Foodworld India 2005
November 28-30, 2005, India

Address by Mr. D.P. Singh, Secretary, Ministry of Food Processing Industries

The Hon'ble Union Minister of State (Independent Charge), Food Processing Industries, Shri Subodh Kant Sahai, the Hon'ble Chief Minister, West Bengal, Shri Buddhadeb Bhattacharjee, Shri Onkar S. Kanwar, President, FICCI, Dr. Hans-Joachim, Korber, CEO, Metro Group, Mr. Rajeev Bakshi, Chairman, FICCI, Food Processing Committee, Dr. Amit Mitra, Secretary General, FICCI and friends. It is a matter of great privilege to be present here before this august gathering on occasion of "FOODWORLD INDIA 2005".

India, with the second largest arable land in the world and with diverse agro climatic zones across the country, has tremendous production advantages in agriculture, with the potential to cultivate a vast range of agricultural products. India has strong base in agriculture and provides a large and varied raw material base for food processing. We are the third largest producer of food in the world. We produce over 91 million times of milk (highest in the world), 150 million tones of fruits & vegetables (second largest), have 485 million livestock (largest), 212 million tones of foodgrain (third largest) and are significant producers of eggs, poultry and fish.

However, processing levels are low. Conservative estimates put processing levels in the Fruits & Vegetables Sector at 2%, Poultry 6% Milk 35% (only 13% in modern dairies), Marine products 8%, Buffalo meat 21%. Processing in the areas of food grains, oilseed, tea, coffee, etc., where raw produce has perforce to be processed have the requisite levels of Primary processing. Even in these products the demands of modern food processing sector are still emerging.

Employing over 120 lakh persons, the food processing sector though in a nascent stage constitutes 13% of manufacturing GDP. Gross consumption of food in India is Rs. 8,60,000 crores. Of this the market size of primary processed food is Rs. 2,80,000 crores whereas value added food amounts to Rs. 1,80,000 crores. Food processing has grown at a rate of 7.1% per annum during the period 1993-94 to 2002-03. The higher rate of growth as compared to the Agriculture growth rate and the GDP growth rate is indicative of the increased availability of surpluses, changing life styles, tastes and higher disposable income with consumers. Within the food basket the growth rate for fruit and vegetables, milk, meat and poultry products and convenience snack foods have been higher than for staples like sugar, pulses and grains.

And as a consumer, India with a population of 1.08 billion growing at about 1.7% per annum, is a large and growing market for food products. Food is the single largest component of private consumer expenditure, accounting for as much as 49% of the total. Further , the upward mobility of income classes and increasing need for convenience and hygiene will drive demand for perishable, non food staples and processed foods.

We have thus, tremendous natural advantages in the development of food processing sector. A large raw material base, a vast pool of scientific and technical manpower, a huge expanding market and a number of premium food products provide a great opportunity to food processing industry for exploitation of this potential.

Exports of Agri products has been going up over the years in quantitative terms. They constitute about 12% of the Indian merchandise basket. Constituting just 1.6% of global exports, we need to step up exports to take advantage of our low factor costs. Examples of success as in the case of gherkins from Karnataka and grapes from Maharashtra come to mind. We have to take lessons from these successes to replicate the model in other locations and states. Further, India's geographical situation gives it the unique advantage of being at the centre of Middle East and Far East including countries like Japan, Singapore, Thailand, Malaysia, Korea etc. We also have range of agro climatic zones. This gives India the competitive edge for linking these markets as an export Centre.

However, despite substantial raw material base and inherent strength in this sector, the growth of food processing industry has been sub-optimal because of high cost and low level of domestic demand. Processing level in fruits and vegetables is as low at 2%, thus leading to huge loss of produce. The agri and food sector faces several challenges which hamper realisation of potential. Long and fragmented supply chain is the single largest bottleneck facing the sector. Supply chain constraints together with demand related issues have cumulatively resulted in inefficiencies. Further inadequate storage, handling and processing has led to unacceptable levels of wastage and value loss.

The Government of India has taken many steps to give impetus to this sector which include virtual de-licensing of the sector, inclusion in the priority sector for lending, allowing 100% FDI except in alcoholic beverages and retailing, several duty and tax reliefs, financial assistance for infrastructure building, setting up of food processing units etc. In case of export-oriented units, foreign investment is permitted even in case of items reserved for small scale sector. In addition, the export oriented units are given a number of incentives and concessions under the Export-Import Policy, such as, duty free import of capital goods, raw materials and intermediates.

In the above backdrop, India has adopted "Vision 2015" which aims to triple the size of food sector in 10 years time by increasing the level of processing of perishables from 6% to 20%, value addition from 20% to 35%, share in global trade from 1.6% to 3%. This would require making processed food affordable domestically and competitive globally. An investment of about Rs. 1,10,000 crores is envisaged in the next ten years.

To realize its potential for growth, food processing sector will have to build on its strengths and its ability to adjust to a changing environment. To remain viable and enhance its market competitiveness in both domestic and international markets, the sector will have to focus on "market drivers" which are health and convenience issues globally added with the issues of price sensitivity for the domestic market.

To enhance our competitiveness the Government of India is in the midst of looking at a Vision, Strategy and Action Plan for this sector. This would address issues of taxation, organized retail, incentivising infrastructure development, a relook at varietal availability of crops, marketing interventions and regulations, strengthening of the R&D and HRD infrastructure besides issues of food safety and regulation. Backed with increased support from Government to this sector I am sure our entrepreneurs shall leave no stone unturned to make India the Food Factory of the world. I am sure this Conference shall bring us a greater awareness of the world of Global Food Business and how we in India can embrace these opportunities.

I would like to thank the organisers of the event having chosen the subjects so relevant to global and Indian food industry ranging from management of supply chain, trends in global food market, retailing, consumer behaviour and patterns, food safety etc. I would like to thank our friends from abroad who have taken the trouble to be among us today to share their knowledge and vision with us. I am sure that fruitful deliberations will take place in this forum and the food industry shall benefit from interactions in this conference.

I wish the Conference all success.