Microfinance Self-Help Groups in India: Living Up to Their Promise. This post introduces the book.Food processing Units a report.

In India, Self Help Groups or SHGs represent a unique approach to financial intermediation. The approach combines access to low-cost financial services with a process of self management and development for the women who join as members of an SHG. The SHGs are formed and supported usually by NGOs, or (increasingly) by Government agencies and sometimes directly by banks. SHGs are linked to banks first with a group deposit account, then for credit, which is disbursed to the group and in turn distributed to the members. There is a process of group formation and group leaders and members of trained on managing the savings and credit. Often too SHGs are linked to wider development or community programmes. SHGs are thus seen to confer many benefits, both economic and social, providing new and real opportunities for rural women that challenge the traditional barriers that women face. SHGs enable women to grow their savings and to access the credit which banks are increasingly willing (or directed) to lend. SHGs can also be community platforms from which women become active in village affairs, stand for local election or take action to address social or community issues (the abuse of women, alcohol, the dowry system, schools, local water supply).

SHG numbers have grown rapidly since 2000, across India first in the more developed south, now too in the north. The SHG ‘bank-linkage’ programme is the flagship microfinance programme of the National Bank for Agriculture and Rural Development (NABARD) which has actively supported the development of this programme since the early 1990s. For some time, NABARD’s website announced: Did you know: more than 400 women join the SHG movement in India every hour; an NGO joins our microfinance programme every day? But, as with much of microfinance everywhere, so with SHGs, alongside the growth numbers there are also some questions. Microfinance Institutions (MFIs) do usually publish information about their financial performance. Some MFIs are also beginning to report on their social performance. But in the case of SHGs, there is little information, even on financials. Even the growth and portfolio data reported by NABARD, at the time we started the study for this book, were cumulative rather than annual. And the data on loan repayments was unclear.

Our research then aimed to explore financial and social questions. On the financial side, how effective and transparent are the groups in managing their financial transactions? Are the groups sustainable? Are they equitable? On the social side, what does it take for SHGs to mobilise for social or community action? How effective are such actions? On both sides, financial and social, who is really benefiting? Do the poorest benefit, do they not join at all or if they do join, are they more likely to drop out?

Understand the Difference between Profit Making and Profiteering in Microfinance

Microfinance Focus, December 19, 2010 : This is in response to the article from Mr. Gurcharan Das in leading news papers on the status of micro finance.
First of all it must be understood that the events and institutions responsible for the ordinance of Andhra Pradesh and for viewing the micro finance institutions as villains originate from none other than Gurcharan Das's SKS micro finance institution. It is wrong to say that SKS microfinance is a non profit making NGO. It is already four years since SKS has converted itself into a NBFC U/S 24 of the company's act. Registered under this act SKS cannot be a non profit organisation, but a company which assures maximised profits to shareholders. That is the reason why SKS IPO was valued at Rs. 990/- on a face value of Rs. 10/-. It is therefore not surprising that these shares opened in the Bombay stock exchange at a flattering Rs. 1,400/-.

Have you ever wondered why SKS shares were marketed at Rs. 1,400/- when most shares of the scheduled commercial banks with the face value of Rs. 10/- are trading at rates between Rs. 100/- to Rs. 200/- years after their IPO's? What business does SKS do that the shareholders expect such a huge profit as to make them buy a share of Rs. 10/- at Rs. 1,400/-? As the writer himself admits, the company gives credit to the poor. Does business with poor earn so much of profit? Even if it does, can it be passed on to the shareholders? It is true that the companies should earn profit to make them sustainable. But should profiteering be the motto? Should this be advertised so vehemently? Should we not realise the difference between profit making and profiteering? When the facade of SKS was thus uncovered to show the profiteering face of SKS is it any wonder that common people all over the country turned their anger against micro finance institutions in general?

The truth is that funds are available in the Indian financial market for microfinance at 10 to 12%. The Govt. of India has declared lending to MFIs as priority sector. Experience has taught us that it will cost us 5% to manage these funds. Even after considering a provision of 2% to 3% there is no justification for charging interest rates in excess of 20% to the poor. As the volumes of business go up as in the case of SKS the cost apparently comes down drastically and the benefit ought to have been passed to the poor instead of the shareholders.

Inspite of calling themselves as pro poor most microfinance institutions in the country charge 24 to 48% on the loans given by them to the poor. Most loans have tenure of one year, creating pressure on the borrowers to repay at weekly intervals. The poor who begin with small loans drastically increase the size of the loans between Rs. 30,000/- to Rs. 50,000/- after three to four cycles. The MFI insists that such big loans also be repaid in 50 weeks. They also charge high rate of interest as already explained. Many loans have disguised costs like compulsory insurance, compulsory health insurance, surcharge etc. Poor people who borrow such loans by paying the disguised costs, naturally become depressed when pressurised for speedy repayment.

When one analyses the reasons for charging high rate of interest another black spot of the industry also gets exposed. The pay packages of senior executives and officers working in micro finance institutions appear to be much higher than their peers in the Indian scheduled commercial banking sector. The documents released by SKS during its IPO declared huge pay outs to their Executive Director amounting to crores of rupees. The Chairperson of SKS who was once called modern Gandhi also was drawing substantial pay package. Should servants of poor be enjoying such huge packages? It is becoming more and more apparent that many Indian MFIs look to foreign venture capitalists for equity and debt funds. The tax payers of the advanced countries who cannot even get 2 to 3% interest on their bank deposits in their own countries are investing Rs. hundreds of crores in micro finance business in this country. There are many agencies who act as intermediaries in this business. The poor of this country are made responsible to bring more profit to the venture capitalists, the shareholders, pay high wages to their own servants, also meet the expenses of the venture capitalists. So for whom are the poor people are working? Most poor are trapped in the vicious debt cycle, they are moving one loan to another just to service their depts. Most micro finance institutions in the name of poverty alleviation have become wolves in a sheep pack. They call themselves NGOs when talking to poor and declare themselves NBFCs when talking to investors. They are clearly dichotomous. The most surprising fact is that these wolves when faced with local finance companies who try to copy the wolves will immediately start yelling fraud, bogus and cry injustice!

The microfinance institutions develop a very close rapport with the poor, entice them with easy loans and pressurise them for recovery by blackmailing them on their trusted values. The poor naturally come under tremendous pressure which gets exploded when politicians who live in the name of the poor start a war of words against the MFIs. The law enacted in Andhra Pradesh is the sum result of all these factors.

The Andhra Pradesh the microfinance law is so harsh that the even emergency ordinance of 1975 is feeling shy of the AP enactment. This act will no doubt lead to license raj, corruption and untold miseries. This is also acting as stimulant to the politicians of various other states to try to become popular with the people by passing similar enactments.

Interestingly, there is another question. In our country where there is a bank branch on average for every 12,000 population meaning 3,000 families, why should micro finance institutions be functioning? The truth is that the failure of the banks is the victory for microfinance institutions. As revealed in the NSSO survey 2003 and as often quoted by the likes of Dr. Rangarajan more than 70% of the Indian farmers have not received credit from scheduled commercial banks. The financial inclusion programme of the Govt. of India has so far remained a facade.

Ground reality being such that, enactments of Andhra Pradesh will completely destroy the financial oasis of the wolves in the garb of MFI from providing even the trickle of funds that is now flowing to the poor people. Such acts will lead to more suicides without money than suicides having to pay them back.

We cannot compare our country to Tunisia, Colombia, Bangladesh. Our country has a lot of fund flow, it is possible to reach the funds to the poor without profiteering. The networks created by the micro finance institutions and self help group movement can achieve this. But the govt. must to pro actively respond as under

1. Check the profiteering attitude of the MFIs. Cap the interest rate to 7% to 8% above the cost of funds.
2. Instead of passing crazy ordinances, make effective use of the law of the land to deal with tragedies like suicides.
3. Give a further fillip to the SHG movement and the business correspondent programme by making necessary changes in the programme.
4. The governments and more specially the politicians should refrain from making false promises that they will give credit at subsidised rates to every one.
5. Even though we blame micro finance institutions as wolves we should realise that they also are playing a major role in nation building. Instead the mainstream institutions should effectively compete with the micro finance institutions. There are many instances where the public sector have successfully competed with the private sector to bring in equality.

Most importantly, a time has come for the micro finance institutions to introspect. Is this the goal the MFIs set out to achieve? Should business with poor lead to profiteering or healthy sustenance? If the intelligentsia involved in the sector donot appreciate the thin line between profit making and profiteering, they are sure to be cursed by the poor.

About the Author : Dr. L. H. Manjunath is the Executive Director of Shri Kshethra Dharmasthala Rural Development Project (R.) This MFI has recently awarded by The Micro Finance Institution of India award ,2010

Disclaimer : Views expressed in the article by the author are his own and do not necessarily represent those of Microfinance Focus. Microfinance Focus does not take any responsibility for correctness of the data presented by contributor.

Corporate Catalyst India A report on Indian Food Processing Industry
India is the world’s second largest producer of food next to China, and has the potential of
being the biggest with the food and agricultural sector. The food processing industry is one
of the largest industries in India-it is ranked fifth in terms of production, consumption,
export and expected growth. The food industry is on a high as Indians continue to have a
feast. Fuelled by what can be termed as a perfect ingredient for any industry - large
disposable incomes - the food sector has been witnessing a marked change in consumption
patterns, especially in terms of food.
Increasing incomes are always accompanied by a change in the food basket. The
proportionate expenditure on cereals, pulses, edible oil, sugar, salt and spices declines as
households climb the expenditure classes in urban India while the opposite happens in the
case of milk and milk products, meat, egg and fish, fruits and beverages.
For instance, the proportionate expenditure on staples (cereals, grams, pulses) declined from
45 per cent to 44 per cent in rural India while the figure settled at 32 per cent of the total
expenditure on food in urban India.
A large part of this shift in consumption is driven by the processed food market, which
accounts for 32 per cent of the total food market. It accounts for US$ 29.4 billion, in a total
estimated market of US$ 91.66 billion.
The Confederation of Indian Industry (CII) has estimated that the food processing sector
has the potential of attracting US$ 33 billion of investment in 10 years and generate
employment of 9 million person-days.
The Government has formulated and implemented several Plan Schemes to provide
financial assistance for setting up and modernizing food processing units, creation of
infrastructure, support for research and development and human resource development in
addition to other promotional measures to encourage the growth of the processed food
Food processing is a large sector that covers activities such as agriculture, horticulture,
plantation, animal husbandry and fisheries. It also includes other industries that use
agriculture inputs for manufacturing of edible products. The Ministry of Food Processing,
Government of India indicates the following segments within the Food Processing industry:
• Dairy, fruits & vegetable processing
• Grain processing
• Meat & poultry processing
• Fisheries
• Consumer foods including packaged foods, beverages and packaged drinking water.
Though the industry is large in size, it is still at a nascent stage in terms of development of
the country's total agriculture and food produce, only 2 per cent is processed.
Corporate Catalyst India A report on Indian Food Processing Industry
The industry size has been estimated at US$ 70 billion by the Ministry of Food Processing,
Government of India. The food processing industry contributed 6.3 per cent to India’s GDP
in 2003 and had a share of 6 per cent in total industrial production. The industry employs 1.6
million workers directly. The industry is estimated to be growing at 9-12 per cent during the
period 2002 to 2007.
Value addition of food products is expected to increase from the current 8 per cent to 35 per
cent by the end of 2025. Fruit & vegetable processing, which is currently around 2 per cent
of total production will increase to 10 per cent by 2010 and to 25 per cent by 2025.
The highest share of processed food is in the dairy sector, where 37 per cent of the total
produce is processed, of this only 15 per cent is processed by the organized sector. The
food processing industry in the country is on track to ensure profitability in the coming
decades. The sector is expected to attract phenomenal investments of about Rs 1,400 billion
in the next decade.
Food processing levels in various sub sectors:
1.2 1.7 0.4
0.5 1
Fruits and
Meat Poultry Marine
Organized sector Unorganized sector
Source: Ministry of food processing India,, Annual Report 2004
Segmentation of different sectors in food processing industry:
Sectors Products
Diary Whole Milk Powder, Skimmed milk powder, Condensed milk,
Ice cream, Butter and Ghee, Cheese
Fruits & Vegetables
Beverages, Juices, Concentrates, Pulps, Slices, Frozen &
Dehydrated products, Potato Wafers/Chips, etc
Grains & Cereals
Flour, Bakeries, Starch Glucose, Cornflakes, Malted Foods,
Vermicelli, Beer and Malt extracts, Grain based Alcohol
Fisheries Frozen & Canned products mainly in fresh form
Meat & Poultry Frozen and packed - mainly in fresh form, Egg Powder
Consumer Foods Snack food, Namkeens, Biscuits, Ready to eat food, Alcoholic
Corporate Catalyst India A report on Indian Food Processing Industry
and Non-alcoholic beverages
Source: Ministry of food processing India, Annual Report 2004
Primary food processing is a major industry with a highly fragmented structure that includes
hundreds of thousands of rice-mills and hullers, flour mills, pulse mills and oil-seed mills,
several thousands of bakeries, traditional food units and fruits, vegetable and spice
processing units in the unorganized sector. In comparison, the organized sector is relatively
small, with around 516 flour mills, 568 fish processing units, 5,293 fruit and vegetable
processing units, 171 meat processing units and numerous dairy processing units at state and
district levels. The share of the organized and unorganized sectors varies across different
segments of the industry.
Food processing units in organized sector
Flour mills 516
Fish processing units 568(+ 482 cold storage units)
Fruits and vegetables processing units 5,293
Meat processing units 171
Sweetened and aerated water units 656
Milk product units 266
Sugar mills 429
Solvent extract units 725
Rice mills 139,208
Modernized rice mills 35,088
Source: Ministry of food processing India, Annual Report 2004
1.1 Processed Foods Scenario with respect to Specific Sectors
The industry structure and ongoing transformation offers opportunities for organized
players to invest and grow. As the Indian market matures and consumers become more
quality and brand conscious, the organized sector is poised to grow and gain prominence.
ITEMS 2001-02 2002-03 2003-04 2004-05
Quantity Value Quantity Value Quantity Value Quantity Value
fruits and
385984.29 1100.57 423924.61 1206.93 429797.92 1125.81 589976.71 1462.72
292652.2 1500.93 359726.28 1800.53 793467.42 2024.81 629550.2 2252.33
1031177.35 1780.07 988950.37 1720.11 1279619.06 2316.44 616755.91 2032.34
Grand total 1709813.84 4381.57 1772601.26 4727.57 2502884.4 5467.06 1836282.82 5747.39
Source: Agricultural and Processed Food Products Export Development Authority, India
1.1.1 Dairy
In the dairy sector, most of the processing is done by the unorganized sector. Though the
share of organized sector is less than 15 per cent, it is expected to rise rapidly, especially in
the urban regions. Among the milk products manufactured by the organized sector, some of
Corporate Catalyst India A report on Indian Food Processing Industry
the prominent ones are ghee, butter, cheese, ice creams, milk powders, malted milk food,
condensed milk and infant foods.
The market size and growth rates of some of the products in organized dairy and consumer
food segments are shown in the graph below.
Ice Creams
Fruits Cheese
0 100 200 300 400 500
Growth rates (%)
Market Size (US$ million)
Market Size-growth rates of different product segments
Amongst dairy products, the 50,000 ton branded butter market, valued at US$ 133 million is
estimated to be growing at 8-10 per cent per annum. The cheese market is estimated to be
US$ 110 million in value terms and an estimated 54,000 tonnes in volume terms, and has
been growing at a compounded annual growth rate (CAGR) of 8-9 per cent during 1999-
2003. The growth in urban areas has been higher at about 15 per cent per annum. The ice
cream market in India is estimated to be about US$ 199 million per annum.
A few corporate players, including Multi National Corporations are now focusing on this
market. For example, Nestle and Britannia have forayed into emerging segments such as
Ultra Heated Treatment (UHT) and flavored milk. Ultra Heat Treated (UHT) milk is
becoming popular and the market is estimated at US$ 33.4 million (Rs1.5 billion).
1.1.2 Fruits and Vegetables
Fruit and vegetable processing in India is almost equally divided between the organized and
unorganized sectors, with the organized sector holding 48 per cent of the share. While
products like juices and pulp concentrate are largely manufactured by the organized sector,
the unorganized sector’s foothold is in the traditional areas of processed items like pickles,
sauces and squashes. By size, pickles form the strongest category.
The installed capacity of fruit and vegetable processing industry has increased from 1.11
million tonnes in 1993 to 2.33 million tonnes in 2004. Over the last few years, the industry
has seen a positive growth in ready-to-serve beverages, fruit juices and pulps, dehydrated and
frozen fruits and vegetable products, pickles, processed mushrooms and curried vegetables.
Corporate Catalyst India A report on Indian Food Processing Industry
The government expects the processing in this sector to grow to 10 per cent in 2010 and 25
per cent of the total produce by 2025. Most of the units engaged in above are currently
export oriented. Domestic consumption of processed fruits & vegetable products is low,
indicating a potential for growth through increased penetration of the domestic market.
Export of Processed Fruits and Vegetables, 2004-05
Dried and
Mango Pulp,
Pickle and
processed fruits
and vegetables,
1.1.3 Grains
India produces more than 200 million tonnes of different food grains every year. All major
grains – rice, wheat, maize, barley and millets like jowar (great millet), bajra (pearl millet) &
ragi (finger millet) are produced in the country. About 15 per cent of the annual production
of wheat is converted into wheat products. There are 10,000 pulse mills in the country with a
milling capacity of 14 million tonnes, milling about 75 per cent of annual pulse production.
The country is self sufficient in grain production and is the second largest rice producer in
the world with a 20 per cent global share. Primary milling of rice, wheat and pulses is the
most important activity in food grains processing. Total investment in the grain milling
sector up to December 2002 was around US$ 1.5 billion, of which US$ 253.5 million was
foreign investment. Branded rice is becoming popular in both the domestic as well as the
export market. Indian Basmati rice commands a premium in the international market. This
segment thus offers opportunities in marketing of branded grains, as well as grains
1.1.4 Meat and Poultry
India has a livestock population of 470 million, which includes 205 million cattle and 90
million buffaloes. Processing of meat products is licensed under Meat Food Products Order,
(MFPO), 1973. Total meat production in the country is currently estimated at 5 million
tonnes annually. Only about 1-2 per cent of the total meat is converted into value added
products. The rest is purchased raw and consumed at home. Poultry processing is also at a
nascent stage. The country produces about 450 million broilers and 33 billion eggs annually.
Growth rate of egg and broiler production is 16 per cent and 20 per cent respectively.
Corporate Catalyst India A report on Indian Food Processing Industry
9092 9121
1999-00 2000-01 2001-02 2002-03
Value of Meat Products manufactured under MFPO,
Value(US$ '000)
India has 3,600 slaughter houses, 9 modern abattoirs and 171 meat processing units licensed
under Meat Products Order. A few modern pork processing plants are also coming up in the
country. There is a large potential for setting up modern slaughter facilities and development
of cold chains in the meat and poultry processing sector. Buffalo meat is surplus in the
country and also has good export potential.
In the case of poultry, export from India is mostly to Maldives and Oman. Other markets
such as Japan, Malaysia, Indonesia and Singapore are being explored.
Export of Processed Animal Products, 2004-05
Animal casings,
552.33 Processed meat,
Buffalo meat,
Sheep/ Goat
meat, 8885.28
Dairy products,
The growing number of fast food outlets in the country has had a significant impact on the
meat processing industry in India. As per capita incomes rise and urban families live in
smaller units, the demand for processed meat products, which can be quickly cooked, has
been rising. Most of the production of meat and meat products continues to be in the
unorganised sector. Some branded products like Venky’s and Godrej’s Real Chicken are,
however, becoming popular in the domestic market.
1.1.5 Fish Processing
India is the third largest fish producer in the world and is second in inland fish production.
The fisheries sector contributes US$ 4.4 billion to the national income, which is about 1.4
per cent of the total GDP. With its over 8,000 km of coastline, 3 million hectares of
Corporate Catalyst India A report on Indian Food Processing Industry
reservoirs, 1.4 million hectares of brackish water, 50,600 sq km of continental shelf area and
2.2 million sq km of exclusive economic zone, India is endowed with rich fishery resources
and has vast potential for fishes from both inland and marine resources. Processing of fish
into canned and frozen forms is carried out almost entirely for the export market. It is widely
felt that India’s substantial fishery resources are under-utilized and there is tremendous
potential to increase the output of this sector. Total investment in the sector since 1991 has
been around US$ 600 million. With the liberalized policy, fish-processing sector has been
attracting more foreign investments. Foreign investment up to 2003 has been US$ 122.5
The units in the fish processing sector are largely small scale proprietary/ partnership firms
or fishermen co-operatives. In the past ten years, the corporate sector has increased its
operations in preservation, processing and export of coastal fish.
1.1.6 Consumer Foods
Consumer food industry includes packaged foods, aerated soft drinks, packaged drinking
water and alcoholic beverages.
Packaged or Convenience Foods
This segment comprises bakery products, ready-to-eat snacks, chips, namkeens (salted
snacks and savouries) and other processed foods/ snack foods.
The market size of confectioneries is estimated at US$ 484.3 million growing at the rate of
5.7 per cent per annum. Biscuits have a market of US$ 373.4 million, growing at 7.5 per cent
per annum. Other products like bread, chocolates are also growing at a significant rate.
There is a demand for Indian snack food (Ready-To-eat) in overseas markets. The exports
market is estimated at US$ 33.4 million and is growing at around 20 per cent annually.
The packaged food industry has around over 60,000 bakeries, 20,000 traditional food units
and several pasta food units. In the past decade several new biscuits & confectionery units,
soya processing units and starch/glucose/sorbitol producing units have come up.
Multinational Companies are coming up in confectionery and cocoa based products areas.
Aerated Soft Drinks
The aerated soft drinks industry in India comprises over 100 plants across all States. It
provides direct and indirect employment to over 125,000 employees. It has attracted one of
the highest foreign direct investments in the country, amounting to around US$ 1049
million. Two of the biggest global brands in this segment are well established in India. Soft
drinks constitute the third largest packaged foods segment, after packed tea and packed
biscuits. Total export earnings of the industry are over US$ 156 million per annum.
Penetration levels of aerated soft drinks in India are quite low compared to other developing
and developed markets, an indication of further potential for rapid growth.
Corporate Catalyst India A report on Indian Food Processing Industry
Packaged Drinking Water
The market size for packaged drinking water in India has been estimated at around US$ 223
million. The industry comprises 215 companies which have been granted license for
manufacturing packaged drinking water and 3 for manufacturing packaged natural mineral
water. Trends such as shortage of drinking water in the large metropolitan cities, changes in
consumer lifestyles leading to demand for convenience and availability of various packaged
sizes to suit different needs have led to a spurt in growth over the last 3-4 years and these
trends are expected to continue to fuel demand in this sector.
Alcoholic Beverages
India is the third largest market for alcoholic beverages in the world. The demand for spirits
and beer is estimated to be around 373 million cases per annum. There are 12 joint venture
companies producing grain based alcoholic beverages that have a combined licensed capacity
of 33.9 million litres per annum. 56 units are engaged in manufacturing beer under license
from the Government of India. The demand per annum for wine in the domestic market is
estimated to be around 6 million bottles (750 ml), while the domestic production of wine is
over 2.4 million bottles. The market is estimated to grow at a healthy rate of around 25 per
cent per annum in the next five years, indicating attractive investment potential.
Export of other Processed Food Products, 2004-05
Milled products,
Alcoholic and
non alcoholic
Jaggery and
Cocoa products, 35549.29
1.2 Competitive advantages that India enjoys
The Indian food processing sector is highly competitive.
There are a large number of players in the organised as well as unorganized sector. The
organised sector is small but growing - for example, it forms less than 15 per cent of the
dairy sector and around 48 per cent of the fruits and vegetable processing. The sector offers
Corporate Catalyst India A report on Indian Food Processing Industry
potential for growth and a large number of Multi National Corporations have entered into
India to leverage this opportunity.
Some of the successful overseas players in this sector include Unilever, Cadbury, Nestle and
Pepsi. These players face competition from strong Indian brands. Companies have adopted
various strategies to maintain and increase their market share in India. These include
competitive pricing, aggressive advertising campaign, expansion plans etc. Examples of such
strategies are
• Agro Tech Foods uses two strategies to counter the threat of low priced
competition. By launching lower-priced blended oils under the Sundrop umbrella,
and acquiring a fairly strong presence in the mass market for edible oils through its
low priced brand, Crystal. Secondly, it has reengineered its costs to lower its own
fixed cost structure.
• In the mass segment, Britannia has introduced biscuit packs at lower price points.
• Gits is strategically growing and broadening its export market and has launched new
international style export packaging.
• The strategy followed by Haldiram is competitive pricing and labor intensive
products that predominantly cater to the Indian palette. It follows aggressive
marketing in terms of TV advertisements, print ads and kiosks of Haldiram’s range
of products at railway stations.
• Hindustan Level Limited has followed the strategy of divesting its non-core
businesses and focusing on its food business as a growth driver.
• New products are being continuously launched in all product segments by Nestle.
The dairy portfolio consisting of regular and flavoured curds, skimmed milk and
fruit-based milk, condensed milk and butter is being expanded by launch of lassi and
Corporate Catalyst India A report on Indian Food Processing Industry
1.3 Diamond porter analysis of Indian Food Processing Industry
The various competitive advantages in the food processing sector in India have been
analyzed under the frame work given below:
• In Five-year tax holiday for new
food processing units in fruits
and vegetable processing along
with other benefits has bolstered
the Government’s resolution of
encouraging growth in this
• Liberalized overall policy regime
• High market awareness.
• Rapid urbanization, increases
literacy and rising per capita
income, have all caused rapid
growth and changes in demand
• India has a wide-ranging and
large raw material base suitable
for food processing industries.
• India has developed advanced
technology to support food
processing industry.
Related and supporting
• India’s comparatively cheaper
workforce can be effectively
utilized to setup large low cost
production bases for domestic and
export markets.
• diverse agro-climatic conditions
India is second in world in terms
of arable land (million hectares)
Firm strategy,
structure and
• A large number of domestic
as well as multi-national
• Highly competitive industry
Corporate Catalyst India A report on Indian Food Processing Industry
2.1 Policy Initiatives
Given the size of the industry and the nascent development stage, the food processing sector
is a key focus area for the Government of India. The importance of the sector is further
enhanced by the fact that over 70 per cent of the population depends upon agricultural
activity for livelihood. The government has therefore been focusing on commercialization
and value addition to agricultural produce, minimizing pre/post harvest wastage, generating
employment and export growth in this sector, through a number of regulatory and fiscal
incentives. The industry is largely unorganised, with a small but growing organised sector.
The popularity of food and agro products is not surprising when the sector is now offering a
growth of more than 150 per cent in sales. With such promise in the sector, a number of
foreign companies have joined the fray. While US brands such as McDonald's, Pizza Hut
and Kentucky Fried Chicken have become household names, more are on their way.
The new wave in the food industry is not only about foreign companies arriving here
attracted by the prospective size of the market. It is also about the migration of the Made in
India tag on food products traveling abroad. Indian food brands and fast moving consumer
goods (FMCGs) are now increasingly finding prime shelf-space in the retail chains of the US
and Europe. These include Cobra Beer, Bikanervala Foods, MTR Foods' ready-to-eat food
stuff, ITC's Kitchen of India and Satnam Overseas' Basmati rice.
The Government has formulated and implemented several schemes to provide financial
assistance for setting up and modernizing of food processing units, creation of
infrastructure, support for research and development and human resource development in
addition to other promotional measures to encourage the growth of the processed food
• The Centre has permitted under the Income Tax Act a deduction of 100 per cent of
profit for five years and 25 per cent of profit in the next five years in case of new agro
processing industries set up to package and preserve fruits and vegetables.
• Excise Duty of 16 per cent on dairy machinery has been fully waived off and excise duty
on meat, poultry and fish products has been reduced from 16 per cent to 8 per cent.
• Most of the processed food items have been exempted from the purview of licensing
under the Industries (Development and regulation) Act, 1951, except items reserved for
small-scale sector and alcoholic beverages.
• Food processing industries were included in the list of priority sector for bank lending in
• Automatic approval for foreign equity up to 100 per cent is available for most of the
processed food items except alcohol, beer and those reserved for small-scale sector
subject to certain conditions.
• The Union Commerce Ministry has approved a brand promotion campaign for valueadded
“Made in India” cashew being launched in the West Asian market by March end.
The campaign, mooted by Cashew Export Promotion Council of India (CEPCI),
involves a financial assistance of US$ 344,787 by the Ministry.
Corporate Catalyst India A report on Indian Food Processing Industry
• Full repatriation of profits and capital has been allowed.
• Zero duty import of capital goods and raw material for 100 per cent export oriented
• Sales of up to 50 per cent in domestic tariff area for agro based, 100 per cent export
oriented units is allowed.
• Government grants have been given for setting up common facilities in agro Food Park.
• Full duty exemption on all imports for units in export processing zones has been done.
2.2 Food Safety and Standard Act, 2006
Till the year 2005, thirteen different laws were applicable on the food and food processing
sector. Multiple laws/ regulations prescribe varied standards regarding food additives,
contaminants, food colours, preservatives and labeling. In order to rationalize the
multiplicity of food laws, a Group of Ministers (GoM) was set up to suggest legislative and
other changes to formulate integrated food law, to be a single reference point in relation to
regulation of food products. Based on the recommendations of the GoM the ministry of
food processing enacted the Food Safety & Standard Act (FSSA), 2006. Salient features of
the act:
• FSSA will be aided by several scientific panels and a central advisory committee to lay
down standards for food safety. These standards will include specifications for
ingredients, contaminants, pesticide residue, biological hazards and labels.
• The law will be enforced through State Commissioners of Food Safety and local level
• Everyone in the food sector is required to get a licence or a registration which would be
issued by local authorities.
• Every distributor is required to be able to identify any food article to its manufacturer,
and every seller to its distributor. Anyone in the sector should be able to initiate recall
procedures if he finds that the food sold had violated specified standards.
2.3 Foreign Direct Investment
The government of India is planning to offer 100 per cent foreign direct investment and
income tax benefits in the food processing sector.
Foreign direct investment (FDI) in the country's food sector is poised to hit the US$ 3-
billion mark. In the last one year alone, FDI approvals in food processing have doubled. The
cumulative FDI inflow in food processing reached US$ 2,804 million in March '06. In '05-
06, the sector received approvals worth US$ 41 million. This figure is almost double the US$
22 million approved in 2004-05.
Corporate Catalyst India A report on Indian Food Processing Industry
Nearly 30 per cent of FDI in this sector comes from EU countries such as Netherlands,
Germany, Italy and France. Some of the successful ventures from EU countries are Perfetti,
Cadbury, Godrej-Pilsbury, Nutricia International, Manjini Comaco, etc.
The US-based private equity fund, New Vernon Private Equity Limited (NVPEL), has
decided to invest Rs 45 0 million in Kochi-based masala major, Eastern Condiments, the
flagship company of Eastern Group.
America's largest chocolate and confectionery-maker Hershey is acquiring 51 per cent stake
in Godrej Beverages & Foods for US$ 54 million.
2.4 Vision strategy and action plan
Ministry had commissioned a Vision preparation for the growth of FPI sector. The Vision
Document was released on April 07, 2005. The Vision envisages that industry should aim to
increase processing level of perishables from 6per cent to 20 per cent, increase value
addition from the present level of 20 per cent to 34per cent and share in global trade up
from 1.6 per cent to 3 per cent, thus tripling the size of processed food industry by 2015.
Tripling of the size of industry is estimated to generate direct employment of 2.8 million and
indirect employment of 7.4 million persons.
2.5 Tax Relief for Speed Growth of FPI Sector
Budget of 2006- 07
Recognizing the enormous benefits that the food processing industry can bring to
agriculture and job creation, and to consumers, food processing will be treated as a priority
sector for bank credit. NABARD will create a separate window with a corpus of US$ 225
million for refinancing loans to the sector, especially for agro-processing infrastructure and
market development. Government will also set up the National Institute of Food
Technology Entrepreneurship and Management. The Paddy Processing Research Centre at
Thanjavur will be developed into a national-level institute.
• Output of foodgrains likely to be 209.3 MT
• 2 per cent credit on farm loans
• To double farm loans in 3-Years
• US$ 22 million fund to help tea growers
• Increased funding for repair of water bodies
• To double farm loans in 3 years Short term credit to farm
Food processing industry has been given a fillip as the condensed milk, ice cream,
preparation of meat, fish and poultry, pectins, pasta and yeast have been fully exempted
from excise duties.
2.6 Eleventh Five Year Plan (2007-2012) Initiatives
Corporate Catalyst India A report on Indian Food Processing Industry
• To cope up with the growth of 9% visualized during the 11th Five Year Plan milk
production has to be enhanced, so that, per capita availability is doubled as milk
contributes almost 60-65% of the total livestock product value
• To build participatory institutions of collective action for small-scale farmers that allow
them to get vertically integrated with livestock processors and input suppliers
• To create an environment in which farmers will increase investment in ways that will
improve productivity in the livestock sector
• To promote effective regulatory institutions to deal with the threat of environmental and
health crisis stemming from livestock
• To increase per ha. fish production through private sector to bring it at par with national
• To develop PAN culture for raising fish finger-lings
• Renovation of 1,642 seasonal ponds through NREG Programme to make available
approx. 6,000 ha. additional water area
• Development of fish seed production and infrastructure in vicinity of NVDA reservoirs
• Providing employment to fisherman communities by allotting water bodies on long lease
for fish culture
• To introduce biotechnology in fish seed and fish production
2.7 Infrastructure Development in Food Processing Sector
There is a lack of suitable infrastructure in the shape of cold chain, packaging centres, value
added centre, modernized abattoirs etc. Improvement in general infrastructure is also an aid
for energizing of sector. Government attaches highest priority to development and
expansion of physical infrastructure for facilitating prompt growth of industries. In order to
address the problem of infrastructure in food processing sector, the Government has
implemented the scheme for infrastructure development comprising the following
Food Park Scheme
The idea behind setting up of food parks is that small and medium entrepreneurs find it
difficult to invest in capital-intensive activities. Therefore, as a part of the strategy to develop
food processing infrastructure, the Ministry has been pro actively pursuing the task of setting
up of food parks in different parts of the country. In the food parks, common facilities like
cold storage, food testing and analysis lab, affluent treatment plant, common processing
facilities, packaging centre, power supply, water supply, seminar / conference / training
facilities etc can be assisted. Financial assistance for food parks is provided at 25 per cent for
general and 33.33 per cent for difficult areas subject to a maximum of Rs. 40 million. Under
the scheme, 02 food parks were assisted under 8th Plan, 39 under 9th Plan Scheme and 10
under 10th Plan. An amount of Rs. 1.04 billion has been sanctioned up to December 2005.
22 food parks have become operational.
In a bid to boost the food sector, the Government is working on agrizones and the concept
of mega food parks. Twenty such mega parks will come up across the country in various
cities to attract Foreign Direct Investment (FDI) in the food processing sector.
Corporate Catalyst India A report on Indian Food Processing Industry
The Government has released a total assistance of US$ 23 million to implement the Food
Parks Scheme. It has so far approved 50 food parks for assistance across the country. The
Centre also plans US$ 22 billion subsidy for at least 10 mega food processing parks.
Packaging Centres
The Scheme aims to provide facilities for packaging, which may help in enhancement of
shelf life of food products and make them internationally acceptable. Assistance at 25 per
cent of the project cost in general areas and 33.33 per cent in difficult areas subject to a
maximum of Rs. 20 million is provided for establishment of packaging centre. Assistance is
available to all implementing agencies. So far assistance of Rs. 1450 million has been
sanctioned to one packaging centre in Jammu & Kashmir.
Integrated Cold Chain Facility
The scheme is intended to improve viability of cold storages and enhance cold storage
capacity. Assistance at 25 per cent of the project cost in general areas and 33.33 per cent in
difficult areas subject to a maximum of Rs. 7.5 million is provided for establishment of cold
chain facilities. During 10th Plan an amount of Rs. 4010 million has been sanctioned
towards assistance for three cold storages in Gujarat, three in Maharashtra, one each in U.P.,
Kerala, Manipur, Meghalaya, Andhra Pradesh, Haryana, Delhi and Goa. During 9th Plan,
assistance of Rs. 148.6 million was extended to 53 cold storages.
Value Added Centre (VAC)
The Scheme is intended to enhance value addition leading to enhanced shelf life, higher total
realization and value addition at each level of handling and also to facilitate traceability.
Assistance at 25 per cent of the project cost in general areas and 33.33 per cent in difficult
areas subject to a maximum Rs. 7.5 million is provided for establishment and modernization
of value added centre. So far, three VACs i.e. one each in Maharashtra, Himachal Pradesh
and Punjab have been sanctioned assistance involving an amount of Rs. 1100 million during
10th plan.
Irradiation Facilities
The scheme aims at enhancing shelf life of the food product through irradiation techniques
by preventing infestation like in flour, sprouting and change in chemical composition of the
product (as in potato). Financial assistance at 25 per cent of the project cost in general areas
and 33.33 per cent in difficult areas subject to a maximum of Rs. 50 million is provided for
establishment of irradiation facilities. So far four irradiation projects i.e. two in Maharashtra
and one each in West Bengal and Haryana have been sanctioned assistance involving an
amount of Rs. 78.9 million.
Modernized Abattoir
The Scheme aims at scientific and hygienic slaughter, causing least pain to the cattle and
ensuring better byproduct utilization. Assistance at 25 per cent of the project cost in general
Corporate Catalyst India A report on Indian Food Processing Industry
areas and 33.33 per cent in difficult areas subject to a maximum of Rs. 40 million is provided
to local bodies for modernization of abattoirs. So far only one case i.e. of MCD Delhi has
been approved for grant of Rs. 40 million.
2.8 Sector-Specific Government Policies
2.8.1 Fruits and vegetables
Though no industrial license is required for setting up Fruits & Vegetable Processing
industries, setting-up 100 per cent Export Oriented Units require specific Govt. approvals.
• Many Fruits & Vegetables Processing industries are eligible for automatic approval
of foreign technology agreement and up to 51 per cent foreign equity participation
including tomatoes, mushrooms & other frozen vegetables, fruit, nuts, fruit-peel,
fruit jellies, marmalades, fruit juices & vegetable juices etc.
• This sector is regulated by the Fruit Products Order, 1955 (FPO), issued under the
Essential Commodities Act
• All processing units are required to obtain a license under this order
• Some items like: pickles & chutneys, tapioca sago and tapioca flour are reserved for
exclusive manufacture in the small scale sector
• Export of fruit & vegetable products is freely allowed
2.8.2 Fisheries
• Foreign equity is permitted in fish processing sector. Fish processing projects with a
minimum of 20 per cent value addition can be set up as 100 per cent Export
Oriented Units
• All items can be exported freely except for silver pomfrets of weight less than 300
• Export of marine products is allowed only after registration of the units as an
exporter with the Marine Products Export Development Authority (MPEDA),
2.8.3 Meat & Poultry
• The Meat Products Control Order, 1973 under the Essential Commodities Act, 1954
regulates the manufacture, quality and sale of all meat products
• A license is required under this order to set up of a factory for producing/processing
meat products
• Export of meat is subjected to pre-shipment inspection and a certificate is required
from State Animal Husbandry Department/Directorate of Marketing and Inspection
• Slaughter of cows is banned in most of the States. Export of beef is prohibited
• A No Objection Certificate (NOC) has to be obtained from the District
administration for the slaughter of cattle, buffaloes etc.
Corporate Catalyst India A report on Indian Food Processing Industry
• Permission from the civic bodies/State Government (Department of Animal
Husbandry) is also required before setting up a meat processing unit integrated with
a slaughter house
2.8.4 Milk & Milk products
• Milk and Milk Products Order (MMPO) regulates milk and milk products
production in the country. The order requires no permission for units handling less
than 10,000 litres of liquid milk per day or milk solids up to 500 tonnes per annum
• All the milk products except malted foods are covered in the category of industries
for which foreign equity participation up to 51 per cent is automatically allowed
• Ice cream, which was earlier reserved for manufacturing in the small scale sector, has
now been de-reserved. As such, no license is required for setting up of large scale
production facilities for manufacture of ice cream
• Subsequent to de canalization, exports of some milk based products are freely
allowed provided these units comply with the compulsory inspection requirements
of concerned agencies like: National Dairy Development Board, Export Inspection
Council etc.
2.8.5 Grains
The Rice Milling Industry (Regulation) Act 1958 & Rice Milling Industry (Regulation &
Licensing) Rules 1959 have been repealed from 28 May, 1997.
• Rice milling and pulse milling sectors, which were earlier reserved for the small scale
sector, have now been de reserved
• Since liberalization, there is no license requirement for setting up or capacity
expansion of roller flour mills. The mills can obtain their wheat supply from any
• There is no license requirement or price/distribution controls on manufacture of
wheat products
2.8.6 Packaged Foods
• The industry is de licensed and automatic approval for foreign investment up to 51
per cent of equity (except for items like malted food and items which are reserved
for production in small scale sector) is granted
• The setting up of 100 per cent export oriented units requires specific government
• The packaging laws and regulations affecting food products are mainly covered
under the Standards of Weights and Measures Act, 1976, and the Standards of
Weights and Measures (Packaged Commodities) Rules, 1977 (SWMA) specifying the
quantity and package labeling regulations for all products
• The Prevention of Food Adulteration Act, 1954, and the Prevention of Food
Adulteration Rules, 1955 (PFA) specify food adulteration/contamination norms and
permissible ingredients from consumer health and safety point of view
Corporate Catalyst India A report on Indian Food Processing Industry
• The Agmark Rules relate to the quality specifications and needs of certain
agricultural products to be eligible for Agmark certification
Corporate Catalyst India A report on Indian Food Processing Industry
3.1 Dabur India Ltd.
Dabur India Limited is the fourth largest FMCG Company in India with interests in Health
care, Personal care and Food products. Building on a legacy of quality and experience for
over 100 years, today Dabur has a turnover of Rs.19 billion with powerful brands like Dabur
Amla, Dabur Chyawanprash, Vatika, Hajmola & Real.
It is a closely held company with promoters holding at 78.4per cent of the total share capital.
Dabur foods is a 100 per cent subsidiary of Dabur India, with a turnover of Rs 858 million
in 2004.
Catering to the beverages and cullinary segment, its major products are fruit juices, cooling
pastes, coconut milk, tomato puree, lemon drink, chilli powder and honey.
The company will further focus on boosting sales to hotels, restaurants and caterers in
addition to retail sales.
3.2 Gitz Food Products Pvt. Ltd.
Gitz Food Products Pvt. Ltd. is majorly into snack foods and dairy products with a large
product range of sweet mix, namkeens, snack mixes, pure ghee, dairy whitner and milk
Gitz exports to Europe, UK, USA, Australia, Canada and the Middle East contributing to
the extent of approximately 35 per cent of its total revenue. Gitz is an unlisted private family
owned business.
Gitz is strategically growing and broadening its export market and has launched new
international style export packaging.
3.3 Godrej Industries Ltd
Godrej Industries Ltd, a member of the Rs. 45 billion (US$ 1 billion) Godrej Group is
India's leading manufacturer of oleo chemicals and food products. The foods division of
Godrej Industries produces and markets edible oils, vanaspati, bakery fats, fruit drinks, fruit
nectar and tomato puree. Their revenues from the food segment were US$ 41.3 million
(Rs1.9 billion) in FY04.
The division has two state-of-the-art manufacturing facilities: at Wadala in Mumbai, the
capital of the western Indian state of Maharashtra; and at Mandideep near Bhopal in the
northern Indian state of Madhya Pradesh. It has a national distribution network consisting of
800 distributors and 24 consignment agents. The plants are equipped with the best of
modern equipment for the processing and packaging of a wide variety of food products.
The company’s strategy is to increase capacity utilization in edible oils and to tap the niche
health conscious market.
Corporate Catalyst India A report on Indian Food Processing Industry
3.4 Haldiram Marketing Pvt. Ltd
Haldiram Marketing Pvt. Ltd was started in 1936. Their major share is namkeen and snack
food market in India along with syrups, crushes, chips and papads. They have a strong
presence in northern India especially in New Delhi. They exports to USA, UK, Canada,
Australia, Singapore and the UAE.
3.5 MTR Foods Ltd
MTR Foods Ltd is an ISO 9002 and HACCP certified company is amongst the top five
processed food manufacturers in India. They manufacture, market and export a wide range
of packaged foods to global markets that include USA, UK, Australia, New Zealand,
Malaysia, Singapore, UAE and Oman. The turnover is estimated at US$ 261 million (Rs12
billion), with the export market accounting for approximately 10 per cent of MTR’s total
Their wide range of products include ready-to-eat curries and rice, ready-to-cook gravies,
frozen foods, ice cream, instant snack and dessert mixes, spices(turmeric, coriander, black
pepper) and a variety of accompaniments like pickles and papads.
The strategy followed is competitive pricing and labor intensive products that predominantly
cater to the Indian palette.
After establishing itself in the south, MTR is developing its brand in the west and north
Indian markets in line with the rapid expansion of its products.
3.6 Parle Agro Private Ltd
Parle Agro Private Ltd is leading player in the fruit based beverages segment and the bottled
water segment. Its flagship product is the fruit based drink Frooti Mango, which has 75 per
cent market share. It is also present in the mineral water segment.
3.7 Mill Food
It is a subsidiary of LP Investments Ltd. which is a wholly owned subsidiary of Jagatjit
Industries Ltd. They cater mainly to the dairy products segment, with a product range of
milk powder, baby food, cheese and other milk products.
3.8 Hindustan Lever Limited (HLL)
The parent company Unilever holds 51.55 percent of HLL’s equity. Unilever is a Fortune
500 transnational, which sells Foods and Home and Personal Care brands in about 100
countries worldwide. India’s largest fast moving consumer goods company, with leadership
in Home & Personal Care Products and Foods & Beverages. HLL’s Foods segment is at 9
per cent, beverages are at 12 per cent of its businesses.
It caters mainly to the beverages, staples, snacks and dairy products with a wide range of
products like tea, instant coffee, biscuits, ice creams, salt, wheat flour, instant drinks, soups,
jams and squash.
Corporate Catalyst India A report on Indian Food Processing Industry
3.9 Britannia Industries Ltd
A leading player in the Indian organised biscuit market with nearly 30 per cent value share.
The Nusli Wadia group, one of the oldest business houses in India and Groupe Danone,
French multi-products food company, equally share the 48.5 per cent promoter holding in
Britannia. Britannia achieved sales of Rs. 18.18 billion in the financial year 2005-06.
It mainly caters to the bakery products segment with a product portfolio of biscuits,
flavoured milk, dairy whitener, ghee, bread, cake and rusk.
3.10 Agro Tech Foods
A dominant player in the edible oils and branded foods sector, in India. ConAgra Foods Inc
of USA, world’s third largest foods company, along with Tiger Brands of South Africa holds
a majority stake of 52.3 percent in Agro Tech Foods Ltd, through CAG Tech Holdings,
Mauritius. It made net sales of Rs. 2.8 billion in the second quarter of financial year 2007.
It mainly caters to the snacks and staples food market having a product portfolio of wheat
flour, edible oil, vanaspati, popcorn, French fries and green peas.
3.11 ITC Ltd.
ITC is a listed company with British American Tobacco (BAT) holding 33 per cent stake and
Institutions holding 50 per cent stake. ITC made its entry into the branded & packaged
foods business in August 2001 with the launch of the Kitchens of India brand. A more
broad based entry was made in mid 2002 and the company currently has a wider portfolio in
the confectionery, staples and snack foods segments.
It caters to the staples and snacks food segment having a product range of wheat flour, salt,
ready to eat meals, biscuits, confectionaries, snacks and cooking pastes.
3.12 Nestle India Pvt. Ltd.
Nestle India Pvt. Ltd. was incorporated in 1959 as Food Specialties, Nestle Alimentana,
Switzerland promoted Nestle India (NIL). Nestle India is a 51 percent subsidiary of Nestle
SA (founded 1866), which is today the world’s largest food and beverage company. The net
sales of Nestle for the year 2006 were Rs. 281.61 billion.
It majorly caters to dairy products, beverages and snack foods, with products ranging from
instant coffee, condensed milk, dairy whitener and infant food to chocolates and
The company is focusing on launching new products in all product segments.
3.13 PepsiCo India Pvt. Ltd.
Corporate Catalyst India A report on Indian Food Processing Industry
PepsiCo was founded in 1965 through the merger of Pepsi-Cola and Frito-Lay. It acquired
Tropicana in 1998 and further merged with The Quarter Oats Company including Gatorade
in 2001.
It caters to the beverages and snack food segment having a product portfolio of soft drinks,
fruit juices and chips.
It’s focus is high volume sales and is planning to raise capacity by setting up of new
Greenfield projects as well as appointing new franchisee bottlers.
3.14 Cadbury India Ltd.
Cadbury India Ltd is a subsidiary of Cadbury Schweppes which is a dominating player in the
Indian chocolate market with strong brands like Dairy Milk, Five Star, Perk, Gems etc.
Dairy milk is the largest chocolate brand in India. Chocolates and confectionery contribute
to 75 per cent of Cadbury’s turnover.
It basically caters to the confectionaries segment and is a dominant player. It has a huge
product portfolio including chocolates, hard boiled confectionery, malt foods, and cocoa
Corporate Catalyst India A report on Indian Food Processing Industry
The future of the Indian farmer depends on the success of the food industry as India's
prosperity is predominantly linked to the growth of incomes in the agrarian sector of the
economy. Increasing liberalization of the economy has tried to lift the protection that the
food and agriculture sector once enjoyed in the country. This has exposed the sector both to
the opportunities and challenges of the global food economy.
The market forces are compelling the Indian agriculture producers to increase the quality of
their farm produce while continuing to maintain their cost competitiveness in order to be
able to compete effectively in the global food market. Even in the domestic market, rising
per capita incomes and changing demographic profile of the population has ensured the
growing demand for processed and convenience foods. Increasing consumer awareness
about health and hygiene has shifted the focus of the market to "safe" foods.
The Indian food-processing sector is undergoing a veritable revolution - all the way from the
plate to the plough.
Indian food processing industry has seen significant growth and changes over the past few
years, driven by changing trends in markets, consumer segments and regulations. These
trends, such as changing demographics, growing population and rapid urbanization are
expected to continue in the future and, therefore, will shape the demand for value added
products and thus for food processing industry in India. The Government of India’s focus
towards food processing industry as a priority sector is expected to ensure policies to
support investment in this sector and attract more FDI. India, having access to vast pool of
natural resources and growing technical knowledge base, has strong comparative advantages
over other nations in this industry. The food processing sector in India is clearly an attractive
sector for investment and offers significant growth potential to investors.
Challenges faced by the Indian industry
The most crucial challenge today that the Indian food processing industry is facing is the
lack of suitable infrastructure in the shape of cold chain, packaging centres, value added
centre, modernized abattoirs etc.
Improvement in general infrastructure is also a must requirement for the industry to
progress. Some other important initiatives that are needed are
• Promotion of appropriate crossbreeds while conserving indigenous breeds of
• Establishment of livestock marketing system
• Promotion of rural backyard poultry in a cooperative marketing setup
• Development of cooperative dairy firms
• Enhancing livestock extension services
• Encouraging private veterinary clinic
• Institutionalising a framework for utilising synergy between restoration and creation
of water bodies for water harvesting and fishery
Corporate Catalyst India A report on Indian Food Processing Industry
• Provision of an insurance package to avoid distress
Strengths and opportunities that India enjoys
• It is the seventh largest country, with extensive administrative structure and
independent judiciary, a sound financial & infrastructural network and above all a
stable and thriving democracy
• Due to its diverse agro-climatic conditions, it has a wide-ranging and large raw
material base suitable for food processing industries. Presently a very small
percentage of these are processed into value added products
• It is one of the biggest emerging markets, with over 1 billion population and a 250
million strong middle class
• Rapid urbanisation, increased literacy and rising per capita income, have all caused
rapid growth and changes in demand patterns, leading to tremendous new
opportunities for exploiting the large latent market. An average Indian spends about
50 per cent of household expenditure on food items.
• Demand for processed/convenience food is constantly on the rise
• India's comparatively cheaper workforce can be effectively utilized to setup large low
cost production bases for domestic and export markets
• Liberalized overall policy regime, with specific incentives for high priority food
processing sector, provide a very conducive environment for investments and
exports in the sector
• Very good investment opportunities exist in many areas of food processing
industries, the important ones being : fruit & vegetable processing, meat, fish &
poultry processing, packaged, convenience food and drinks, milk products etc.

No comments:

Post a Comment


Title:Contact Tel/email:Content:City:Area:Looking for / Available :Category:URL if any :Date posted:You can copy/paste too.

...Indian Universities Web Directory...
International Property

AddThis Feed Button

New business?
However small
it may be,
success requires
proper planning,
preparation and

RIGHTS In business, there are no
guarantees. There’s simply
no way to eliminate risks
associated with starting an
enterprise. But you can improve
chances of success with good
planning, preparation and insight.
Find out what to consider when
starting a business.
Drawing up a business plan
It’s important to draft a
comprehensive and thoughtful
business plan. Much hinges on
it: Outside funding, credit from
suppliers, management of your
operation and finances, promotion
and marketing of your business,
and achievement of your goals
and objectives.
Creating a business plan will
force you to think about key issues
before you start your enterprise,
such as raising money and your
projected start-up costs and
marketing strategies. This will help
you figure out if your idea is
a winner.

The core of naming a business lies
in understanding the trademark
law. Trademarks help consumers
identify the makers of the goods
or services. Often, the name of
your company may also be used
as a trademark to identify your
company’s offerings. What’s in a
name, you may wonder. But if you
choose something too similar to a
competitor’s name, you might be
accused of violating the their legal
rights, and you could be forced to
change it and even pay monetary
damages. A good business name
should be:
■ Distinctive
■ Memorable
■ Easily spelled and
■ Suggest the products or
services you offer
■ Distinguish you from your
Many people opt for partnerships
with their friends or relatives for
doing business, because they
feel very comfortable dealing with
people they have known for a long
time. But before you do, create
a Partnership Agreement which
should include the following:
■ Amount of equity invested by
each partner
■ Type of business
■ How profit and loss will be
■ Each partner’s pay and
■ Distribution of assets on
■ Provisions for changes or
dissolving the partnership
■ Dispute settlement clause
■ Settlement in case of death or
■ Restrictions of authority
and expenditures
Financing A new business
Money can be raised either by
borrowing it from a friend, family
member, bank or selling ownership
interests (equity) in your business.
There’s no hard and fast rule on
the best way to raise money; you’ll
have to evaluate your situation
and decide what kind of loan or
investment you’re willing to take.
If you are going beyond family
and friends for loans or equity
investments, you’ll definitely need
a business plan.
If you take a loan, you will
have to repay the money over
time (usually monthly), with
interest. The lender won’t receive
an ownership interest in your
business, and you won’t have to
share any of your future profits
with the lender. On the other hand,
if you raise money by selling equity
(ownership interests), you will
not have to make these monthly
payments or repay the investment
at any particular date. L e g a l
All about you
The business of
doing business
your business is profitable, you’ll
need to share the profits with your
investors, generally in proportion
to the percentage of the business
they own.
Licences and permits
Business licences and permits
can range from the general (a
basic trade licence to operate
a business within a city), to the
specific (a permit to sell alcohol/
firearms/food items). Bear in mind
that regulations vary by industry.
Investigate into the licensing
and permit requirements that
affect your industry, and avoid
any temptation to ignore these
important regulatory details.
Being out of licensing and permit
compliance could leave you
unprotected legally, which may
lead to expensive penalties, and
can jeopardise your business.
Location of workplace
There is no universal rule for
choosing a business location.
The biggest consideration is
sometimes not where it is but
what it is. The building facilities
need to be appropriate for your
business whether you are working
from home, a business centre or
a rented space. Or you could take
up space in a market with similar
businesses or consumer groups.
Entering into agreements
Be mindful of employment
contracts as these take different
forms. All employees at a
company may be asked to sign
the same form of contract, or
each employee may have a
contract with the employer that
is exclusively applicable to his
or her employment agreement.
It mentions the kind of work the
employee will do, for how long,
and at what rate of pay. Please
consult an attorney who can
advise you about Confidentiality
and Non-Competition Agreements,
and clauses pertaining to
ownership of inventions, exclusive
employment, termination,
minimum wages, bonus,
arbitration and jurisdiction.
In almost all business dealings,
every time you or your company
agrees to take some action or
make a payment in exchange
for anything of value, a legal
contract is created. Make sure
that you and the other party
agree on the meaning of any
potentially ambiguous words or
phrases. Even a misplaced (or
unnoticed) punctuation mark can
dramatically change the scope of
your rights and obligations under a
contract. Watch out for commonly
misused words. When you agree to
bimonthly payments, for instance,
do you understand that you will be
paid every other month? Or do you
expect to be paid twice a month?
Some business agreements may
be simple enough for the regular
person to draft, while others may
require the help of a lawyer.
If your advertisement is deceptive,
you’ll face legal problems even
if you had the best intentions
while framing it. In addition, if
your advertisement contains a
false statement, you have already
violated the law. The fact that you
didn’t know ‘the information was
false’ is irrelevant. Advertisements
should conform to laws and
should not go against morality,
decency and the religious
susceptibilities of people.
Business Advisors
Finally, the key to success for any
entrepreneur is to have the best
set of advisors, not necessarily
the most expensive but the
ones you can trust totally. These
may includes lawyers, chartered
accountants, insurance advisors,
and bankers among others.

Decide on the meaing of potentially
ambiguous phrases. Even a misplaced
punctuat ion mark can change the
scope of your rights and obligations..