Food processing is the process of adding value to the agricultural or horticultural produce by using various techniques like grading, sorting, packaging, etc. which enhances the shelf life of food products. A strong and dynamic food processing sector plays a significant role in the overall economic set up of a country. It provides vital linkages and synergies between industry and agriculture. It has been identified as a sector having immediate potential for growth and employment. It leads to diversification of agricultural activities, improves value addition opportunities and creates surplus for export of agro-food products.
In India, the food processing industry is one of the largest in terms of production, consumption and export prospects. The Ministry of Food Processing Industries is the main central agency responsible for developing such a vibrant 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 soft drink. It aims to create increased job opportunities in rural areas, enable the farmers to reap benefit from modern technology and stimulate demand for processed food.
The Ministry is actively involved in encouraging greater investment into the sector by creating a conducive environment for healthy functioning of the industry. For this purpose, the sector has been accorded a high priority 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 through:-
- Fiscal initiatives/interventions like rationalization of tax structure on fresh foods, processed foods and machinery used for the production of processed foods.
- Harmonization and simplification of food laws by an appropriate enactment to cover all provisions relating to food products as well as issues concerning merit goods, futures marketing, equalisation fund, etc.
- Expanding the availability of the right kind and quality of raw material round the year by increasing production and productivity.
- Strengthening of database and market intelligence system to enable planned investment in the sector matching with the availability of raw material and marketability of processed products.
- Encouraging setting up of agro-processing facilities close to the area of production, so as to avoid wastage and reduce transportation cost.
As a result of such policy initiatives, the industry has witnessed fast growth in most of its segments. For example, India is annually producing 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 food grain (third largest); 6.3 million tonnes fish (third largest); 489 million poultry and 45,200 million eggs.
Thus, there exist immense opportunities for investment in the Indian food processing sector arising from the fact that India is one of the major food producers in the world and has abundant availability of a wide variety of crops, fruits, vegetables, flowers, live-stock and seafood. This is reflected in the amount of FDI inflow into the sector which stood at Rs. 333.06 crores (US$ 74.01 million approximately) in 2005-06 and 2006-07 (till September 2006).