Promoting food processing

The national food processing policy draft brought out by the government for public comments, though good in parts, needs a review of some of its key tenets to ensure inclusive growth of this sector. Many of the policy prescriptions, especially those concerning subsidies, tax rebates and concessions in customs and excise duties, are, in fact, already in place. But what sets this policy apart is the attempt made to overcome some critical constraints that are holding this sector from growing to its full potential. These include ways to ease land acquisition and get around the labour laws. The need to encourage processing and value-addition of agro-products cannot, indeed, be overstated given that a sizeable part of farm produce is lost even before it reaches the mandi. A nationwide study to assess post-harvest losses in 46 commodities, quoted in the policy document itself, reckons this loss is worth over Rs 44,000 crore (at 2009 wholesale prices) annually. The wastage is particularly massive in perishable products such as vegetables and fruits, which the country can ill-afford, especially because these commodities witness wild fluctuations in supply and price. These losses can be averted to a large extent by processing them into value-added and shelf life-extended products.

One of the plus points of the proposed policy is that it seeks to create a positive business environment for food processing entrepreneurs. It does so by mooting single-window clearance, responsive pre- and post-investment services, self-regulation, and delineation of whole states as single zones for raw material and processed food products. Besides, it also proposes strengthening of the supply chain, development of necessary cold chain infrastructure, skilling facilities and linkages between food producers and processors through contract as well as corporate farming. To facilitate access to land, the policy calls for the abolition of the ceiling on land leased to food processing units and treating processing as an agricultural activity to obviate the need for conversion of agricultural land into industrial land. Similarly, in the case of labour laws, the policy suggests the declaration of food processing industry as an essential service and regarding it as a seasonal industry to circumvent the normal laws.

That said, in its present form, the policy is tilted in favour of mega projects and large food-based industrial clusters. It under-emphasises the relevance of micro- and medium-sized food processing units in the small farms-based rural economy. The government has, in fact, been favouring the emergence of mega food parks for nearly a decade but with a limited outcome. Of the over 40 food parks sanctioned since 2008-09, few have actually come up and many were annulled. Though the situation is changing of late thanks to the improved overall business environment, annual growth of the food processing sector has failed to exceed 2.5 per cent. What is needed is encouragement for setting up of a large number of small and medium food processing units scattered across the countryside. These units, with backwards linkage with local growers, can spur farmers to produce process-worthy stuff through contract farming. Such units can help promote crop diversification, generate additional employment and enhance farmers’ income besides stabilising the supply and prices of perishables.

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel