Ground Reality

Key Drivers – to be an
agri super power

Challenges

Opportunities

Strategy

Suggestions
Going For Growth
 Ground reality – a study in
contrast

• The largest grower of fruits – 15% of world output

–Low share of global Exports at 0.5%
• The second largest grower of vegetables – 11 % of world output
–Low share of global exports at 1.7%
–Cold storage facility available for only 10% of produce
• Lowest cost producer of fruits & vegetables
–Low farmer income – farmer suicide
• Second highest producer of milk
– Organized dairy accounts for only 13% of milk produced
– Only 70,000 Ton cold storage capacity for 90 million Tones produced
– Poor yield per cow
• Second largest cattle population
– 5500 registered & 25770 unregistered slaughter house with no chilling, freezing &
cold storage facility as hot meat market prevails

Source: Task force Report on Development of cold chain in India –

Going For Growth GOI/CII
 Ground reality (cont….)

• Fifth largest producer of eggs

– Poultry meat sold as hot in retail market
• Sixth largest producer of fish
– 20 – 30% damage and no cold storage facility in WB, AP, Goa
• Low processing
– 2.20 % in fruits
– 35 % in milk
– 6 % in poultry
• Value addition – 20%
• India’s current share in world trade of processed foods – 1.60
%
• Poor lab to land transfer of technology and adoption of new
varieties. example of pineapple

Source: Task force Report on Development of cold chain in India – GOI/CII

Going For Growth APEDA data
 Ground reality (cont….)
• Market surplus of fruits & vegetables – 88%
– Farmer sells immediately due to perishability & absence of proper
infrastructure to keep it for longer period
• Post Harvest wastage of fruits & vegetables – 25 to 35% valued at over Rs
45,000 crore
– Losses as above in India is more than consumption of same in UK
• Market surplus of food grains– 60%
– Farmer keeps some for own consumption, seed purpose and to give to
labour as wages
– Loss in above equal to annual food grain production in Australia
• Cost of wastage 6 times amount spent on food subsidy
• Farm gate price 25% of domestic consumer retail price against 50% in
developed countries
• Story of Fyffee PLc - in Banana Handling and Processing on the ships before
final destination of selling.

Source: Task force Report on Development of cold chain in India – GOI/CII

Going For Growth
 Key Drivers – To be a Global Agri Super
Power
2

1 3

Strong
Demand

5 4

Going For Growth

 Role of Key Drivers

Going For Growth

 Is India Ready to be a Global
Power ?
tural
Inherent Na
advantage

Literate
workforce

Weak &
e
ineffectiv
hain
Supply c

Going For Growth

 Challenges And Strategy For Future …. Food
processing
Challenges Opportunities
• Utilisation of scarce resources – MORE Indian domestic market
CROP PER DROP, power etc
• Varying taste preference within the country
Diversifying into new markets and
• Increasing International Competition
product segments
• Non tariff barriers Post harvest loss management
• Integrated Food law to remove multiplicity itself to provide funds for
of food laws & regulatory agencies investment

Strategy
Enhancing the sales of Value added products
Creating Economies of Scale
Lab to Land & Farm to Fork linkages
Introducing innovative products

Going For Growth

 Challenges
• Low level of value addition
– Bottle necks in cold storage including during transit
– Seasonality – capacity utilization issues e.g. Himachal apples
2006-07 prod was half of 2005-06
– Non Efficient storage/warehousing, processing & marketing
techniques
– Non adoption of efficient technology
• Infrastructure and others
– Shortage of power
– High electricity tariff
– Low area under Irrigation
– High capital cost -Inadequate institutional finance at low rates
– High insurance premium in risk coverage
– Farm connectivity by road yet to take off

Going For Growth

 Challenges (cont….)

• Quality and consistency at grass root levels

– Inputs delivery not in time
– Innumerable varieties
– Poor procurement and logistics
– Lack of cheap and timely credit

• Weak and ineffective supply chain

– Non professional management
– Low revenue rentals
– Non Efficient and competitive retailing
– High wastage

Absence of a Successful Business Model.

Going For Growth
 Agri supply chain – a comparison with Developed
countries

Consumer
India Trader Wholesaler Retailer
Consolidator Commission
Farmer agent

High wastage and

low margins

Consumer
Retailer
Developed countries Wholesaler
Farmer High investments –
Low wastage -
better margins

Going For Growth

 Challenges - Hurdles towards Value addition

• Wide disparity between peak & lean period arrivals

usually ranging from 100 – 150%
• Long revenue cycle as products to be purchased in
bulk during peak season
• Control of markets by few traders and agents who
command large storage capacity
• Discouragement of farmer – lower returns act as
disincentive
– Crashing of prices during peak season
• Larger intermediaries exerts negative pressure on
farmer margin, and deteriorates quality due to
multiple handling

Going For Growth

 Bottle-necks in Cold storage & Processing
industry
• Higher Tax duties including on packaging material
• Lower capacity utilisation
– Role of cold storage etc – current utilisation 48% of capacity
– 5100 units with 216 lakh MT capacity
• Non adoptive of cost effective technology
• High working capital requirement
• High cost of finance
• Infrastructural constraints
• Dependence on intermediaries – inadequate farmer –
processor linkages

Source: Task force Report on Development of cold chain in India – GOI/CII

Going For Growth
 India …….. A land of opportunities

• 52% cultivable land as against 11% world wide

• Unsurpassed Natural Advantages
– All the 15 major climates of the world
– 46 out of the 60 soil types
– 17% animal, 12% plant and 10% fish genetic
resource of the world
• Food processing sector ranks fifth in terms of
contribution to GDP
• Indian urban food market estimated at 350,000 crore
• Estimated investment in Food processing sector
during 11th plan – 1 lakh crore

Source: FICCI/KPMG study and Task force Report on Development of cold chain in India
– GOI/CII
Going For Growth
 Road to Evergreen revolution …….

• Horticulture crops – Fruits vegetables and flowers cover

7% of cropped area of the country
• India ranks First in production of mango (65% of world)
Bananas (11% of world) and papayas
• India ranks Second in production of Lime and lemon
• Exports quantity increased 4 times & value 10 times in
last 15 years
• Move to invest in 10 mega food parks in the country
• Indian food processing industry averaging a growth of
10%

Source: Task force Report on Development of cold chain in India – GOI/CII

Going For Growth Mc Kinsey reports
 Can India be a sourcing hub for food
products ?
• Good governance
– Strong , Stable and reform oriented government
– WTO signatory
– Strong economy comparatively resilient to the current economic crisis
– Focus on improving the Road connectivity
– Vision to solve the power situation – Nuclear energy
– Improving relationship with neighboring countries and a more
important role in the WORLD ORDER
• Focus on agri & rural sector
– Has a Strong agriculture base
– Increased out lay for rural spend
– Rural economy to be give the next big push to GDP
– Annual rural income to increase from 2.8% to 3.6% over next 2 years

Going For Growth Source: FICCI – KPMG study

 Indian growth story …….
• Strong Corporate leadership
– Indian is already …….
• IT Hub of the world
• Auto and auto ancillary hub to the world
• Telecom hub
• Acquiring global companies
• India managers at the Helm of many Fortune 500
companies

India is preparing to take off …….

Going For Growth

 Impetus by Govt

• Included in the list of Priority sector lending by banks since 1999

• Most of processed food Exempted from purview of licensing under
the industries (Development & regulation) Act, 1951, except items
reserved for small scale sector & alcoholic beverages
• Excise duty for processed fruits & vegetables, food mixes etc. – NIL
• Excise duty on reefer vans reduced from 16 to 8%
• Reduction in customs duty on food processing machinery
• Tax breaks
• Move towards GST

Going For Growth

 Towards being the 5th largest consumer
market by 2025
– Large young earning population
• 50% of population under 25 years of age
• Ready to experiment and try out new products
– Increase in number of upper middle class & middle class by 159 % & 63 % respectively
• Urban population projected at 40% by 2020
• Middle class of 200 – 250 million spread across the country to increase to 580 million by 2025
– Dual income households
• Higher disposable incomes
• Ready to try out value added products

Source: Mc Kinsey Report May 2007: The Rise of India’s consumer market
Going For Growth
 Suggestions ….

• Reduction of wastage /spoilage to be tackled on a war footing

– Accelerated establishment of cold chain networks
– Irradiation facilities and pest free warehouses
– Encourage SSI units and corporate to set up food processing units

• Improvement of productivity – both land and manpower

– Example the case of Rubber where India has the highest land
productivity in the world
– Change in cultivation practices such as irrigation for paddy rather than
method of flooding the fields

• Price stability
– Make farming remunerative to attract talent and retain farmer interest

Going For Growth

 Suggestions …… Role for corporate

• Incentives to Corporate to enter core farming – land ceiling

restrictions
• Increase Mechanization to tackle low availability of labour
and to remain a low cost producer
• Liberalized credit norms for agricultural – production ,
marketing and infrastructure development
• Changes in market regulatory framework to allow corporate
to establish market yards
– At present 7521 regulated markets which lack critical infrastructure
• Review of legal instruments to facilitate entry in marketing
activities
• Tax holidays and incentives
• Excise exemptions for CAPEX items.

Going For Growth

 The Requirement: Striking a Balance

Size

Partnerships Solutions

Speed Cost

Flexibility

Going For Growth

 Conclusion

• Food sector – the highest multiplier effect of any

industry – 2.4
• Tripling the size of the industry would generate
– Direct employment – 28 lakh and Indirect employment –
74 lakh
• Thrust in agriculture to be provide the next push to
GDP and prosperity
• Enhanced export earnings to compensate for any
slow down in IT related exports

India - Sone ke chidiya

Going For Growth