minimum of 10% and balance from the loan.
o On-site skill training & Handholding for DPR and technical up-gradation.

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• Implementation strategy: Student Notes:
o Seed capital of Rs. 4 lakh per SHG will be given for the loan to members for working
capital and small tools.
o Grant will be provided to FPOs for backward/forward linkages, common infrastructure,
packaging, marketing & branding.
• Administrative and Implementation Mechanisms
o The Scheme would be monitored at Centre by an Inter-Ministerial Empowered
Committee (IMEC) under the Chairmanship of Minister, FPI.
o A State/ UT Level Committee (SLC) chaired by the Chief Secretary will monitor and
sanction/ recommend proposals for expansion of micro-units and setting up of new units
by the SHGs/ FPOs/ Cooperatives.
o The States/ UTs will prepare Annual Action Plans covering various activities for
implementation of the scheme, which will be approved by the Government of India.
o A third-party evaluation and mid-term review mechanism would be built in the
programme.
o The State/ UT Government will notify a Nodal Department and Agency for
implementation of the Scheme.
• Establishment of a National Portal & MIS
o A National level portal would be set-up wherein the applicants/ individual enterprise
could apply to participate in the Scheme.
o All the scheme activities would be undertaken on the National portal.
• Benefits catered by the Scheme
o Nearly eight lakh micro-enterprises will benefit through access to information, better
exposure and formalization.
o Credit linked subsidy support and hand-holding will be extended to 2 lakh micro-
enterprises for expansion and up-gradation.
o It will enable them to formalize, grow and become competitive.
o The project is likely to generate nine lakh skilled and semi-skilled jobs.
o The scheme envisages increased access to credit by existing micro food processing
entrepreneurs, women entrepreneurs and entrepreneurs in the Aspirational Districts.
o Better integration with organized markets.
o Increased access to common services like sorting, grading, processing, packaging,
storage etc.
Gram Samriddhi Yojna:
• It aims to bolster the unorganized food processing sector concentrated in rural areas. About
66% of unorganized food processing units are in rural areas and of these, 80% were family
run.
• The Rs. 3,000 crore scheme funded by the World Bank and the centre will help cottage
industry, farmer producers’ organization and individual food processors to increase capacity,
upgrade technology besides skill improvement, entrepreneurship development and
strengthening the farm-to market supply chain.
Scheme for Cold Chain, Value Addition and Preservation Infrastructure:
The objective of the scheme is to facilitate creation of integrated cold chain and preservation
infrastructure facilities without any break from farm to consumer. It intends to address the
shortage of cold storage capacity. The scheme mentions three types of facilities to be created
such as:
• Minimal processing centre at the farm gate level having facilities like weighing, sorting,
grading, pre-cooling, CA/MA storage, IQF and normal storage facilities
• Mobile pre- cooling vans and reefer trucks

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• Distribution hubs having facilities such as multi-purpose cold stores, variable humidity stores, Student Notes:
Quick Freezing and blast freezing etc.
Modernization of Abattoirs:
The objective is to modernize existing abattoirs or establish modern abattoirs promoting scientific
and hygienic slaughtering, application of modern technology for waste management, better by
product utilization, provision of chilling facility, retail cold chain management etc. under PPP
mode with the involvement of local bodies (panchayats or municipalities) on build-own-
operate/build-operate-transfer (BOT)/Joint venture (JV) basis.
Make In India:
As part of the Make in India campaign, food processing sector was identified as one of the 25
focus areas. Also, under Make in India campaign, 31 Sector Skill Councils (SSCs) were established
by the government along with FICCI of which 1 is for FPI.
TRIFOOD Project:
Ministry of Tribal Affairs, Ministry of FPI along with TRIFED have initiated the project with aim to
enhance the income of tribals through better utilization of and value addition to the Minor Forest
Produce (MFP) collected by the tribal forest gatherers.
Food Processing Fund:
A special fund in the NABARD worth INR 2,000 crore, designated as the Food Processing Fund,
was set up in the FY 2014-15 for providing affordable credit to food processing units in Mega &
Designated Food Parks.
One District One Product (ODOP):
The scheme was launched by the Government of Uttar Pradesh to encourage and revive
aboriginals’ arts and craft products. It would help Micro, Small and Medium Enterprises (MSMEs)
to produce and promote products that are unique in Uttar Pradesh. The programme aims to
encourage more visibility and sale of indigenous and specialized products/crafts of Uttar Pradesh,
generating employment at the district level.
The main objectives of the One District One Product Programme are as follows:
• Preservation and development of local crafts/skills and promotion of the art.
• Increase in the incomes and local employment (resulting in a decline in migration for
employment).
• Improvement in product quality and skill development.
• Transforming the products in an artistic way (through packaging, branding).
• To connect the production with tourism (Live demo and sales outlet – gifts and souvenir).
• To resolve the issues of economic difference and regional imbalance.
• To take the concept of ODOP to national and international level after successful
implementation at the State level.

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 Student Notes:

Under this project, one particular product is selected from every district. The selected product
under ODOP needs to be traditionally famous for its production and manufacturing from that
particular district. For instance: Lucknow is famous for zari-zardozi and chikankari. Many of these
products are GI-tagged, which means they are certified as being specific to that region.
The manufacturing process of a lot of these products is are being revived through modernization
and publicization. Under the ODOP programme, artisans, production units and associations
which are related to the selected products are promoted by lending loan, establishing Common
Facility Centers, providing marketing assistance so these products can be popularized and
employment can be generated at the district level.
Sub-schemes under the ODOP are:
• Common Facility Centre Scheme
• Marketing Development Assistance Scheme
• Finance Assistance Scheme (Margin Money Scheme)
• Skill Development Scheme.

8.2. Recent Developments

• The Ministry of Food Processing Industries hosted ‘World Food India’ event, in November
2023, in New Delhi. The event provided a distinctive platform to all the stakeholders in the
food value chain including food processors, equipment manufacturers, producers, cold chain
players, technology providers, logistics players, researchers, start-ups and innovators, food
retailers etc. to engage and demonstrate their capabilities.
• The United Nation’s General Assembly (UNGA) declared 2023 as the International Year of
Millets. The Union Budget 2023-24 included a special focus on millet, highlighting the
aspirations to make India a Global Hub for Millets (Shree Anna).
• During the Presidency of G20 summit, India had organized a two-day Global Millets
Conference in March 2023 in New Delhi bringing together participants from more than 102
countries facilitating discourse on important issues related to millets, including its production,
consumption, nutritional benefits, value chain development, market linkages, and research
and development.

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• The Indian Institute of Millets Research in Hyderabad was declared as a Centre of Excellence Student Notes:
for sharing best practices, research, and technology at national and international level.
• In 2022, a Special Food Processing Fund of US$ 263 million (Rs. 2,000 crore) was set up with
National Bank for Agriculture and Rural Development (NABARD) to provide affordable credit
for investments in setting up units under Mega Food Parks (MFP) and Designated Food Parks
(DFP).
• The Production Linked Incentive Scheme for Food Processing Industry (PLISFPI) was approved
in March 2021, with a budget of US$ 1.3 billion (Rs. 10,900 crore) to be implemented from
2021-22 to 2026-27. It is aimed at incentivizing manufacturing, promoting innovative/organic
SME products, and endorsing Indian brands internationally. Additionally, a PLI Scheme for
Millet-based Products (PLISMBP) was launched in FY23 with an outlay of ~US$ 96 million (Rs.
800 crore).
8.3. Challenges that still remain despite Government Initiatives

The challenges for the food processing sector are diverse and demanding, and need to be
addressed to boost FPI in India. A combination of uncontrollable and controllable factors has
affected the growth of the sector and has acted as a hindrance in achieving its potential.
Uncontrollable factors:
• Fragmentation of land holdings which has resulted in lack of scale and has made investments
in automation unviable;
• Regional climatic variations which impact the production;

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• The constraints in land availability due to competing pressure from urbanization, Student Notes:
constructions and industrialization.
Controllable factors: which can be addressed by intervention of Government and private
enterprises.
• It includes issues of quality and quantity of raw produce,
• Low labor productivity with slow adoption of technology.
• Low levels of value addition and safety/quality of processed food etc.
• Lack of access to credit;
• Inconsistency in state and central polices, which requires both the Center and the State to
work as one single cohesive unit.
• Lack of cold chain and storage- India has inadequate cold storage and transportation facilities.
This results in severe loss of post-harvest perishable goods.
• Fragmented supply chain leading to inefficiencies and increased costs.
• Businesses find it difficult to navigate the complex web of licenses, regulations and permits.
Indian food-processing industry is poised for explosive growth driven by changing demographics,
growing population and rapid urbanization along with increased government support. These
factors will increase the demand for value added products and thus improve the prospects of
food-processing industry in India.
The government’s focus towards food processing industry as a priority sector will ensure policies
to support investment in this sector and attract more FDI. India with its vast pool of natural
resources and growing technical knowledge base has strong comparative advantages over other
nations. According to CII estimates, food-processing sector has the potential of attracting US $33
billion of investment in 10 years and generate employment of 9 million person-days. The food
processing sector in India is clearly an attractive sector for investment and offers significant
growth potential to investors.
8.4. Suggestions and Way Forward
The need of the hour is to adopt an integrated approach to address the above mentioned
tailbacks with a clear-cut focus on improving the quality and value of the output, reducing the
cost of raw material for the processors, while improving the farmers' income levels.
To promote this sector, attempts are required to be made to promote farmer–producer
interaction, provide appropriate tax incentives and holidays for setting up food processing
industries, taking care of expenses on market promotion and ancillary activities.
Policy initiatives to plug supply side and infrastructure bottlenecks
• Foster development of backward linkages by evolving conducive regulatory framework for
contract and corporate farming
• The North Eastern Region, the Hilly States (J&K, HP and Western UP), the Islands (A&N,
Lakshadweep) areas in the country should be given special consideration as they are naturally
conducive for FPIs. In this direction, Zoram Mega Food Park, Mizoram’s 1st such park was set
up by MoFPI.
• Encourage commodity clusters and intensive livestock rearing.
• Promote private sector participation with well-defined roles of the participants, risk sharing
mechanisms, fiscal incentives and partnership models for creation of infrastructure for
logistics, storage and processing.
• Encourage technology up gradation of existing facilities and investment in development of
ancillary industries like research and development, packaging, food processing equipment
manufacturing, food safety certifying agencies by extending fiscal incentives to investors.

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• Enable better access to credit by augmenting current cap of Rs 10 crore investments in plant Student Notes:
and machinery to qualify as Priority Sector Credit to accommodate the high cost technology
adoption and scale enhancement.
Streamlining the regulatory structure
• Remove impediments of multiple departments and laws in seeking approvals by bringing
them under a single window.
• Ensure uniform implementation of the APMC act to encourage private sector investment in
infrastructure development.
Change in mindset - Orienting stakeholders towards ‘demand and profit driven production'
Participants across the agri value- chain need to shift their focus from trying to market ‘what is
produced' to producing ‘processable varieties and marketable products' meeting global quality
standards and traceability requirements, duly adopting need based viable technologies and
quality controls.Human resource development-to meet increasing demand for skilled
manpower
• Stimulate industry, academia and government to put in combined efforts for development of
specialized institutes and courses for providing training on managerial, safety and
enforcements, technology and production, warehousing and distribution aspects.
• Encourage State Agricultural Universities to commence courses in food packaging, processing,
bio-technology, information technology in agriculture and such allied fields.

9. SWOT Analysis of the Food Processing Industry in India

10. Previous Year UPSC Mains Questions

1. India needs to strengthen measures to promote the pink revolution in food industry for
ensuring better nutrition and health. Critically elucidate the statement. (2013)
2. What are the impediments in marketing and supply chain management in developing the
food processing industry in India? Can e-commerce help in overcoming this bottleneck?
(2015)
3. What are the reasons for poor acceptance of cost effective small processing unit? How the
food processing unit will be helpful to uplift the socio-economic status of poor farmers?
(2017)
4. How do subsidies affect the cropping pattern, crop diversity and economy of farmers?
What is the significance of crop insurance, minimum support price and food processing for
small and marginal farmers? (2017)
5. Examine the role of supermarkets in supply chain management of fruits, vegetables and food
items. How do they eliminate number of intermediaries? (2018)

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6. Discuss the factors for localization of agro-based food processing industries of North-West Student Notes:
India. (2019)
7. Elaborate the policy taken by the government of India to meet the challenges of the food
processing sector. (2019)
8. Elaborate on the policy taken by the Government of India to meet the challenges of the food
processing sector. (UPSC 2019)
9. What are the challenges and opportunities of food processing sector in the country? How
can income of the farmers be substantially increased by encouraging food processing? (UPSC
2020)
10. Elaborate the scope and significance of the food processing industry in India. (UPSC 2022)

11. Previous Year Vision IAS GS Mains Test Series Questions

1. Highlight the potential, significance and challenges facing the food processing sector
in India.
Approach:
• Start with a short note on the importance of the Food Processing Sector in general.
• Discuss the potential of Food Processing Industry in India and make use of facts and
figures.
• Highlight its significance and present challenges facing this sector in India.
• Conclude with a short way forward.
Answer:
The food processing sector offers a vital linkage between agriculture and industry. . With
India moving from a position of scarcity to surplus in food production the prospects for
increasing processing levels are enormous.
Potential of Food Processing Sector in India:
• Sunrise industry: Less than 10% of India’s agri-output is processed and most of it is
primary processing that offers lower value-addition. India's significant agricultural
production strength, along with low levels of current processing offer huge
opportunities for growth.
• Promising growth pattern: The sector grew at an Average Annual Growth Rate
(AAGR) of around 8.5% from 2014-18 and constituted as much as around 9 per cent
and 11 per cent of Gross Value Added in the Manufacturing and Agriculture sector
respectively. Also, cheaper workforce availability can be effectively utilized to setup
large low cost production bases for domestic and export markets.
• Market composition: India’s large and growing market, rising income, changing
consumption patterns due to urbanization, changes in the gender composition of
workforce, growing household consumption (which is expected to double by 2020)
etc. are likely to give boost to growth of this sector.
• Increased Investments: From 2014-19, FDI inflow into Indian food industry has been
increasing steadily to the tune of USD 3.28 billion at a CAGR of more than 4%.
Significance of Food Processing Sector:
• United Nations estimates that 40% of production is wasted. Similarly, the NITI Aayog
estimated annual post-harvest losses of close to Rs. 90,000 crore. Thus, food
processing is also significant from the point of reducing food waste.
• With a growth rate of 10.35% in the 2010-17 period, this sector provides huge
employment generation potential also.
• Owing to the labour intensive nature of the food processing industry, it has a higher
multiplier effect on the overall economy.

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 • Moving up the value chain in the processed food sector is key to doubling farmer’s Student Notes:
income by reducing food wastage; enhancing food exports and contributing to food
security.
Challenges facing the Food Processing Sector:
• There is a lack of efficient supply chain infrastructure and inadequate expansion of
processing and storage capacity commensurate with agriculture production.
• Minimization of losses in the perishable segment requires huge investment with a
long payback period in farm gate infrastructure, storage & cold chain infrastructure
and expansion of processing capacities.
• Low level of food processing and value addition impacts our competitiveness &
export performance.
• Inadequate linkage of processors, exporters and bulk purchasers with farmers
results in mismatch between industry requirements and supply of agri-produce by
the farmers.
• Inadequate and high cost of credit fails to attract prospective entrepreneurs in the
food processing sector for investment.
• Multiple permissions & clearances, inadequate marketing experience, tough
labour laws, uniformity of standards applicable to small and large units act as
disincentives for smaller establishments.
• There is a lack of adequate emphasis on food safety standards along the food value
chain to promote Good Hygiene Practice (GHP) and Good Manufacturing Practice
(GMP).
To realize the potential of this sector, the Government of India has accorded it 'high
priority' status under its Make in India initiative. Furthermore, policy environment is
being made conducive through efforts like relaxation of FDI norms, marketing reforms,
and facilitation of infrastructure creation through schemes like National Mission on Food
Processing, Pradhan Mantri Kisan SAMPADA Yojana, Mega Food Parks Scheme, Agri
export zones etc. This shall go a long way in making India the ‘Food Basket of the world’.

2. Mega Food Parks (MFPs) were considered to be a game changer for the food processing
sector in India, but their progress remains stunted. Discuss.
Approach:
• Introduce by briefly explaining the concept of Mega Food Parks (MFPs).
• Discuss in brief its failure.
• Mention the issues associated with it.
• Conclude with a way forward.
Answer:
Mega Food Parks involves setting up modern food processing units with well-established
supply chain infrastructure including collection centers, primary processing centers,
central processing centers, cold chain etc. They are established with the aim of providing
a mechanism to link agricultural production to the market by bringing together farmers,
processors and retailers.
They were considered to be a game-changer for the food processing sector in India, as:
• They would ensure maximization of value addition, minimizing wastage, increasing
farmers’ income and creation of employment opportunities by providing a platform
for collaboration of different stakeholders.

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 • They would facilitate establishment of an integrated value chain, with food Student Notes:
processing at the core and supported by requisite forward and backward linkages.
However, the scheme failed to yield desired results. Even after 13 years of its inception,
only 37 food parks have been sanctioned and only 21 are operational. Further, 16 food
parks are still under implementation. This is due to the following issues associated with
MFPs:
• Regulatory Issues:
o The regulations, which have to be met for a grant to be obtained, are extremely
explicit on how these parks are to be set up and run. This has acted as a deterrent
for multinationals like PepsiCo, which have their own models.
o It initially required lead investors to partner with three or four other major
players to set up parks. Corporates are not always keen on such partnerships.
o Also, at least one of the investors in an SPV is required to have a background in
the food processing industry, as well as 50 acres of land. The latter requirement
brings its own problems, such as land acquisition or conversion to industrial use,
which requires multiple approvals.
• Difficulty in getting loans: Promoters have faced difficulties in selling the new
concept to banks and, as a result, have failed to secure loans to build the parks.
• Delay in implementation: This is due to the time taken to issue various statutory
clearances by the State governments, changes in project components midway
through a revision in DPR and changes in shareholding pattern and bank approval
thereon.
Other than above issues, the global economic slowdown has also resulted in stunted
growth of Mega food parks. However, a seed fund has been created with NABARD to
address the funding issues. To make it a success, the government should steer away from
‘one size fits all strategy’ to one that is more cognisant of specific requirements.

3. Food processing industry provides a vital link between the two pillars of the economy,
i.e. agriculture and industry. In view of this, examine the constraints faced by the agri-
food supply chain system in India. Suggest suitable solutions as well.
Approach:
• Introduce by explaining the status and relevance of the food processing sector in
India.
• Discuss how it provides opportunities to agriculture as well as industry.
• Highlight the constraints in food supply chain management in Indian agriculture.
• Suggest a way forward.
Answer:
Food processing has become an integral part of the food supply chain in the global
economy. The Economic Survey notes that during the last 5 years ending 2018-19, this
sector has been growing at an Average Annual Growth Rate (AAGR) of around 9.99% as
compared to around 3.12% in agriculture and 8.25% in manufacturing at 2011-12 prices.
The food processing industry provides a vital link between agriculture and industry as:
• It has potential to drive the rural economy as it brings synergy between the
consumers, industry and agriculture. A well-developed food processing industry
increases farm gate prices, reduces wastages, ensures value addition, promotes crop
diversification, generates employment opportunities and increases export earnings.

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 • The industry contributes around 14 percent of manufacturing GDP and is ranked Student Notes:
fifth in terms of production, consumption, export and expected growth, which
provides a huge market for agricultural produce.
• 70% of India’s rural households still depend primarily on agriculture for their
livelihood. Thus, the food processing sector provides huge employment generation
potential as well.
However, it is still argued that the potential of the food processing industry is yet to be
tapped in India owing to various challenges in the agri-food supply chain system in
India, as follows:
• Lack of infrastructural facilities: There exists a gap in the supply chain infrastructure
due to lack of primary processing, cold storage and associated infrastructure and
distribution facilities.
• Lack of standardization and certification: Poor standards, regulations, and
certification issues in India hamper exports from the food processing industry. Also,
there is an inadequate focus on quality and safety standards.
• Uneven facilities amongst states: 60% of the cold storages are located in just four
states—Uttar Pradesh, Punjab, West Bengal and Gujarat.
• Institutional gaps in the supply chain: For instance, there is overdependence on
Agricultural Produce Marketing Committees (APMCs) for procurement of agricultural
produce.
• Lack of awareness: Pre-processing losses occur due to lack of awareness and a
dearth of storage and pack-house facilities close to the farm gate.
• Other constraints:
o Lack of avenues to adequately grade, sort and pack perishable produce.
o High requirement of working capital.
o Low availability of reliable and better accuracy instruments and equipments.
o Inadequate automation with regard to information management and
underdeveloped linkages between R&D labs and industry.
o Inadequate product development and innovation.
Way Forward:
• Skilling: It is required at two levels:
o At the farm gate in promoting best agricultural practices and in processing
activities. Also, revamped extension services are critical at the farm gates.
o Skill training in the food processing industry must be stepped up.
• Enhancing infrastructure: Enhancing the cold-chain capacity, logistics infrastructure
and farmer training.
• Backward linkages to farmers: It needs to be made more robust. Contract farming is
an attractive avenue in this regard.
• Smoothening the supply chain: This can be done by improving quality standards,
expanding supply of formal credit, particularly to small and medium enterprises, and
broadening the skilled labour pool in the economy.
In this context, the Agriculture Export Policy (2018) is expected to give a big push to food
processing/manufacturing.

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4. Micro food processing sector is the key driver of growth in the Indian economy as it Student Notes:
encourages food processing innovation. In this context, state the challenges faced by
the micro food processing sector and discuss how the recent initiatives taken by the
government aim to address them.
Approach:
• Briefly highlight the significance of the micro food processing sector for the Indian
economy.
• Discuss the challenges faced by the micro food processing sector.
• Highlight the recent steps taken by the government to address the above challenges.
• Conclude accordingly.
Answer:
The micro food processing sector is a fast growing industry and is an important
connection between the agricultural and industrial sectors of the economy. Mostly
unorganised, it comprises over 25 lakh food processing units contributing around 74% of
employment in the food processing sector.
Nearly 66% of these units are located in rural areas and about 80% of them are family-
based enterprises supporting livelihood of rural households and minimising their
migration to urban areas. They encourage food innovation by developing new
methodology and practices for preserving food by improving the shelf life of agro and
horticultural produce, adding necessary nutrition, optimizing the process parameters by
adding value through processing and reducing wastage.
Challenges faced by the micro food processing industry
• Lack of efficient supply chain infrastructure: Inadequate expansion of processing
and storage capacity commensurate with agriculture production have been
identified as the main reasons for higher wastages, higher cost of production, lower
value addition in micro-food processing sector.
• Growing informalization: The micro-food processing industry has a high
concentration of unorganised segments, representing almost 75% across all product
categories. This causes inefficiencies in the existing production system.
• Poor credit facility: Micro-food processing units face problems in their access to bank
credit due to the seasonal and perishable nature of the commodities handled by
these units.
• Marketing of processed food: It is a major problem faced by food processors
particularly for the micro and small processors. Given the scale of operation,
individual units are unable to invest in marketing and branding impacting
performance of the sector.
• Limited ability to control quality and safety: Being largely unorganized segments,
implementation of quality and safety norms are difficult leading to practices such as
milk adulteration and use of carbide for fruit ripening becoming more widespread.
Moreover, food testing, quality certification and safety issues are other weak areas
needing priority attention.
Initiatives taken by the government to address the above challenges
• Pradhan Mantri Formalisation of Micro food processing Enterprises (PMFME)
Scheme:
o The scheme provides existing micro food processing units to avail credit-linked
capital subsidy @35% of the eligible project cost to address challenges of
institutional finance.

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 o One District One Product (ODODP) approach under the scheme would help Student Notes:
micro food processing units to reap benefits of scale in terms of procurement of
inputs, availing common services and marketing of products.
o Proper training and research to individual or group owned food processing
enterprises through academic and research institutions under MOFPI along with
state level technical institutions.
• Production Linked Incentive Scheme for Food Processing Industry (PLISFPI): It
supports creation of global food manufacturing champions and supports Indian
brands of food products in international markets.
• PM Kisan SAMPADA Yojana: It aims to address supply chain constraints by creation
of modern infrastructure with efficient supply chain management from farm gate to
retail outlet.
• The Food Safety and Standards Authority of India (FSSAI) supports the Micro Level
Food Entrepreneurs and Farmer Producer Organizations (FPOs) to improve the
standard of their food businesses by providing food safety training and obtaining
FSSAI license and registration.
The need of the hour is effective implementation of above schemes by adopting
integrated approach and streamlining the regulatory structure. Further, attempts are
required to be made to promote farmer-producer interaction, provide appropriate tax
incentives and holidays for setting up micro food processing industries, taking care of
expenses on market promotion and ancillary activities.

5. Discuss the potential of digitization in harnessing the untapped potential of the food
processing sector and resolving the challenges that it faces.
Approach:
• Give a brief introduction about the food processing industry in India.
• Highlight the several challenges faced by the food processing industry.
• Discuss the potential of digitization in harnessing the untapped prospects of the
sector and addressing the challenges it faces.
• Give a brief conclusion.
Answer:
India, being a leading producer of a diverse array of agricultural products, presents an
extremely lucrative opportunity to turn the country into a potential hub for food
processing. The sector is one of the largest employment-generating industries in India
and contributes 8% of the GDP of the nation. It is estimated to be worth $380 billion and
is projected to grow at a CAGR of 11% to reach $540 billion by 2025. Further, in FY22
alone India exported agricultural and processed food products worth US$ 25.6 billion,
and the export of processed vegetables and fruits increased by 59.1%.
Several schemes such as Pradhan Mantri Formalisation of Micro Food Processing
Enterprises (PMFME) Scheme, Pradhan Mantri Kisan Sampada Yojana, Production Linked
Incentive Scheme for Food Processing Industry, etc. have been implemented to enhance
the productivity and competitiveness of the sector.
However, despite its growth, there are several challenges faced by the food processing
industry, which hinder it from harnessing its untapped potential, such as:
• Lack of cutting-edge infrastructure: Many food processing businesses operate in the
small and medium enterprises (SMEs) sector, which often lacks the resources needed
to upgrade their facilities and machinery to the latest technology.

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 • Post-harvest loss: Inefficient supply chains due to insufficient cold storage facilities Student Notes:
and transportation networks result in significant post-harvest losses.
• Lack of access to working capital: Traditional banks and financial institutions often
have stringent lending criteria, making it difficult for SMEs involved in the food
processing sector to access funding. Moreover, the loan approval process can be
time-consuming and cumbersome. This results in cash flow issues, which can hinder
their ability to grow and invest in new technologies.
• Competition from international players: The food processing industry in India faces
competition from international players, that have access to better technology, more
efficient supply chains, and lower costs.
• Lack of skilled manpower: There is a shortage of skilled workers and a lack of training
facilities tailored to the specific needs of the sector posing challenges in adopting
advanced processing techniques, implementing food safety practices, and optimizing
production processes.
• Issue in exports: Compliance with international quality standards and regulations is
essential to access export markets. The presence of pesticide residues and lack of
awareness on policy requirements for global markets impact food processing exports
from India.
In this context, digitization of the sector has the potential in harnessing its untapped
potential and resolving the challenges it faces in the following ways:
• Digitization can help streamline the supply chain and help the sector become more
efficient, productive, and competitive by enabling real-time tracking of inventory and
delivery, reducing wastage and ensuring timely delivery of goods. For instance,
○ Internet of things (IoT) can help connect various parts of the supply chain,
enabling real-time tracking and monitoring of inventory and delivery.
○ Artificial intelligence (AI) can help optimize production processes and improve
the quality of products.
○ Blockchain can help ensure transparency and traceability in the supply chain,
improving the efficiencies for processors by cutting out middlemen.
• The data produced by digitization would help smaller processing units in planning
capacities and procurements more efficiently.
• Digitization can enable SMEs’ to determine and analyze their creditworthiness and
understand working capital solutions based on their financial history and potential.
Thus, to achieve the target of $540 billion by 2025, the Indian food processing units need
to become more competitive and innovative, and digitization can play a crucial role in
this.

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 1

16
in TOP 20Selections in CSE 2023 AIR

from various programs of Vision IAS Aditya Srivastava

2 5 6 7 9 10
AIR AIR AIR AIR AIR AIR

Animesh Ruhani Srishti Anmol Nausheen Aishwaryam

Pradhan Dabas Prajapati

39
Selections
in TOP 5 0

in CSE 20 22
1
AIR
2
AIR
3
AIR

Ishita Garima Uma

Kishore Lohia Harathi N

SHUBHAM KUMAR
CIVIL SERVICES
EXAMINATION 2020

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