Investment Opportunities in Food Processing Sector in India

Presentation at

ISRA Food 2012

Surendra Singh,Asstt. Industrial Adviser,

M/o Food Processing Industries, Government of India

Food processing: Potential Rising Income: GDP Growth of 7.5% over last five years

GDP for Food Processing sector recording significant growth

Higher Disposable income: 3rd largest economy in terms of purchasing power parity

Domestic market of over a Billion Consumers; 300 Million Upper and Middle Class

Lower operational cost: Cheaper skilled manpower; fiscal incentives

Competitive Geographic Location: Proximity major markets

Fast growing organized retail marketing

Food Processing Sector in India

• Food Processing has emerged as one of the most important economic growth levers in the agriculture sector in India, which targets to address:

Low farmer price realization Surplus production Significant wastages

AND

• To capitalize on growing domestic food market currently estimated at US$ 182 Billion, expanding at a CAGR of 4.1%.

India Advantage: Natural resources Richly endowed agricultural nation:

• One tenth of world’s arable land: 158 million hec.

• One fifth of world’s irrigated land: 61 million hec.

• Vast Coastline (7,517 Km) & Freshwater reservoirs (15 million hec.)

• All major Climates of the world.

• 20 agro-climatic regions and nearly 46 out of 60 soil types in the country.

• Sunshine hours and day length are ideally suited for round the year cultivation

Raw materials: Fruits & Vegetables(1)

Raw Materials: Pulses & Cereal Production(2)

66% (1st)

25% (1st) 21% (1st)

21% (2nd)

33% (2nd)

0%

10%

20%

30%

40%

50%

60%

70%

Chick peas Beans, Dry Rice, Paddy Peas, Green Lentils

% of World Production

Raw materials: Cattle/ Marine/ milk (3)

Largest producer of milk-117 million MT

Largest Cattle Population: 210 million (14.7%)

Largest Buffaloes population:111 Million (57%)

Second largest in sheep and goats population: 228 million (11.5%); Produces 6.2 million MT of meat

Third largest in marine landings – 3.2 Million MT

Fifth in poultry production- 799 Millions

Raw materials: Spices (4)

More than 50 types of spices with annual production of 3.2 million tons.

Major spices produced are black pepper, cardamom (small & large), ginger, garlic, turmeric, chili, etc.

India is the largest producer, consumer and exporter of spices.

India is a treasure house of medicinal aromatic plant species.

9500 species of medicinal and aromatic plants classified and documented.

Advantage India: Fiscal Incentives (1)

Automatic approval to Foreign Direct Investment up to 100% equity in FPI sector excluding alcoholic beverages and a few reserved items;

51% foreign direct investment permitted in multi-brand retail: Likely to generate a wave of foreign investments in Indian Food Processing sector

Food processing industry is declared a priority sector: New Trade Policy places greater thrust on Agro-based industries;

Most capital goods can be imported without requirement of any license/ permission;

Customs duty rates have been substantially reduced on plant and equipment as well as on raw materials and intermediates especially for export production;

Institutional & credit support: Priority sector lending to SSI units

Most processed food items exempt from excise duty, others attract 2% ad valorem duty;

150 % weighted deduction under Income Tax for R&D in Food Processing Sector

Tax deduction on the profit derived from the business of food processing, Dairy, poultry & meat products.

Investment-linked tax incentives to the Units setting up and operating Cold Chain warehousing facilities for storing agricultural produce.

Advantage India: Fiscal Incentives (2)

Proactive steps taken by Government of India

Dedicated Ministry at Union Government level started. Paradigm shift in Government Strategy: • Regulatory & proactive support

Focus on catalyzing private investment: Financial Support for: Mega Food Park Cold Chain Abattoir Skill Development SEZs & Agri Processing Zones

Enacted Integrated Food Law: One law & one regulator

Industry Giants - Global And Domestic - Entering With Huge Investments

Major Multinationals already present-

Nestle, Pepsi, Coke, Delmonte, Kellogg's, Con agra, Unilever Perfetti , GlaxoSmithKline, Heinz, Wyeth Ajinomoto, Nissin Met, Wal-Mart, Le Bon Griffith Laboratories, and many others are in pipeline………………………………….

Some of the Indian Giants in Food- ITC, Dabur, Britannia, Parle, Amul, Haldiram, Godrej Capital Foods, Future Group, Temptation Foods, Keventer Agro, Zydus, Cadilla etc.

The Indian Multinationals entering in retail marketing- Reliance, Bharti Group, Tata, Wipro & Thapar etc.

Snapshot of:

India’s Mega Food Parks & cold chain infrastructure

Mega Food Parks• Scheme formulated to accelerate growth of food

processing industry in the country

• Mega Food Parks provides state-of-the art infrastructure facility – to enable setting up of food processing units

• Cluster based approach for ensuring backward and forward linkages: “Hub & Spoke” model with CPC at the core and networked by PPCs and CCs.

• Projects to be implemented by a Special Purpose Vehicle (SPV) as private led initiative

• 30 Mega Food Parks have been approved.

Cold Chain – Potential Impact

• Cold Chain Infrastructure:Reduces wastages , aims at longer shelf life and

provides long term market etc.

• “Creation and Management of cold chain infrastructure” for agriculture has been identified as thrust area by the Hon’ble Prime Minister of India

Cold Chain Status - India

• Cold chain by its definition is negligible for horticulture in IndiaSynonymous with cold storage in India Individual components like CA, Pre-cooling, Pack-

houses, Reefers etc exist in isolation

• Highly fragmented with more than 3,500 companies in the whole value system

• Around 5,000 Cold Stores with a capacity of 21mn MT currently exists in the country

85% for potatoesIsolation cold storesOnly 0.2 % for F&V other than potatoesAround 90% in private sector, 7% in Co-ops

Cold Chain Status - India

• A study by the National Spot Exchanges Ltd. has estimated cold storage requirements of 61.13 million MT, as against the present capacity of cold storage of 23.51 million MT.

• The cold storage gap of about 38 million MT has been worked out on the basis of peak season production and highest arrival/harvesting of storable fruits and vegetables in a mouth.

• Seasonal Utilization of capacity – March to September peak capacity utilization – 80-88%, rest around 20%

International participation in cold chain - examples

Fiscal Incentives to the cold chain sector

• Capital investment for modern storage capacity eligible for viability gap funding schemes.

• External Commercial Borrowings available for cold storage

• Project import status at concessional customs duty of 5 per cent, with full exemption from service tax to:

Setting up of mechanized handling systems and pallet racking systems in ‘mandis’ or warehouses for food grains and sugar.

The initial setting up and expansion of Cold storage

• Full customs duty exemption to refrigeration units required for the manufacture of refrigerated units or trucks.

• Central excise exemption to specified equipment for preservation, storage and processing of agriculture and related sectors and exemption from service tax to the storage and warehousing of their produce.

India-Israel bilateral trade and co-operation

inFood Processing

sector

India-Israel Trade Scenario

In 2011, India was the 8th largest trader partner of Israel in the world and 3rd largest trade partner in Asia.

India Israel two-way trade in 2011 increased by 8.8% from US $ 4.73 Billion to US $ 5.15 Billion.

Major exports from India to Israel include precious stones and metals, chemical products, textile and textile articles, plants and vegetable products, mineral products, rubber and plastic products, base metals and machinery.

India is the 5th largest export destination of Israel (including diamonds) and 7th largest excluding diamonds (Jan-Dec 2011).

Areas of possible collaboration : India & Israel

Opportunities for investments in India:-

i) Indian food retail chain,

ii) Mega Food Park, Cold Chain & Abattoirs Infrastructure. Israel investments in India’s FPI sector would not only

serve the fast growing Indian domestic market, but also the Middle East and Far East Asia.

Israel is having core strength in area of the technology transfer in the field could be a major area of collaboration.

Boosting of two-way trade in food sector by promoting business to business contact through BSM/participation in Fairs.

THANK THANK YOUYOU