[Editorial] India’s Food Processing Potential

Food Processing

What the editorial is about?

Production-Linked Incentive Scheme for Food Processing Industry.

Context:

India has formulated a unique Production-Linked Incentive Scheme (PLIS) which aims to incentivise incremental sales with ₹10,900 crores earmarked for the scheme.

Most probable and repeated topics of upsc prelims

What is the scope of the Food Processing Industry in India?

Competitive Advantage

  • India is one of the largest producers of fruits and vegetables in the world.
  • India has a competitive advantage in terms of resource endowment, large domestic market and scope for promoting value-added products.

Marketplace Stats of Food Processing in India

  • This zone is anticipated to generate nine million jobs with the aid of 2024.
  • The Indian food industry is increasing at a CAGR of 11% and the food processing region accounts for 32% of the overall food industry.
  • By the year 2030, Indian annual household intake is predicted to triple, making India the 5th-biggest customer inside the globe.

Impact of Covid-19

  • Due to the pandemic, there has been a significant number of people working from home, resulting in a 170% rise in demand for products from the ready-to-eat market between March-June 2020.

The Need for a Production-Linked Incentive Scheme (PLIS)

  • The challenge to feed the 10 billion people by mid of 21st-century demands efficient ways of production that are both economically viable and ecologically sustainable.
  • The pandemic has accelerated the demand for ready-to-eat products.
  • The emerging technologies have revamped the traditional approach of farm to fork with a lower environmental footprint.

Objectives of Production-Linked Incentive Scheme (PLIS)

  • To provide global visibility and wider acceptance in the international markets for Indian brands of products.
  • To increase employment opportunities.
  • To ensure remunerative prices for farm produce and increase the income of farmers.
  • To support Food manufacturing entities with minimum sales and willing to make minimum investment for expansion of processing capacity and branding abroad to incentivise emergence of strong Indian brands.

What is the progress made so far by the Production-Linked Incentive Scheme (PLIS)?

  • A sum of Rs. 10,900 crores have been outlaid for the scheme.
  • 60 applicants have already been selected under Category 1. These firms are incentivised for incremental sales and branding/marketing initiatives taken abroad.
  • Beneficiaries have been obliged to commit a minimum investment while applying for the scheme.
  • With this, the sector is likely to witness at least Rs. 6,500 crores worth of investment over the next 2 years.

Key Features and Challenges

Branding and Marketing

  • Sales promotion is positively related to increased sales volume for the exports market, but inversely related to profitability. To bridge this gap, of the 13 key sectors announced under the PLIS.
  • The ‘Food Processing PLIS’ outlays a dedicated Category 3 for supporting branding and marketing activities in foreign markets. This ensures that India’s share of value-added products in the export basket is improved.
  • It may leverage its unique geographical proximity to the untapped markets of Europe, the Middle East/West Asia, Africa, Oceania and Japan.

Investment in public infrastructure

  • It can be seen that with higher public investments, Andhra Pradesh, Gujarat, Maharashtra, Tamil Nadu and Uttar Pradesh have ranked among the highest in the ‘Public Infrastructure and Utilities’ parameter by the Good Governance Index 2020-21.
  • With good connectivity to Rural Habitations, these states show the highest improvement. A 1% increase in public infrastructure is expected to increase the food manufacturing output by 0.06% in the longer run.
  • So, PLIS plays a significant role as an investment in public infrastructure.

Access to credit

  • The access of micro, small, and medium enterprises (MSMEs) to finance is a perennial problem in the country, predominating due to a lack of proper credit history mechanism for MSMEs.
  • Smart financing alternatives such as peer-to-peer (P2P) lending hold potential for micro-food processors.
  • Access to working capital has in theory been addressed by the Trade Receivables Discounting System (TReDS), a platform for facilitating the financing/discounting of trade receivables of MSMEs through multiple financiers.

Way Forward

  • The pandemic has bolstered the demand for functional foods. It is expected to provide a launchpad for health-orientated start-ups and micro-food processing units.
  • New alternatives are being explored which have immense potential in replacing the staples of rice and wheat in the form of Nutri-cereals, plant-based proteins, fermented foods, health bars and even fresh fortified foods for pets. By welcoming the new brands in the category, PLIS aims to create an enabling ecosystem for innovation in both food products and processes.
  • With growing populations, changing food habits and unrestricted use of natural resources, nations must come together and lay out a road map for a common efficient food value chain.
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