|
Indian
Food Processing - A fast Emerging Sector
|
|
|
Overview
With the rapid growth of the economy, a shift is seen in the consumption pattern, from cereals to more varied and nutritious diet of fruit and vegetables, milk, fish, meat and poultry products. This has resulted in the development of a sunrise industry namely the Food Processing Industries. The growth of food processing sector has nearly doubled to 13.7 per cent during the last four years, according to the Minister of State for Food Processing Industries Subodh Kant Sahai, who added that India has set a target of growing at 20 per cent by 2015. The industries has great export and employment potential. The policies are investor-friendly and more importantly technological and human resources are available aplenty in the country. India has the highest population of livestock in the world (485 million). It is also a major producer of fish (6.3 million per year) and poultry (489 million). Processing level is 26 percent for marine products, 6 percent for poultry and 20 percent for buffalo meat, as compared to 60-70 percent in advanced countries. India is the fifth largest exporter of bovine meat in the world. Poultry meat is the fastest growing animal protein in India. The industry has grown at 13 percent through 1991-2006. Poultry meat production is app. 2.2 million tons. The industry is moving from largely unorganized to a few large organized sector players. The Government of India boosts activities in food processing sector and attract private investment of $24 billion by provides assistance and incentives in the setting up of food processing industry. Demand The Ministry of Food Processing envisages tripling the size of the processed food sector by increasing the level of processing of perishables from 6 to 20 percent, value addition from 20 to 35 percent and share in global food trade from 1.5 to 3 percent by 2015. The thrust areas identified for strategic intervention are - establishing large food parks, modernization of abattoirs, cold chain and preservation infrastructure. The Indian consumer prefers to buy freshly cut meat from the wet market, rather than processed or frozen meat. Processing of large animals is therefore largely for the purpose of exports. The total processing capacity in India is over 1 million tons per annum, of which 40-50 percent is utilized. India exports more than 500,000 tons of meat, of which major share is buffalo meat. The production has been growing at the rate of 6 percent in last five years. Meat production is intimately linked to leather production, in which India has acquired second position in the world after Italy. Indian buffalo meat is witnessing strong demand in international markets due to its lean character and near organic nature. Unlike cow slaughter, there is no social taboo in killing buffalo for meat. Goat and lamb meat are relatively small segments where local demand is outstripping supply. The production levels in these two categories have been almost constant at 950,000 tons with annual exports of less than 10,000 tons. This has restricted large processing companies from developing business interests in this sector. FDI The sector has been attracting substantial FDI and is among the top ten sectors getting FDI equity. FDI up to 100 per cent equity is permitted under the automatic route in food and infrastructure like food parks and cold chains. Facts and Figures Around 60 firms in India raise livestock in large scale.
The sector is mainly geared towards the domestic market. According to
a Confederation of Indian Industry (CII) report, 21 percent of meat
and 6 percent of poultry are currently processed. By 2015, this is expected
to go up to 45 percent and 25 percent respectively. According to Ministry
of Food Processing's Annual Report, there are around 170 meat-processing
units around the country. Total export of meat products is around $0.3
million. Fish and related products is the highest category of export
among food products, amounting to around $600 million. Several more are under construction. The plants follow all the sanitary and phyto- sanitary measures required by the International Animal Health code of World Organization for Animal Health (O.I.E.). These plants mostly produce buffalo meat for export. India is becoming a major buffalo meat producing country. It will be a main player in the international market with additional establishment of the state-of-art-abattoirs cum meat processing plants. There are also four integrated poultry meat-processing plants, which follow international standard sanitary and phyto-sanitary measures. India has announced that it will reduce Customs duty on packaging machines from 15 percent to 5 percent. During the year 2006-07 Ministry of Food Processing assisted seven projects for manufacture of meat and meat food products. Policy The important regulations that foreign companies may need to know about are: a) The Food Safety and Standards Bill, 2006 Ministry of Food Processing is also working on an integrated food law that will replace 16 laws that currently govern the sector. A Food Quality and Standards Authority of India is also proposed to be set up for growth of the sector. Foreign meat processing equipment companies can employ agents/distributors, or have joint ventures with local firms. Licensing of design is also a good option to keep the costs low. Partnership with local companies is recommended in the early phase of market entry for small and medium enterprises. If the response from key clients is good, it is also worthwhile to open an office. Customs Duty Custom duty on packaging machines reduced. Central excise duty on meat, poultry and fish reduced to 8 per cent Income tax rebate allowed (100 per cent of profits for 5 years and 25 per cent of profits for the next 5 years) for new industries in fruits and vegetables besides institutional and credit support. On the Government side, there is also a renewed enthusiasm to popularise organic food cultivation since exports of organic food have grown to US$ 75.16 million crore over the past one year from US$ 25.05 million just two years ago. Prospects Municipal Abattoirs- The Greater Mumbai Municipal Corporation's slaughterhouse has been approved by the United Arab Emirates for exporting goat-meat to Dubai, thus making Mumbai the first city in the country whose municipal abattoir has received recognition in the international meat trade. The Ministry of Food Processing provides assistance to government abattoirs with the aim of scientific and hygienic slaughter, causing least pain to the cattle and ensuring better byproduct utilization as well as availability of better grade meat for the consumers. Assistance of 25 percent of the project cost in general areas and 33.33 percent in difficult areas subject to a maximum of $1 million is provided to local municipal authorities for modernization of abattoirs. Private sector end-user industries- Number of private
sector companies are investing heavily in meat/chicken/fish processing.
Some of the leading players are listed under "Prospective Buyers".
All leading chambers like FICCI, CII and ASSOCHAM have a food processing
sub-committee consisting of major food related companies. Government
has implemented the scheme for technology upgradation /establishment/
expansion/ modernization of the food processing industries. Under the
scheme, assistance is provided @ 25 percent of the project cost in general
areas and 33.33 percent in difficult areas subject to a maximum of $0.12
million and $0.18 million respectively. There are a number of companies supplying meat-processing equipment to end-user industries. Ministry of Food Processing, Government of India is the key agency within the government domain. It deals with quality control of meat food products from processing to finished product by way of ante-mortem and post-mortem inspection of meat animals to ensure hygienic conditions of processing of meat food products. Individual municipal authorities within different states that run abattoirs are also potential clients. However, most of the business opportunities for foreign companies are with the private sector. Market Entry A foreign company has the following options as part of its market entry strategy: a) Wholly owned subsidiary company- This is treated as an Indian company for all regulations. At least two shareholders are mandatory for a private limited company and seven for a public limited company. b) Joint venture with an Indian partner, preferably with majority equity participation -- this is again treated as an Indian company. Such strategic alliances are forged with local companies having substantial experience and expertise in the relevant line of activity. c) Liaison office -- this is treated as a foreign company. Its role is limited to collecting information about the possible market and providing information about the company to prospective clients. Such offices act as "listening and transmission posts," and are not allowed to undertake any business activity and cannot earn any income in India as per approval granted by the Reserve Bank of India. d) Project office -- this is treated as a foreign company, meant for executing specific projects. e) Branch office -- this is treated as a foreign company, meant for foreign companies engaged in manufacturing, trading and consulting; with prior approval of Reserve Bank of India. Issues & Obstacles Three main factors that undermine India's potential in reaching markets across the globe are high costs of getting produce from the farm to the market, huge gap between domestic and international standards on health, safety and quality and trade protection in different forms. India transportation costs, which are 20-30 percent higher than those in other countries are, also affect exports. Other factors, which affect the growth in meat processing market specifically, are insufficient of cold chain infrastructure and local consumer's preference to buy from the wet market than to buy processed food. Useful links |
|