FOOD PROCESSING INDUSTRY IN INDIA
SUMMARY
·
192 Million Hectares of gross cropped area.
·
89.9 Million Hectares of net irrigated area.
·
127 agro-climactic zones.
·
42 mega food parks being set up with an
allocated investment of INR 98 Billion.
REASONS TO INVEST
·
A rich agriculture resource base – India was
ranked No. 1 in the world in 2012 in the production of bananas, mangoes,
papayas, chickpea, ginger, okra, whole buffalo, goat milk and buffalo meat.
·
India ranks second in the world in the
production of sugarcane, rice, potatoes, wheat, garlic, groundnut (with
shells), dry onion, green pea, pumpkin, gourds, cauliflower, tea, tomatoes,
lentils, wheat and cow milk.
·
The country’s gross cropped area amounts to199
Million hectares, with a cropping intensity of 140%. The net irrigated area is
89.9 Million hectares.
·
A total of 127 agro-climatic zones have been
identified in India.
·
Strategic geographic location and proximity to
food-importing nations makes India favorable for the export of processed foods.
·
An extensive network of food processing
training, academic and research institutes spans the country.
·
42 mega food parks are being set up in
public-private partnership at an investment of INR 98 Billion rupees. The parks
have around 1200 developed plots with basic infrastructure enabled that
entrepreneurs can lease for the setting up of food processing and ancillary
units.
·
The cost of skilled manpower is relatively low
as compared to other countries.
·
Attractive fiscal incentives have been instated
by central and state governments and these include capital subsidies, tax
rebates, depreciation benefits, as well as reduced custom and excise duties for
processed food and machinery.
·
The major global players in the food domain are
already present in India.
·
121 cold chain projects are being set up to
develop supply chain infrastructure.
STATISTICS
·
India’s food processing sector ranks fifth in
the world in exports, production and consumption.
·
Major parts of the food processing sector are
milled grain, sugar, edible oils, beverages and dairy products.
·
The contribution of the food processing industry
to the gross domestic product at 2004-05 prices in 2012-13 amounts to INR
845.22 Billion. India’s food processing industry has grown annually at 8.4% for
the last 5 years, up to 2012-13.
·
The value addition of the food processing sector
as a share of GDP manufacturing was 9.8% in 2012-13.
·
Investment in registered food processing sector
had grown by 20.1% at the end of 2012.
·
The number of registered processing factories
has increased from 35,838 in 2010-11 to 36,881 in 2011-12, marking a growth
rate of 2.9%.
·
The industry is also one of the largest
employment creators, with growth in direct employment in the organised food
processing sector standing at 6.05% between 2010-11 and 2011-12.
·
Food is the biggest expense for an urban Indian
household. About 38.6% of the total consumption expenditure of households was
spent on food in 2011-12.
·
The total household expenditure on the purchase
of food items in 2012-13 was INR 11 Trillion. An average household in India
spent INR 41,856 on food.
GROWTH DRIVERS
·
Liberalization and the growth of organized
retail has made the Indian market more attractive for global players. With a
large agricultural sector, abundant livestock and cost competitiveness, India
is fast emerging as a sourcing hub of processed food.
·
A population of 1.2 Billion people, with the
world’s highest youth population – India has 572 Million people under the age
of 24.
·
Rising income levels and a growing middle class.
·
One-third of the population will be living in
urban areas by 2020.
·
Increasing desire for branded food as well as
increased spending power.
·
Large and distinct consumer brackets to support
customised offerings, new categories and brands within each segment.
·
Consumption in India is driven towards packaged
and ready-to-eat foods.
·
Favorable economic and cultural transformation
and a shift in attitudes and lifestyles have consumers experimenting with
different cuisine, tastes and new brands. There is an awareness and concern for
wellness and health, for high protein, low-fat, wholegrain, organic food.
·
Processed food exports and related products have
been rising steadily, the main destinations being the Middle East and Southeast
Asia.
·
India is a global outsourcing hub, with large
retailers sourcing from India owing to abundant raw materials, supply and cost
advantages.
FDI POLICY
·
100% FDI is permitted in the automatic route for
most food products except for items reserved for micro and small enterprises.
·
100% FDI is permitted for alcoholic beverages,
with the requirement of an industrial license.
·
For pickles, mustard oil, groundnut oil and
bread – items reserved for the micro small and medium sector, 24% foreign
direct investment is allowed under the automatic route, with the requirement of
prior approval from the Foreign Investment Promotion Board for FDI amounting to
more than 24%.
SECTOR POLICY
·
National Food Processing Policy aims to increase
the level of food processing from 10% in 2010 to 25% in 2025.
·
Food Processing is recognized as a priority
sector in the new manufacturing policy of 2011.
·
The National Mission on Food Processing and the
Ministry of Food Processing Industries have launched a new centrally sponsored
scheme in April 2012, for implementation through state and union territory
governments.
·
The basic objective of the Natonal Mission on
Food Processing is decentralization of the implementation of food processing
related schemes for ensuring substantial participation of state and union
territory governments.
FINANCIAL SUPPORT
KEY PROVISIONS OF
THE 2O14-2O15 UNION BUDGET :
·
INR 500 Million has been allocated for the
development of indigenous cattle breeds and an equal amount has been set for
starting a blue revolution in inland fisheries. It has also been decided to
provide for a lock-in period of eight years for use of assets in instances
where deduction under Section 35 A of teh Income Tax Act has been claimed.
·
Any of the following two deductions can be
availed:
·
Investment allowance (additional depreciation)
at the rate of 15% to manufacturing companies that invest more than INR 1
Billion in plant and machinery acquired and installed between 01.04.2013 and
31.03.2015 provided the aggregate amount of investment in new plant and machinery
during the said period exceeds INR 1 Billion.
2. In order to provide a further fillip to companies engaged in manufacturing, the said benefit of an additional deduction of 15% of the cost of new plant and machinery exceeding INR 250 Million, acquired and installed during any previous year, until 31.3.2017.
2. In order to provide a further fillip to companies engaged in manufacturing, the said benefit of an additional deduction of 15% of the cost of new plant and machinery exceeding INR 250 Million, acquired and installed during any previous year, until 31.3.2017.
·
Full exemption from customs duty is being
granted to de-oiled soya extract, groundnut oil cake/cake meal, sunflower oil
cake/cake meal, rice bran/rice bran oil cake and palm kernel cake until 31.12.2014.
·
The government has introduced several schemes to
provide financial assistance in the form of grants and subsidies for the
setting up and modernization of food processing units, the creation of
infrastructure, support for research and development and human resource
development as well as other promotional measures to encourage growth within
the processed food sector.
THE NATIONAL
MISSION ON FOOD PROCESSING :
·
The centrally sponsored scheme provides the
following:
1. Technology
upgradation, establishment and modernization of the food processing industries.
2. Cold
chain, value addition and preservation infrastructure for non-horticultural
products.
3. The
setting up, modernization and expansion of abattoirs.
4. Human
resource development.
5. Promotional
activities.
6. Primary
processing and collection centres in rural areas.
7. The
modernisation of meat shops.
8. Reefer
vehicles.
·
The scheme for infrastructure development
includes grant of subsidies for the setting up of mega food parks and
integrated cold chains.
·
Project imports for food processing at
concessional customs duties.
·
In order to promote faster establishment of food
processing industries in the country, the government provides various tax and
other incentives to businesse
INCOME TAX :
Deduction of expenditure:
·
These incentives are allowed for the following
businesses, for the investment made in the previous year and prior to
commencement of its operations.
1. Businesses
permitted 100% deductions:
a) Setting up
and operating a cold chain facility.
b) Setting up
and operating warehousing facilities for storage of agricultural produce.
2. Businesses
permitted 150% deduction, provided the taxpayer has commenced business on or
after the Ist of April, 2012.
a) Beekeeping
and the production of honey and beeswax.
b) The setting
up and operation of a warehousing facility for the storage of sugar.
DEDUCTION OF TAX
FROM PROFIT :
·
This tax incentive is available at the rate of
100% tax exemption for the first 5 years of operations. After 5 years, the rate
is 25% of the profits. However, in the case of a company, the rate of tax is
30% of profits, after 5 years of operations. This benefit is available only for
ten years provided that such business has commenced with effect from the 1st of
April, 2001.
·
This incentive is provided for new units in the
business of processing, preservation and packaging of fruits or vegetables,
meat and meat products, poultry, marine or dairy products. However, in the case
of businesses relating to meat, meat products, poultry, marine products or dairy
products, the above incentive is available to only those units who have started
their production after the 1st of April, 2009.
SERVICE TAX :
Exempted activities:
·
Service tax may not be levied on items contained
in the negative list. These are services including processes carried out at an
agricultural farm including tending, pruning, cutting, harvesting, drying,
cleaning, trimming, sun-drying, fumigating, curing, sorting, grading, cooling
or bulk packaging and such operations which do not alter the essential
characteristics of agricultural produce but make it only marketable for the
primary market.
·
Exempted categories:
·
Service tax is exempted in the following
instances:
1) The
construction, erection, commissioning or installation of original works
pertaining to post-harvest storage infrastructure for agricultural produce,
including cold storage for such purposes.
2) Mechanized
food grain handling system, machinery or equipment for units processing
agricultural produce as foodstuff, excluding alcoholic beverages.
3) Services
provided by goods transport agencies for transportation of fruit, vegetables,
eggs, milk, food grains or pulses in a goods carriage.
4) Services
such as loading, unloading, packing, storage or warehousing of agricultural
produce.
CUSTOMS DUTY :
·
Projects for the installation of mechanized food
grain handling systems and pallet racking systems in mandis (agricultural
produce markets) and warehouses for food grains and sugar.
·
Cold storage, cold rooms (including facilities
for farm level pre-cooling) or industrial projects for the preservation,
storage or processing of agricultural produce, apiaries, horticultural
production, dairy, poultry, marine produce and meat.
·
Consequently, all goods related to food
processing, imported as partof the project, irrespective of their tariff
classification, would be entitled to uniform assessment at a concessional
customs duty of 5%, plus countervailing duties as applicable.
CENTRAL EXCISE
DUTY :
Food Products:
·
Nil excise duty in milk, milk products,
vegetables, nuts & fruits – both fresh and dried.
·
Against a standard excise duty of 12%, processed
fruits and vegetables carries a merit rate of 2% without CENVAT or 6% with
CENVAT.
·
Food Processing Machinery:
·
All refrigeration machinery and parts used for
the installation of cold storage, cold room or refrigerated vehicles for the
preservation, storage, transport or processing of agricultural, apiary,
horticultural and marine produce as well as dairy and poultry, are exempt from
excise duty.
·
Machinery for pasteurising, drying, evaporating,
etc. used in the dairy sector is exempt from excise duty.
INVESTMENT
OPPORTUNITIES
·
Fruits and vegetables: preserved, candied,
glazed and crystallized fruits and vegetables, juices, jams, jellies, purees,
soups, powders, dehydrated vegetables, flakes, shreds and ready-to-eat curries.
·
Food preservation by fermentation: wine, beer,
vinegar, the preparation of yeast, alcoholic beverages.
·
Beverages: fruit-based, cereal-based.
·
Dairy: liquid milk, curd, flavoured yoghurt,
processed cheese, cottage cheese, swiss cheese, blue cheese, ice cream,
milk-based sweets.
·
Food additives and nutraceuticals.
·
Confectionery and bakery: cookies and crackers,
biscuits, breads, cakes and frozen dough.
·
Meat and poultry: eggs, egg powder, cut meats,
sausages, other value added products.
·
Fish, seafood and fish processing – processing
and freezing units.
·
Grain processing – oil milling sector, rice,
pulse milling and flour milling sectors.
·
Food preservation and packaging: metal cans,
aseptic packs.
·
Food processing equipment: canning, dairy and
food processing, specialty processing, packaging, frozen food/refrigeration and
thermo-processing.
·
Consumer food: packaged food, aerated soft
drinks, packaged drinking water.
·
Spice pastes.
·
Supply chain infrastructure – this niche has investment
potential in food processing infrastructure, the government’s main focus is on
supply chain related infrastructure like cold storage, abattoirs and food
parks.
·
The establishment of food parks – a unique
opportunity for entrepreneurs, including foreign investors to enter in the
Indian food processing sector.
FOREIGN INVESTORS
·
Kraft (USA)
·
Mars (USA)
·
Nestle (Switzerland)
·
McCain (Canada)
·
Danone (France)
·
Ferrero (Italy)
·
Del Monte (USA)
·
Kagome (Japan)
·
Kelloggs (USA)
·
Pepsi (USA)
·
Unilever (Anglo Dutch)
·
Perfetti (Italy)
·
Cargill (USA)
·
Coca Cola (USA)
·
Hershey (USA)
AGENCIES
Source: http://www.makeinindia.com/sector/food-processing/
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