Not ripe for picking

In the World Food India event that concluded this week, the DIPP and the ministry of food processing industries pulled out all stops to convince foreign investors that food processing can be the next big sunrise sector in India, if only it could attract the necessary capital. The pitch highlighted that India, having grown its agri, dairy, meat and horticultural produce by leaps and bounds in recent years, is now a food-surplus nation offering a readymade raw material base for global food processing giants. Post-harvest losses of 5-15 per cent and the large consumer market were presented as evidence of market potential. But as the Centre redoubles its policy effort to woo global majors, it would pay to introspect on why past policy efforts to promote food processing have proved somewhat ineffectual. Despite receiving more than its fair share of income tax breaks, indirect tax concessions and subsidised funding over the years, the food processing industry has remained a straggler. In the last five years, the industry contributed a minuscule 1.5 per cent to the country’s Gross Value Added, accounted for a mere tenth of its agricultural output, and saw exports actually shrink from $36 billion to $31 billion.

One reason for the lack of scale in India’s processed foods industry could be the misreading of the market by the global food giants who were the early movers. Drawn to India’s 1.3 billion strong consumer market, multinationals such as Nestle, Pepsi, Kelloggs, ConAgra and Unilever marked their presence many years ago. But after making some headway in peripheral categories such as confectionery, aerated drinks, breakfast cereals, noodles and ketchups, MNCs haven’t quite managed to make inroads into the centre of the Indian consumer’s plate. Attempts to force-fit global food preferences to the Indian marketplace, a failure to recognise the enormous regional diversity in food habits and the delay in customising their global products and flavours to the local palate have proved stumbling blocks. Lately consumer backlash against preservative and calorie-laden processed foods has also posed hurdles. In areas where the MNCs do have proven strengths in sourcing, supply chain and processing technology, they have come up against the supply chain inefficiencies created by the fragmented agricultural market, the lack of standardisation and quality checks on produce and draconian State laws on marketing of agri-produce. This could also be the key reason why none of the home-grown food brands such as Haldirams or MTR with a suitably ethnic product range, have attained global scale.

All this suggests that the Centre’s recent efforts to beef up the supply chain through investments in cold chains, state-of-the-art warehousing and Mega Food parks in growing regions, are on the right track. But leaning harder on the recalcitrant States to adopt the model APMC Act and join the eNAM initiative is equally critical. Of course, the recent controversy over cow slaughter is not good advertisement for these earnest efforts to put India on the global food map.

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