Food processing sector is indispensable for overall development of an economy as it provides a vital linkage and synergy between the agriculture and industry. It helps to diversify and commercialise farming; enhance income of farmers; create markets for export of agro foods as well as generate greater employment opportunities. Through the presence of such industries, a wider range of food products could be sold and distributed to the distant locations. The term 'food processing' is mainly defined as a process of value addition to the agricultural or horticultural produce by various methods like grading, sorting and packaging. In other words, it is a technique of manufacturing and preserving food substances in an effective manner with a view to enhance their shelf life; improve quality as well as make them functionally more useful. It covers spectrum of products from sub-sectors comprising agriculture, horticulture, plantation, animal husbandry and fisheries.

The Indian food processing industry is one of the largest in the world in terms of production, consumption, export and growth prospects. Earlier, food processing was largely confined to the food preservation, packaging and transportation, which mainly involved salting, curdling, drying, pickling, etc. However, over the years, with emerging new markets and technologies, the sector has widened its scope. It has started producing many new items like ready-to-eat food, beverages, processed and frozen fruit and vegetable products, marine and meat products, etc. It also include establishment of post-harvest infrastructure for processing of various food items like cold storage facilities, food parks, packaging centres, value added centres, irradiation facilities and modernised abattoir.

The liberalisation of the Indian economy and world trade as well as rising consumer prosperity has thrown up new opportunities for diversification in the food processing sector and opened up new avenues for growth. Demand for processed and convenience food is increasing constantly because of urbanisation, changing life-style and food habits of the people. Accordingly, the Indian consumers are being offered newer high quality food products made by using the latest state-of-the-art technology.

India has a strong agricultural production base with diverse agro-climatic conditions and arable land of 184 million hectares. It is one of the major food producers in the world and has abundant availability of wide variety of crops, fruits, vegetables, flowers, live-stock and seafood. As per the available information, it produces annually 90 million tonnes of milk (highest in the world); 150 million tonnes of fruits and vegatables (second largest); 485 million livestock (largest); 204 million tonnes of food grains (third largest); 6.3 million tonnes of fish (third largest); 489 million poultry and 45,200 million eggs. As a result, Indian food processing industry has become an attractive destination for investors the world over. Actual foreign direct investment (FDI) inflow into the industry in 2005-06 and 2006-07 (till September 2006) has been Rs. 333.06 crores (US$ 74.01 million approximately).

Though the private, public and co-operative sectors are to play their rightful role in the progress of the industry, the 'Ministry of Food Processing Industries' is the nodal agency for developing a strong and vibrant food processing sector in the country. It acts as a catalyst and facilitator for attracting domestic and foreign investments towards developing large integrated processing capacities; providing technical guidance and advice to the industry; as well as creating conducive environment for its growth. It covers the products of fruits and vegetables, dairy, milk, poultry, fishery, consumer food, grains, non-molasses based alcoholic drinks, aerated water and soft drinks. The objectives of the Ministry are to:-

• Utilize and make value addition to agricultural produce for enhancement of income of farmers.


• Minimize wastage at all stages in the food processing chain by the development of infrastructure for storage, transportation and processing of agro-food produce.


• Induct modern technology into the sector from both domestic and external sources.


• Use efficiently agricultural residues and by-products of the primary agricultural produce as well as of the processed industry.


• Encourage R&D in food processing for product and process development and improved packaging.


• Provide policy support, promotional initiatives and physical facilities to promote value added exports.


• Promote rationalisation of tariffs and duties relating to food processing sector.

The Government has accorded the sector a high priority and has undertaken several policy measures and initiatives. It has offered a number of fiscal reliefs and incentives as well as approved a large number of joint ventures, foreign collaborations, industrial licenses and 100% export oriented units (EOU) proposals in different food processing areas. Some of the important steps in this direction are:- (i) Most of the processed food items have been exempted from the purview of licensing under the Industries (Development & Regulation) Act, 1951, except items reserved for small-scale sector and alcoholic beverages; (ii) Food processing industries are included in the list of priority sector for bank lending in order to ensure easy availability of credit to them; (iii) Automatic approval for foreign equity upto 100% is available for most of the processed food items, excepting alcohol and beer and those reserved for small scale sector (subject to certain conditions); (iv) Excise duty on ready to eat packaged foods, instant food mixes like dosa and idli mixes, aerated drinks, as well as on fruits and vegetables processing units, have been reduced.
In addition, food processing enterprise has to comply with several legal requirements. Some of these are:-

• Fruit Products Order (FPO), 1955 - promulgated under section 3 of the Essential Commodities Act, 1955, it provides for regulation of sanitary and hygienic conditions in manufacture of fruit and vegetable products. It aims to ensure that hygienic and good quality products are manufactured and sold. It is implemented by the Ministry through the Directorate of Fruit and Vegetable Preservation. The Directorate has five regional offices located at Delhi, Mumbai, Kolkata, Chennai and Guwahati as well as a sub-office at Lucknow. The licensing under this Order lays down the minimum requirement for the following items, namely:- (i) sanitary and hygienic conditions of premises, surrounding and personnel; (ii) water to be used for processing; (iii) machinery and equipment; and (iv) products specifications. In addition, maximum limits of preservatives, additives and contaminants have also been specified for various products.
  
  
• Meat Food Products Order (MFPO), 1973 - promulgated under section 3 of the Essential Commodities Act, 1955 , it aims to ensure supply of wholesome meat food products to the consumers. It deals with quality control of meat food products from processing to finished product by way of ante-mortem and post-mortem inspection of meat animals so as to ensure hygienic conditions of processing of meat food products. It was earlier implemented by Directorate of Marketing and Inspection (DMI), but its administration has been transferred to the Ministry. The sanitary, hygienic, packing, marking and labeling requirements are specified in separate Schedules of the Order.
  
  
• Food Safety and Standards Act, 2006 (Integrated Food Law) - has been enacted to:-
  
  
  1. Consolidate the laws relating to food
     
     
  2. Establish the Food Safety and Standards Authority of India for laying down science based standards for articles of food
     
     
  3. Regulate manufacture, storage, distribution, sale and import of food articles with a view to ensure availability of safe and wholesome food for human consumption and
     
     
  4. Pool infrastructure, manpower and testing facilities for better standard fixation and enforcement through their proper re-deployment.
     
     
  It aims to achieve a high degree of consumer confidence in the quality and safety of produced, processed, sold or exported food.

As a result of such incentives and measures, the industry has witnessed fast growth in most of its segments. The growth and development of some of the sub-sectors may be enumerated as follows:-

• The installed capacity of fruits and vegetables processing sector has increased from 11.08 lakh tonnes in January 1993 to 21.18 lakh tonnes in January 2006 and 24.74 lakh tonnes in January 2007. The utilization of fruits and vegetables for processing is estimated to be around 2.20 per cent of the total production. Over the last few years, there has been a positive growth in ready to serve beverages, fruit juices and pulps, dehydrated and frozen fruits and vegetable products, tomato products, pickles, convenience veg-spice pastes, processed mushrooms and curried vegetables.
  
  
• In meat and meat processing sector, poultry meat is the fastest growing animal protein in India. The estimated production is 1500 thousand tonnes growing at a rate of 13 per cent through 1995-2003. India exports more than 500,000 MT of meat of which major share is buffalo meat. Indian buffalo meat is witnessing strong demand in international markets due to its lean character and near organic nature. Its exports have the potential to grow significantly and hence presents an opportunity for exporters in the food processing segment. India is the fifth largest exporter of bovine meat in the world. However, in order to develop necessary infrastructure for processing of meat and meat food products for domestic market as well as for export market, the Ministry is providing financial assistance by way of grant-in-aid. During the year 2006-07, it assisted seven projects for manufacture of meat and meat food products.
  
  
• India has a unique pattern of production, processing and marketing/consumption of milk. It ranks first in the world in terms of milk production. Approximately 70 million rural households (primarily, small and marginal farmers and landless labourers ) in the country are engaged in milk production. The production stands at 91 million tonnes growing at a rate of 4 per cent. This is primarily due to the initiatives taken by the Operation flood programmes in organizing milk producers into cooperatives; building infrastructure for milk procurement, processing and marketing; as well as providing financial, technical and management inputs by the Ministry of Agriculture and Ministry of Food Processing Industries to turn the dairy sector into viable self-sustaining organized sector. About 35% of milk produced in India is processed. The organized sector (large scale dairy plants) processes about 13 million tonnes annually, while the unorganized sector processes about 22 million tonnes per annum. In the organized sector, there are 676 dairy plants in the Cooperative, Private and Government sectors registered with the Government of India and the State Governments.
  
  
• With long coastline of over 8000 kms, 50600 sq. km of continental shelf area and 2.2 million sq. km. of exclusive economic zones, India is endowed with rich fishery resources. Considerable infrastructure facilities for processing of marine products have been developed over the years. At present, there are over 369 freezing units with a daily processing capacity of 10266 tonnes out of which 150 units are approved for export to EU. 499 units are engaged in production of frozen fish with a total storage capacity of 134767 tonnes. Besides, there are 12 surimi units, 5 canning units and 473 units which are engaged in pre-processing and dry fish storage.
  
  
• India is self sufficient in grain production and is the second largest rice producer in the world, with a 20 per cent share. It produces about 200 million tonnes of different food grains every year. All major grains, such as paddy, wheat, maize, barley, millets like jowar (great millet), bajra (pearl millet) and ragi (finger millet) are produced in the country. During 2006-07 (upto December 2006), the Ministry has sanctioned 32 rice milling, 13 flour milling, 62 edible oil milling and 13 pulse milling sector.

All these efforts have given competitive edge to the industry on a global platform. More and more people are consuming value-added food products. The industry possess high export opportunities and its growth seeks to bring immense benefits to the economy by raising agricultural yields, enhancing productivity, creating employment and raising life-standards of a large number of people across the country, especially those in rural areas. Thus, there exists innumerable business opportunities in the diverse areas of food processing. But, the sector still remains largely untapped because of high packing costs, cultural preference of the people for fresh food, seasonalities of raw materials, lack of adequate infrastructural facilities and quality control mechanism. As a result, there is a need to diversify the sector by fully harnessing its potentialities, providing greater incentives as well as creating conducive environment for more investments and exports.