OPPORTUNITIES FOR MSME IN FOOD PROCESSING IN POST COVID ERA
This article is authored by Deepak Jain, Director-General, Federation of Indian Industry
GrowthBeats
India is predominantly an agriculture based economy, with over 60% population employed in this sector, contributing to nearly 17% to the total GDP. This figure in itself highlights the imbalance between employment and corresponding GDP ratio.
Before divulging into strategic management of this problematic ratio, I would like to disclose some figures for a better understanding of the challenges faced in this sector.
The central government is giving financial support in the form of subsidy around Rs. 2 lakh crores to agriculture and related sector in various forms with an additional Rs.15 lakh crores as a credit to farmers and furthermore Rs. 1.25 lakh crores as infrastructure funds for agriculture and allied activities. India's total food grain production is about 300 million tons, however, the storage capacity is just 85 million tons. India produces about 350 million tons of perishable fruits and vegetables, the storage capacity is less than 70 million tons. Only about 7 to 10 percent food is processed in organized sector.
The central govt. has brought out various schemes to address these gaps:
- Upgradation of individual Micro Food Processing Units through credit linked subsidies (PM FME Scheme)
- Capacity building and training support for the micro enterprise through entrepreneurship development, marketing, Udyog Aadhar, GST Registration etc
- Common Infrastructure Support
- Seed Capital to Self Help Groups
- Various incentives on sales and investment
- Production Linked Incentive Scheme for Food Processing Industry to support creation of global food manufacturing giants and support Indian brands of food products in the international markets
- Strengthening of institutions focussing on R&D in area of Food Processing
- Skill Development to produce skilled workforce for various processes involved in food processing
- Concept of Mega Food Park based on Cluster approach for setting up of modern food processing units in the industrial plots provided in park with well established supply chain infrastructure including collection centres, primary processing sectors, cold chains etc
Even with all the initiatives put forth by the Govt., it is pretty clear that achieving full potential of this sector would require Indian companies to improve their competitive strength vis-à-vis their global counterpart in term of scale of output, productivity, value addition and their linkages with the global value chain.
It is needless to say that the projection of market and industry look different in the post COVID era. With the changing dynamics, the plan of action for boosting the food processing industry needs to be strategized in a new light.
The initiatives taken by Govt are carved around to address the current struggles faced by the sector. Be it the need for skill development or incorporation of better technology for higher quality processed products. These areas are where our MSMEs have always excelled in: Skilled Manpower and Better Advanced Technology. MSME sector has manufacturing and marketing strength, both of which are amiss in Agriculture sector.
In a given typical scenario, there are roughly 7-8 members of a family all engaged in farming of a single piece of land. There is a limited produce obtained at a higher cost of labour involved.
In an alternate scenario where there are advanced technologies at play, only 1-2 members of family would be engaged in farming activities. The other members of the family can be trained to be engaged in food processing business of goods obtained from the same piece of land.
In the alternate scenario, the cost invested in terms of human labour goes down, added profits from sale of processed foods, an increase in contributing GDP from the same land.
Convergence of these two sectors can benefit crores of people.
India’s MSME sector is in trouble due to the COVID pandemic. Nearly 11 crore people dependent on it will become unemployed, some of which became unemployed last year, some might face the repercussions this year. Trained manpower in MSME sector is struggling with unemployment, they are looking for opportunities.
On other hand, farmers are facing issues where they are unable to get a good price for their crop.
It is time to strengthen Food Processing sector by merging MSME and agriculture sectors, the joint strength can be used to benefit the country.
In Agriculture Sector, there will be value addition and farmers will get better prices for their produce, advancements in Food Processing industry will help produce higher quality and economically viable products, marketing, food safety and Quality Assurance Infrastructure would be provided by the skilled MSME workforce.
This would boost the outreach of processed goods in local market, higher exports to international market through insulated/ refrigerated transport, which are the key strengths of MSME sector.
This is an untapped potential with huge success projections of all three sectors: Food Processing, Agriculture and MSME.
