Processed & Frozen Foods: Indian Scenario.

The food processing industry provides vital linkages and synergies between industry and agriculture.

The food processing industry in India is one of the largest in terms of production, consumption, export and growth prospects. The government has accorded it a high priority, with a number of fiscal reliefs and incentives, to encourage commercialisation and value addition to agricultural produce, for minimising pre-/post-harvest wastage, generating employment and export growth.

India's food processing sector covers a wide range of products - fruit and vegetables; meat and poultry; milk and milk products, alcoholic beverages, fisheries, plantation, grain processing and other consumer product groups like confectionery, chocolates and cocoa products, Soya-based products, mineral water, high protein foods and so on.

The Indian food processing industry is one of the largest in the world in terms of production, consumption, export and growth prospects. Earlier, food processing was largely confined to the food preservation, packaging and transportation, which mainly involved salting, curdling, drying, pickling, etc. However, over the years, with emerging new markets and technologies, the sector has widened its scope. It has started producing many new items like ready-to-eat food, beverages, processed and frozen fruit and vegetable products, marine and meat products, etc. It also includes establishment of post-harvest infrastructure for processing of various food items like cold storage facilities, food parks, packaging centres, value-added centres, irradiation facilities and modernised abattoir.

India has a strong agricultural production base with diverse agro-climatic conditions and arable land of 184 million hectares. It is one of the major food producers in the world and has abundant availability of wide variety of crops, fruits, vegetables, flowers, livestock and seafood. India produces annually 90 million tonnes of milk (highest in the world); 150 million tonnes of fruits and vegetables (second largest); 485 million livestock (largest); 204 million tonnes of food grains (third largest); 6.3 million tonnes of fish (third largest); 489 million poultry and 45,200 million eggs. As a result, Indian food processing industry has become an attractive destination for investors the world over. The size of the semi-processed and ready to eat packaged food industry is over Rs 4,000 crore (US$1 billion) and is growing at over 20%.

Indian frozen foods

India is a large producer of food and is offering different opportunities and business propositions in food and food processing technologies, skills and equipment. The food-based industries encompass canning, dairy and food processing, speciality processing, packaging, frozen food / refrigeration and thermo-processing.

Products which come under the frozen food industry are fruits, vegetables, fisheries, milk products, meat, poultry and other packaged and convenience foods. Although it is a huge producer of food products, India still has immense untapped potential in the frozen food export industry. The demand for Indian recipes from the Indian diaspora settled across the globe has served as an impetus to development of the frozen food industry in recent years. Vegetables like drumsticks and okra and prepared food like chapattis and parathas are nowadays available in frozen form in neat packets all over the world. The Indian frozen food market generated total revenues of $325.9 million in 2010, representing a compound annual growth rate (CAGR) of 16.6% for the period spanning 2006-2010.

Frozen meat products’ sales proved the most lucrative for the Indian frozen food market in 2010, generating total revenues of $124.2 million, equivalent to 38.1% of the market's overall value. The performance of the market is forecast to decelerate, with an anticipated CAGR of 13.6% for the five-year period 2010-2015, which is expected to lead the market to a value of $617.5 million by the end of 2015.

India has following advantages in the processed food sector
India is one of the largest food producers in the world
India has diverse agro-climatic conditions and has a large and diverse raw material base suitable for food processing companies
India has huge scientific and research talent pool
A largely untapped domestic market of 1,000 million consumers
300 million upper- and middle-class consume processed food
200 million more consumers expected to shift to processed food by 2010
Well developed infrastructure and distribution network
Rapid urbanisation, increased literacy, changing lifestyle, increased number of women in workforce, rising per capita income - leading to rapid growth and new opportunities in food and beverages sector
Strategic geographic location (proximity of India to markets in Europe and the Far East, South East and West Asia)

Following are major challenges faced by industry
Consumer education that processed foods can be more nutritious
Low price-elasticity for processed food products
Need for distribution network and cold chain
Backward-forward integration from farm to consumers
Development of marketing channels
Development of linkages between industry, government and institutions
Taxation in line with other nations
Streamlining of food laws

Exports
The Indian food processing industry is primarily export-oriented. India’s geographical situation gives it the unique advantage of connectivity to Europe, the Middle-East, Japan, Singapore, Thailand, Malaysia and Korea. One such example indicating India’s location advantage is the value of trade in agriculture and processed food between India and the Gulf region. Products that have growing demand in the export market are pickles, chutneys, fruit pulp, canned fruits and vegetables, concentrated pulps and juices, dehydrated vegetables and frozen fruits and vegetables along with processed animal-based products. India's exports of agricultural and processed food products in 2009-10, has grown by almost 40%, which is over US$8 billion, against 2008-09 figure of nearly US$6.5 billion.

Regulatory Regime / Food Related Laws
Ministry of Food Processing Industries: This is the main central agency responsible for promoting and regulating the food processing sector. The ministry covers the products of fruits and vegetables, dairy, meat, poultry, fishery, consumer food, grains, non-molasses-based alcoholic drinks, aerated water and softdrink. It acts as a catalyst for bringing in greater investments into this sector. The ministry has accorded high priority to this sector with a number of policy measures, incentives and schemes announced from time to time. The National Food Processing Policy is one such initiative, which aims to create an appropriate climate for investment in the industry.

The following are the food laws applicable to food and related products in India and the food processing industry has to comply with their legal requirements

Food Safety and Standards Act, 2006 (Integrated Food Law): This aims to achieve a high degree of consumer confidence in the quality and safety of produced, processed, sold or exported food and has been enacted to:
Consolidate the laws relating to food
Establish the Food Safety and Standards Authority of India for laying down science-based standards for articles of food
Regulate manufacture, storage, distribution, sale and import of food articles with a view to ensure availability of safe and wholesome food for human consumption
Pool infrastructure, manpower and testing facilities for better standard fixation and enforcement through their proper re-deployment.

Other Food related laws:
The Standards of Weights and Measures Act, 1976, and Standards of Weights and Measures (Packaged Commodities) Rules, 1977
Agriculture Produce (Grading & Marking) Act (Ministry of Rural Development) which lays down the specifications for various agricultural commodities including some processed foods.
Export (Quality Control and Inspection) Act, 1963.
Environment Protection Act, 1986.
Pollution Control (Ministry of Environment and Forests)
Industrial License under Industries (Development & Regulation) Act, 1951 for liquor manufacture.
Bureau of Indian Standards Act, 1986 which is the largest body for formulating standards for various food items.

Government initiatives and duty regime
Most of the processed food items have been exempted from the purview of licensing under the Industries (Development & Regulation) Act, 1951, except items reserved for small-scale sector and alcoholic beverages.
Food processing industries are included in the list of priority sector for bank lending in order to ensure easy availability of credit to them.
Excise duty on ready-to-eat packaged foods, instant food mixes like dosa and idli mixes, aerated drinks, as well as on fruits and vegetables processing units, have been reduced.
Excise duty on processed meat, fish and poultry products reduced from 8% to nil.
Excise Duty of 16% on dairy machinery has been fully waived off.
Excise duty reduction from 16 per cent to 8 per cent on a few more items including water purification devices, veneers and flush doors, sterile dressing pads, specified packaging material and breakfast cereals.
Excise duty exemption on refrigeration equipment will enhance investments in the cold chain sector and help food and beverage sector.
Customs duty on food processing machinery and their parts have been reduced from 7.5% to 5%.
A large number of foreign collaborations have been approved.
Up to a maximum of 24% foreign equity is allowed in SSI sector.
Use of foreign brand names is now freely permitted.
MRTP (Monopolies & Restrictive Trade Practices Act) rules and FERA (Foreign Exchange Regulation Act) regulations have been relaxed to encourage investment and expansion by large corporate.
Most of the items can be freely imported and exported except for items in the negative lists for imports & exports. Capital goods are also freely importable, including second hand ones in the food processing sector.
Units in Export Processing Zone / Free Trade Zone and 100% export oriented units can retain 50% of foreign exchange receipts in foreign currency accounts.
50% of the production of Export Processing Zone / Free Trade Zone and 100% EOU units are saleable in domestic tariff area.
All profits from export sales are completely free from corporate taxes. Profits from such exports are also exempt from Minimum Alternate Tax (MAT).
Another strategic initiative taken in India is to establish cold chain facilities including refrigerated vans all over the country, to provide relief to the farmers, to enhance the shelf life of their product and retain its quality.

Future Prospects
The Indian food market is set to more than double by 2025. The market size for the food consumption category in India is expected to grow from US$155 billion in 2005 to US$344 billion in 2025 at a compound annual growth rate of 4.1 per cent.

In India, the food processing industry is one of the largest in terms of production, consumption and export prospects. As the country's Gross Domestic Product (GDP) growth rate had increased from 3.5 per cent in 2002-03 to 9 per cent in 2006-07, the food-processing sector had grown from 7 per cent to 13.1 per cent during the same period. The government has set an investment target of Rs 1,00,000 crore for the food processing sector by 2015. This is expected to almost double the country’s presence in the global food trade to three per cent. The investments of one lakh crore, as estimated by the government will, undoubtedly, catapult the growth of this sector, and put it at the higher growth trajectory.

Among the emerging business avenues and growth options in the diverse Indian agribusiness sector, the food-processing sector is particularly promising and is undoubtedly one of the largest potential markets for processed foods. The segments with the largest growth potential for processing are dairy, fruits and vegetables, wine, confectionary, poultry, convenience food and drinks and milk products. Products that have growing demand in the export market are pickles, chutneys, fruit pulp, canned fruits and vegetables, concentrated pulps and juices, dehydrated vegetables and frozen fruits and vegetables along with processed animal-based products. As India is world's third largest producer of agricultural products and large production base for a variety of raw materials covering food crops, commercial crops and fibres. Due to India’s diverse agro-climatic conditions, it has a wide-ranging and large raw material base suitable for food processing industries. Presently a very small percentage of these are processed into value-added products. And demand for processed/convenience food/ ready-to-cook/ ready-to-eat is constantly on the rise. Moreover, urbanisation and nuclear families are becoming the norm.

The market size for the processed foods is bound to increase from Rs 4,600 billion ($102 bn) to Rs 13,500 billion ($ 330 bn) by 2014-15, assumed to grow at 10%, and the share of the value-added products in processed foods would grow from Rs 2,800 billion ($44 bn) to Rs 5,700 billion, growing at the rate of 15%. The growth witnessed by the sector in the last decade and further improvement in growth rate expected in the years to come, presents innumerable opportunities for investment.

Source : fnbnews.com