In the last decade, India moved from an era of scarcity to one of plenty. In producing fruits and vegetables which was just 50 per cent of the total quantity of foodgrain production has now achieved 66 per cent of the total quantity of foodgrain production. By the year 2010 it is estimated that the production of fruits and vegetables would reach 80 per cent of the quantity of foodgrains produced in India. Coupled with the fact that the yield of these crops in India is just about one-third compared to other countries, we can imagine the sort of spurt that is probable in the sector.

    In this scenario processing of raw material becomes critical. Food processing would mop up surpluses at farm level and ensure fair price for the producer. It would also ensure availability of the produce at reasonable price for the consumer. In addition, the employment generation potential of this sector is much higher than other sectors. Nearly 54 thousand persons get direct employment per 1000 crore of investment in the food sector as compared to 48 thousand in textiles and 25000 in the paper industry.

    Increasing food processing from the present level of 2 per cent to 10 per cent by 2010 would entail an investment of Rs. 1,40,000 crore. The investment would generate direct employment for about 77 lakh persons and indirect employment to about 3 crore people. This would also reduce wastages by about Rs. 8000 crore. Apart from these advantages the value addition of food products will go up from 7 per cent to 35 per cent which will be reflected in corresponding increases in GNP. The thrust will, therefore, be on attracting foreign and domestic investments and generate internal accruals of the desired magnitude. It is relevant to note that in the first few years after 1991-92 when the industry was de-licensed and major impediments on FDI were removed, a total investment of Rs. 7200 crore was committed. This trend was reversed only when excise duty was first introduced in 1997-98.

    Multifarious laws and multiple authorities are a major hurdle. Many of these laws were framed some 50 years ago like Prevention of Food Adulteration Act and were meant to serve the purpose of food safety and to prevent adulteration. Similarly, many of the statutory orders like Fruit Products Order, Meat and Meat Products Order and Milk and Milk Products Order were brought into being under the Essential Commodities Act when there was an acute scarcity of food items. In the context of liberalisation these laws throttle development and invariably work as dampeners for the industry’s growth. There is, therefore, an acute need for harmonising the existing food laws and to bring about a development orientation to facilitate faster growth of the industry.

    This approach would bring about corporate entities operating large integrated food procurement-cum-distribution companies which operate from the farm to the department store. In this changed scenario the small scale industries which constitute, a majority of the food processing industries need to be adequately protected. In order to provide adequate protection and help them, the industrial corporates will have to become anchors to assist and nurture them…Besides these anchor industrial corporates a number of food parks could be established so as to provide not only adequate help in adhering to international standards. The chosen-anchor industries will ehlp them market the primary and secondary level of processed items and to convert them into value-added products for sale through their network of distribution channels including export.

    By bringing about a tax holiday in the food processing sector for 10 years a proper enabling environment can be created for bringing in adequate investments both from within the country and through foreign direct investment. Such a tax holiday, need not cover tobacco, aerated drinks, Indian-made foreign liquor and plantation items. The enactment of Processed Food Development Act and measures for generic promotion can also be done along with held to industry in locating markets by means of market intelligence. Certain special provisions will also have to be made for developing the North-Eastern region, hilly areas, islands, desert areas and other difficult areas.

    In the medium term of 5 to 10 years the policy framework would attempt to establish a network of R&D institutions. Identification of industrial corporates and development of food parks in all the States with reference to their regional strengths may be achieved during this period. Appropriate policies and schemes could be envisaged for establishment of development-related infrastructure, transfer of new technologies, product-specific packaging, development of appropriate processable varieties of raw material, bringing about future trading and equalisation funds as well establishing a network of institutions and testing laboratories to achieve international standards so as to make Indian products export-worthy are some of the measures aimed during this period. There is need to propagate non-polluting, inexpensive technologies such as irradiation and biotechnology for food preservation.

    One of the key resultants of the policy is the Food Processing Development Act. The proposed Act envisages a single authority for harmonising and clarifying the function of each player. The Department of Food Processing industries will have the role of development while food safety, distribution and other regulatory functions will continue to be administered under the existing legislations. The Act would have a focus on development. The emphasis will be on developing the food processing sector as a whole.

    While the current level of food processing may reflect the primitive rural marketing structure, improvements in this sector can bring about significant improvements in value addition in agricultural products, creation of new employment, especially in the small towns and rural areas, improvement in the nutritional status of the rural women and the poor and availability of cheaper and better products for the consumers. World-wide food processing is considered as a sunrise industry and has the potential of attracting huge local and foreign investments. These investments will not only accelerate the pace of industrialization, but will also lead to improvements in both rural and urban infrastructure. A well run food processing industry ensures that while on one hand the producer gets remunerative prices for his product, the consumer pays less for higher and assured quality. The price to be paid in the shape of tax holiday may no doubt, mean a few crores of loss to the exchequer, but that will be more than amply compensated by the additional investment inflows as also by long term gains to the Government’s fiscal resources.