News: There is a challenge in front of all of us to feed the 10 billion population by mid-century. Hence, food production needs to be both economically viable and ecologically sustainable.
How Production-Linked Incentive Scheme (PLI) scheme is helping in the growth of the food processing sector?
One, India is one of the largest producers of fruits and vegetables in the world. PLIs aims to boost the processed food sector and incentivize incremental sales.
60 applicants have already been selected and beneficiaries have to commit a minimum investment. It will attract ₹6,500 crores worth of investment over the next two years.
Two, a 1% increase in public infrastructure increases the food manufacturing output by 0.06%, as per a study in the United States. This correlation is good as a higher investment is concentrated in states such as Andhra Pradesh, Gujarat, Maharashtra, Tamil Nadu, and Uttar Pradesh.
According to Good Governance Index 2020-21, these States performed well in terms of public Infrastructure and Utilities parameters and Connectivity to Rural Habitations.
Three, the PLI scheme earmarks a dedicated Category 3 for supporting branding and marketing activities in foreign markets.
It will help in increasing the share of value-added products in the exports basket and also help in reaping benefits of unique geographical proximity to the untapped markets of Europe, the Middle East/West Asia, Africa, Oceania, and Japan.
Four, PLI is helping in the growth of new brands and aims to create an enabling ecosystem for innovation in both food products and processes. Now there are technologies that change the traditional approach of farm to fork and also reduce the environmental footprint.
What are the growth opportunities available for the food processing sector?
First, the pandemic has increased the number of people working from home and that has increased the sale of ready-to-eat products by 170% in sales volume between March-June 2020(Netscribes).
Second, it has also increased consumer awareness of functional foods that offer health benefits beyond their nutritional value. This will provide an opportunity for health-orientated start-ups and micro-food processing units.
Third, India has a growing population with changing food habits. These factors along with unrestricted use of natural resources require a sustainable food ecosystem.
Fourth, new alternatives are explored in India which can replace rice and wheat with Nutri-cereals, plant-based proteins, fermented foods, health bars.
What are the challenges still existing?
Access to finance is a continuing problem and another challenge is the lack of a proper credit history mechanism for MSMEs. MUDRA has helped more than 1,18,000 small businesses. Trade Receivables Discounting System (TReDS) is also a platform for facilitating the financing/discounting of trade receivables of MSMEs through multiple financiers.
What is the way forward?
First, smart financing alternatives such as peer-to-peer (P2P) lending need to be explored for micro-food processors. However, the platform needs to grow in size and focus on the enforcement of strict measures for corporates.
Second, integrating the TReDS platform with the Goods and Service Tax Network’s e-invoicing portal will make TReDS more attractive and give relief to financiers.
Third, policymakers need to lay out a road map for a common efficient food value chain.
Source: This post is based on the article “Unlock India’s food processing potential” published in The Hindu on 27th Jan 2022.
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