What is food processing? What are the scope and significance, location, upstream and downstream requirements, and supply chain management in the related industries? Read here to learn more.
Food processing is the transformation of raw ingredients into food, or of food into other forms (i.e., food processing may denote direct manufacturing of food or value addition to existing food).
Food processing typically takes harvested crops or butchered animal products and uses these to produce long-shelf-life food products.
Food processing dates back to the prehistoric ages when crude processing incorporated slaughtering, fermenting, sun drying, preserving with salt, etc. Modern food processing adopts the latest technologies and practices.
Processes in a food processing industry
There are two types of processes in the food processing industry :
- Manufacturing: Raw materials → Food.
- Value Addition: Increase shelf life and value of manufactured food.
Products in the food processing industry
We can divide the products in the food processing industry into two:
- Primary (e.g.: Fruits and Vegetables).
- Secondary or Value Added (Jams and Squashes)
Why are food processing industries significant?
- India is a land famous for food production. More than 50% of the Indian population work in Agriculture-related activities. If there are good food processing industries in India, raw materials like grains or meat can be converted into food for domestic and foreign consumption.
- Food processing units act as a link between agriculture and industries.
- Food processing industries can absorb a major share of workers from the agriculture sector, who face disguised unemployment. It can lead to better productivity and GDP growth.
- Food processing prevents food wastage and helps in attaining food security.
- Processed food requires less space for storage.
- Processed food can be exported. This may help us in getting foreign exchange reserves.
Scope and Significance of Food Processing Industries in India
What is the scope of India in the food processing industry? (Have you ever wondered why UPSC specifically mentioned food processing as a topic in Mains syllabus? – Because it is a sector that has huge potential for growth in the future!)
The Indian food industry is heading for huge growth, increasing its contribution to the world food trade every year due to its immense potential for value addition, particularly within the food processing industry.
Indian food and grocery market is the world’s sixth-largest, with retail contributing 70% of the sales.
The Indian food processing industry accounts for 32% of the country’s total food market. It is one of the largest industries in India and is ranked fifth in terms of production, consumption, export, and expected growth.
- India’s position as a major food producer: India ranks 1st in the production of – milk, ginger, banana, guava, papaya, mango, etc. It ranks 2nd in the production of rice, wheat, potato, sugarcane, cashew nut, tea, etc. It is among the top 5 countries in the production of coffee, tobacco, spices, seeds, etc. With such a huge raw material base, we can easily become the leading supplier of food items in the world.
- Resource advantage of India: Different soil types and different climate types for the cultivation of diverse food crops, long coastal lines suitable for fishing, a huge resource of domestic animals, etc.
- Increasing employment: Expected to create more than 10 lakh new jobs.
- Curbing Migration: Employs in rural areas, hence reducing migration from rural to urban. Resolves issues of urbanization.
- Curbing food inflation: Removes issues of wastage or middle man. Curbs food inflation. Indirect relief on non-food inflation too.
- Crop Diversification: Because of the long shelf life, farmers can diversify their products.
- The demand potential: Expected to reach 250b$ turnout by 2015 and 350b$ by 2020. Youth population, middle class, rising income, nuclear families, media penetration, etc. cited as positive factors.
- Government initiatives to boost food processing: Various government initiatives like attracting FDI, reduction in excise duties, etc. have boosted food processing.
- The future driver of Indian growth: Food processing corresponds to around 10% of GDP in the agriculture-manufacturing sector. It has the potential for more.
Also read: Blue food
Location of food industries in India
India has more than 35000 registered units. But majorities of the food processing factories are concentrated in the coastal states ( one reason being, accessibility to marine food processing)
Major coastal states include Andhra, Maharashtra, Karnataka, Kerala, Gujarat, Punjab and WB. Non-coastal states include UP, Punjab, etc.
Major segments of food processing
- Fruits and Vegetables.
- Milk and Milk Products.
- Meat and Poultry.
- Marine Products.
- Grain Processing.
- Consumer Food.
Upstream and Downstream requirements of food processing industries
Upstream stage: The upstream stage of the production process involves searching for and extracting raw materials. The upstream part of the production process does not do anything with the material itself, such as processing the material. This part of the process simply finds and extracts the raw material. Thus, any industry that relies on the extraction of raw materials commonly has an upstream stage in its production process.
Downstream stage: The downstream stage in the production process involves processing the materials collected during the upstream stage into a finished product. The downstream stage further includes the actual sale of that product to other businesses, governments, or private individuals. The downstream process has direct contact with customers through the finished product.
- Accessibility to raw materials.
- Modern extraction techniques.
- Good linkages with farmers.
- Storage facilities for raw materials like Grains, Meat, Fish, etc.
- Quality testing facilities.
- Transport facilities.
- Latest processing techniques.
- Latest processing machinery.
- Quality testing facilities.
- Organized retail stores for faster distribution.
Supply Chain Management
Supply chain management (SCM) is the management of the flow of goods. It includes the movement and storage of raw materials, inventory, and finished goods from the point of origin to the point of consumption.
Let’s analyze the case of Supply Chain Management for the Food Processing Industry. Raw materials like grains, raw meat, fish, etc. are collected from different sources. These sources may do preliminary processing of these to make components of a food product before passing over them to the main manufacturer through many middlemen. The manufacturer does the final processing of these components to make the food product. This completes only the first stage of supply management.
Now the finished product has to be delivered to the consumer. Here also there will be several middlemen and stages. The manufacturer normally hands over the food product to a wholesale dealer. The wholesaler passes the product to a retailer from where the consumer buys the processed food item for his personal use.
Thus, Supply Chain Management is the management of the upstream and downstream value-added flow of materials from suppliers→ company→ retailer→ final consumers.
If there are good Supply Chain Management practices in a country, then it will boost the economy as a whole. Good supply chain links help farmers, manufacturers, wholesalers, retailers and consumers. Everyone in the supply chain link will get inputs at a faster rate, at the right time, and at a cheaper cost.
Obstacles in the growth of food processing Industries
- Small-size companies: Indian food processing companies are small and can’t compete with global giants that invest heavily in R&D.
- Lack of good laboratories in India: Food export to the US and EU demands high-quality standards. India lacks good laboratories to check heavy metals and other toxic contaminants in food.
- Lack of skilled workforce. We have only a few graduates in Food Technology.
- Lack of the right vision and support from the government at the right time.
- Lack of good transportation facilities. Roads are overburdened.
- Lack of storage facilities and good production techniques.
- Lack of organized retail.
- Limitations in supply chains.
- Limitations in the quality.
- Lack of modern regulations.
The government of India is now encouraging food processing industries by providing :
- 100% FDI in this sector.
- Agri Export Zones.
- National Mission on Agriculture.
Major Schemes by the Government
- Vision 2015 for food processing: The Ministry of Food Processing Industries (MoFPI) has sponsored a study to suggest a roadmap for the growth of the food processing sector. M/S Rabo Bank has conducted a study and submitted a Vision Document suggesting a strategy & action plan for the food processing sector in India namely Vision 2015. Vision Document suggested a strategy to ensure faster growth of the sector. The adopted Vision 2015 provides for enhancing the level of processing of perishables from 6% to 20%, enhancing value addition from 20% to 35%, and increasing India’s share in the global food trade from 1.5% to 3% by the year 2015. To achieve these targets, an investment of Rs.100 thousand crores was estimated by the year 2015, out of which Rs.10,000 crores was to come from the Government. Accordingly, the Ministry of FPI formulated its 11th Plan schemes to attract the required investment in the sector.
- National Mission on Food Processing: The MOFPI launched a new Centrally Sponsored Scheme(CSS) – National Mission- on Food Processing (NMFP) on 1st April 2012 for implementation through States/UTs. The NMFP envisages the establishment of a National Mission as well as corresponding Missions at the State and District level. The basic objective of NMFP is the decentralization of implementation of food processing-related schemes to ensure substantial participation of State Governments/UTs. The mission is expected to improve the Ministry’s outreach significantly in terms of planning, supervision, and monitoring of various schemes apart from playing a more meaningful role in policy formation.
- Mega food parks: The Scheme of Mega Food Park aims to provide a mechanism to link agricultural production to the market by bringing together farmers, processors, and retailers to ensure maximizing value addition, minimizing wastage, increasing farmers’ income, and creating employment opportunities, particularly in the rural sector. The Mega Food Park Scheme is based on the “Cluster” approach and envisages a well-defined Agri/ horticultural-processing zone containing state-of-the-art processing facilities with support infrastructure and a well-established supply chain.
- Modernization of abattoirs: The scheme aims at providing facilities for scientific and less painful slaughtering, chilling, effluent treatment plants, by-product utilization, water, and power with required sanitary/phytosanitary conditions for the modernization of abattoirs. Modernization of abattoirs will also augment the essential supply base of hygienic raw materials to the meat processing industry, both for domestic consumption and exports, besides discouraging unauthorized slaughtering. The scheme of Setting up/ Modernization of Abattoirs provides for the induction of private capital, better technology, and backward and forward linkages. The scheme also provides for the implementation of projects preferably under PPP mode with the involvement of local bodies and has the flexibility for the involvement of private investors/exporters on a BOO/BOT/JV basis.
- Cold Chain Infrastructure: The Scheme for Integrated Cold Chain, Value Addition, and Preservation Infrastructure aims to encourage the setting up of cold chain facilities to provide integrated cold chain and preservation infrastructure facilities without breaking from the farm gate to the consumer.
- R&D, QA, Codex, and Promotion: The scheme for Quality Assurance, Codex, R&D, and Other Promotional Activities is being implemented to create an infrastructure of food testing laboratories in the country to establish a quality monitoring system for food processing, implement HACCP/ISO22000, ISO14000/GHP/GMP, and other quality management systems and to promote research and development for innovative products and process etc.
Boards and Institutions
NIFTEM – National Institute of Food Technology and Entrepreneurial Management.
IGPB – Indian Grape Processing Board.
IICPT – Indian Insitute of Crop Processing Technology.
NMPPB – National Meat and Poultry Processing Board.
The Present Status and Future of Food Processing Industries in India
- The estimated worth of the Indian Food Processing Industry is 121 b dollars.
- India has already witnessed the green and white revolution ie Agriculture and Milk.
- Now the focus is on the Pink Revolution: Meat and poultry sector.
- The packaged food sector in India is likely to double in 2015 to touch 30 b dollars.
- India is currently the world’s second-largest producer of food (next only to China). We have the potential to become the No.1 player in this sector.
Important Websites [for further reference]
Revolutions related to Food Production
- Pink Revolution – Meat and Poultry Production.
- Red Revolution – Meat & Tomato Production.
- Round Revolution – Potato Revolution.
- Silver Fiber Revolution – Cotton Revolution.
- Silver Revolution – Egg/Poultry Production.
- White Revolution – Milk/Dairy production (Operation Flood).
- Yellow Revolution – Oil Seeds production.
- Evergreen Revolution – Overall development of Agriculture.
- Blue Revolution – Fish Production.
- Brown Revolution – Leather /Cocoa production.
- Golden Fibre Revolution – Jute Production.
- Golden Revolution – Overall Horticulture development/Honey Production.
- Green Revolution – Agriculture in general.