WISC 2007
December 17, 2007, New Delhi

Talking Points For Inaugural Address By Shri Subodh Kant Sahai, Minister Of State For Food Processing Industries

• I am extremely happy at the initiative being taken by FICCI for organizing a conference on supply Chain.
• I would like to complement FICCI for working closely with the Government for identifying critical interventions that are required for enabling the Food Processing sector in achieving a quantum jump. I appreciate today's topic of the seminar, which is so important for supply chain linkage to bring the farmers to the market.
• India's agriculture has two important features - heterogeneity of production conditions and segmentation of national market. India's production and consumption centers are widely dispersed. As a result, actual cost of transportation becomes much higher due to long supply chain with inadequate cold storage facilities for perishable products.
• India's supply chain for perishables is characterized by extensive wastage and poor handling. The wastage occurs because of multiple points of manual handling, inadequate packaging and lack of temperature control. This is primarily due to the fact that India does not have a comprehensive cold chain network both in terms of storage and transportation.
• Despite vast potential of the food processing sector to generate income and growth in the country, this has not been realized due to a variety of factors.
• Supply chain management is of paramount importance to the food processing industry given the fact that the production of raw material being relatively unorganized, seasonal and spatially disbursed. The supply chain is long with incommensurate value added in terms of sorting, grading, storage and bulk handling facilities.
• At present farmers are not getting the due value for their produce. They are forced to sell their produce to the intermediaries at prices quoted by the intermediaries.
• At present, the share of producer in the value chain is less than 30%.
• As per study conducted by NIAM, while the consumer pays an amount of Rs. 11.6 for a kg. of fruit, the price realized by farmers is only Rs. 3.3 a kg (28%). The Trader at the village takes Rs. 4.1 (35%), wholesale dealer takes Rs. 1.7 (15%) and the retailer takes Rs. 2.5 (22%). All these margins are without any value addition to the product. Studies have reported that there are 6-7 intermediaries in the supply chain for fruits and vegetables in India as against 2-3 in the developed countries. This reduces the farm gate price and income levels.
• The reason for such distress selling are (1) lack of direct linkages with markets (2) lack of processing facilities (3) lack of on farm pre-cooling and value addition infrastructure (sorting, grading, etc.)
• Lack of processing and storage facilities for fruits and vegetables result in huge wastages estimated at about 35% of production valued at Rs. 33000 Crore.
• Effective Marketing Channels remains a key issue.

Importance of Food Retailing

• Success is linked to close integration of value chain, including production, post harvest management, manufacturing, distribution, and wholesale/retail.
• Organized retail could play a key role in changing the agriculture scenario of the country. About 55% of the total spending in the country is for food and this is very high compared to other countries.
• FDI inflow iin food processing is becoming stronger. A recent KPMG report says India has seen as many as 11 deals with Euro 106.4 million this year against Euro 4.2 million last year (2006).
• The retail chains would utilize the vast growing food retail market in India.
• Only 1% of food retail is through the organized sector. Huge scope for investment.
• Organized retail can ensure fast movement of agri produce after the harvest, reducing losses. It can connect the farmers and consumers who currently face several middlemen, resulting in their exploitation.
• The organized sector, on the contrary, will help the farmers to sustainable demand and get remunerative prices and make more rational decisions.
• Organized retail could promote the food processing industry by offering new products. The consumers will be able to get products from a much more hygienic and safe environment, besides getting a variety of quality products.
• It is projected that by 2007 itself 35 to 40 million sq ft. of retail space would be created.
• Development of organized retailing is expected to reduce wastages, enhance farmers income, enhance employment through food trade and generally increase rural prosperity.
• India may open up its 330 billion dollar retail market after being convinced that KIRANA stores will not be affected by big retailerss. DIPP has engaged an agency to make an in depth study on the impact of FDI in food retail on our domestic retails. The study report is expected to be available by March, 2008.

Ministry's Initiatives

Cold Chain

• To address the situation and with a view to create a modern cold chain for preservation and value addition of perishables, during the XI Plan, the Ministry is launching a revamped comprehensive Cold Chain infrastructure scheme for creating integrated cold chain infrastructure at different levels - farm level primary processing centre-cum-cold chain, collection/aggregation centres and Strategic Distribution Centres.
• As deterioration of produce sets in within a few hours of the harvesting, farm level cooling and primary processing is critical to empower farmers. Such infrastructure at the farm gate would help the farmers preserve and add value to his produce resulting in better realizations. The next level in the chain would be Collection Centres where the produce from individual farms in the hinterland would be aggregated/sorted and kept in Cold Storages for onward supply to Strategic Distribution Centres (SDCs), processing units and nearby consumption centers. The SDCs will have integrated infrastructure facilities like material handling equipment, refrigeration, IQF/Blast freezing facility, Frozen/CA/MA Storage, Modern Packaging Facilities, ancilliary equipment like X-ray, weigh bridge etc. The SDCs will be linked to retail supermarkets.

Mega Food Park

• A new scheme of Mega food parks in the country is proposed which is envisaged to be a well defined agri/horicultural processing zone containing state of the art processing facilities with support infrastructure and well established supply chain. The proposed scheme aims to provide a mechanism to bring together farmers, processors and retailers and link agricultural production to the market so as to ensure maximization of value addition, minimize wastages and improve farmers income. The Mega Food Park is designed ultimately to link the farmer with the retail markets with minimizing of the intermediaries.
• These food parks will function as sourcing hubs for the retail outlets.
• The Ministry has conducted five feasibility studies for mega food parks in the country. It is tentatively envisaged to support 30 Mega Food Parks, spread across the country.

The initiatives of the Ministry are geared towards promoting a vibrant food processing sector in the country. Organized Supply Chain and Food Retailing has a crucial role to play by way of providing the crucial market linkage.

THANK YOU