Food processing and related industries in India- scope and

significance, location, upstream and downstream

requirements, supply chain management
-> See important sectors in food processing
-> See important states
-> See challenges, and reasons why those challenges exist
Scope and Significance
More than 35,000 registered units
Contributes about 10% to the agricultural GDP (which is quite
low as compared to many developed economies)
As per ASI 2010 survey, food processing provides the most
employment out of any industrial stream (employs about 17
lakh people)
If set up near agriculture-heavy states/ areas, they help bring
employment, exposure to industry, provide ready market for
agricultural produce, and limit rural-urban migration
Help reduce food inflation by cutting out middlemen (at least
inflation pass through into manufactured food)
Indirectly also helps in crop diversification; if there arent food
processing industries close by, it is in the interest of farmers
to grow something that can endure distance and time, and
hence cereals are preferred over horticultural products
Potential
Research shows that food habits are changing, and tastes are
moving away from cereals towards horticultural products and
processed food (because of urbanization, demographic change
etc.); household consumption is expected to double by 2020
India has abundant raw material (both crops and livestock)
and manpower for this industry; can make up investment
shortages by inviting FDI
Government has already taken the step of deregulating many
food-processing sectors that were earlier reserved for SMEs
Challenges:
India currently processes only about 6% of its total vegetables
and fruits, as against over 25% in China and USA
Indias labour laws, history of regulation and reservation for
SMEs, high indirect taxes, bad supply chain, and lack of
infrastructure have led to many food processing industries
being stuck in the medium-size phase, thereby not exploiting
economies of scale
High packaging costs and post-harvest losses
Lack of organized retail reduces the variety of products that
can be commercially viable (cuts out many kinds of products
that require cold storage)

Lack of credible food testing facilities like FDA in USA

Lack of R&D and skilled manpower
Transportation problems: Indian trucks cover only about a 3rd
of distances trucks cover in a day; railway freight charges are
some of the most expensive in the world, and the speeds,
some of the slowest; ports are in shambles, with high
turnaround times,

Location
Majority of the food processing units are located in coastal areas:
AP, Maharashtra, Karnataka, Kerala, Gujarat, Punjab, West Bengal
etc. each have more than a thousand registered units.
Upstream and Downstream Requirements
Supply Chain Management
Raw materials like grains, raw meat, fish etc are collected by
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 a number of middlemen and stages. The
manufacturer normally hands over the food product to a wholesale
dealer. The wholesaler pass 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 upstream

and downstream value added flow of materials from suppliers
company retailer final consumers.