The $22-billion package for India's farm sector will facilitate infrastructure like cold chains and post-harvest management systems in the food industry and help attract foreign investors.
The launch of a $14-billion fund to create farm gate infrastructure such as cold chains and post-harvest management systems and the decision to amend the Essential Commodities Act (ECA), which restrains private parties from storing grains beyond a certain limit, as well as to bring in a federal law to free farmers from restrictive trade practices, will encourage the development of the country's partially developed food processing sector. The fisheries sector will also benefit from the $1.5 billion allocated for creation of infrastructure and facilities for increasing exports.
The Central Institute of Post-Harvest Engineering and Technology, a leading farm research institute in India, has estimated that one-sixth of a farmer's produce perishes before he/she can sell it. The UNDP says about 40 per cent of food products are wasted before they reach the end customer. This is a loss to the farmer, the farm trade and the economy.
Many Indian and foreign companies, including foreign funds, are keen on investing in the food processing sector. Such investments play a critical role in in linking Indian farmers to consumers in the domestic and international markets.
India is already collaborating with Israel, the world leader in smart farming technologies, and the Netherlands, a global leader in managing supply chains for fresh vegetables, food and flowers. The package of measures will facilitate a deepening of this cooperation. Large international food processing companies such as Kraft, PepsiCo, Coca Cola, Unilever, Danone, Cargill, Kellogg's, McCain and Nestle have invested about $33 billion and produce about $159 billion of output, according to the website of Invest India, the foreign investment promotion and facilitation arm of the Government of India. In the US, the sector produces almost $2 trillion of output, it produces $1.4-trillion output in China and $1.1 trillion in the EU (making it Europe's largest industry). Given that India is among the top two or three producers of several crops, there is massive scope for much higher levels of value addition.
Currently, trade in agricultural commodities is highly regulated in India. Farmers can sell their produce only to licensed agents, that too in designated markets within their state. Then, laws such as ECA place severe restrictions on quantities that traders, food processors and aggregators can store. These have restricted the growth of the good processing sector. With these restrictions now removed, or substantially diluted, the industry looks set for exponential growth. This will also increase farmers' incomes, rural prosperity and demand for a range of consumer goods. “Deregulation of mandis (markets) is a very bold step... When considered along with farm gate infrastructure and proposed investments in value chain, it would go a long way in helping farmers realise 25-30 per cent higher income, depending on the produce. Farm gate infrastructure would... help significantly reduce wastage particularly for fruits and vegetables,” Satyam Shivam Sundaram, Partner, Government & Public Sector, EY India, was quoted as telling The Economic Times, India's largest financial daily.