CHAPTER - VI

GOVERNMENT SUPPORT FOR FOOD PROCESSING

INDUSTRY

a Government Support for Food Processing Industry

- Promotional Policies of Government of Karnataka

- Objectives of Promotional Policies for Agro Food Processing Industry

Policy Initiative, Action Plan

Agro-Food Technology Parks

Establishment of Agro Export Zones

a Infrastructure

- Power Supply, HRD, Information Dissemination, Creating Linkages,

Market Development, Policy Implementation and Monitoring

a Incentives and Concessions

• Formalities for Setting up of Food Processing Units

• Ministry of Food Processing Industry (MFPI)

• APEDA
 CHAPTER-VI
GOVERNMENT SUPPORT FOR FOOD PROCESSING INDUSTRY

This chapter assesses governmental support for food processing industry in

general and agro-based food processing in particular. Government support in the

form of promotional policies such as. Agro-food technology parks, Agro-export

zones and other physical and social infrastructure facilities are discussed. The

chapter also covers the incentives and concessions from the state and central

goverrmient. Formalities for establishing food-processing units are given in this

chapter helps the entrepreneurs to follow certain guidelines and avail the various

benefits under different schemes.

A strong and dynamic food-processing sector plays a significant role in

diversification of agricultural activities, improving value addition opportunities

and creating surplus for export of agro-food products. This would however

require policies and plans for improvement of food processing infrastructure

including up-gradation of technology and enforcement of quality standards,

promoting investment in food processing, activating domestic market with focus

and support.

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Agro food processing industries are defined to include under the policy are •
• Fruit and vegetable processing including grading / packing

• Food grain milling / processing, using modem technology and

equipment by the specified separately by the directorate of industries
and commerce.

Dairy products including milk, processing and milk based products.

Processing of poultry, eggs, meat and meat products.

Fish processing.

Bread, oilseed meals (edible), breakfast foods, biscuits, confectionery

including cocoa processing and chocolate oil expellers and refining,
malt extract, protein isolates, high protein foods, weaning foods,
extruded / other ready to eat food products and all other processed foods
(excluding non-packed food items served in Hotels and Restaurants of
all categories).

Fruits based ready to serve beverages.

Tissue culture laboratories, green houses, green house nurseries and

seed production units, based on modem scientific methods to meet
industry standards.

Floriculture.

Cold storage units.

Refrigerated transport vehicles / containers (excluding second hand

refiirbished vehicles / containers).

Units manufacturing food-grade packaging, scarming and bottling of

processed foods.

Units engaged in packaging, carming, and bottling of processed foods.

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 • Units manufacturing additives, preservatives, colours and fragrant for
the processed food industry.

• Biotechnology and bio-informatics industries.

• Commodity grading and packaging industry.

• Processing of plantation crops including tea and coffee, forest produce

such as herbal, medicinal and aromatic plants, coconut based products
and Arecanut / Arecanut based products.

• Sugar industry (excluding molasses / alcohol)..

Promotional policies of Government ofKarnataka

The State Goverrmient has formulated an extensive promotion policy for

agro-food processing industries in the year 1999 dated 13"' April 1999 vide CI 20

SPI 1999 dated 13'^ April 1999. This policy has provided for certain amendments

in the Land Reforms Rules in respect of the purchase of agricultural lands by and

for agro-processing industries its utilization for captive cultivation for raw

materials. Delegation of power to the Deputy Commissioner of Districts to grant

approval for the purchases of agricultural lands by such industrial units and also

sales tax incentives on par with the Information Technology Industry. Since the

sales tax incentives are withdrawn from 1^' January 2000, the Government re-

examine the entire policy by issue of another order No. CI 20 SPI 1999 dated 23'^'*

March 2001 brought the agro-food processing industries also under general

industrial policy of the state of 1996-2001.

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 The State Government has taken a number of initiatives to increase

production and productivity in agriculture, horticulture and all related segments.

Goverrmient is convinced that an accelerated promotion and development of food

processing industry is an inevitable part of these efforts. Government of India has

also brought out recently an Approval Paper to the National Food Processing

Policy and has requested the State Government for their conmients, suggestions

etc. The objective of Government of India is to increase the processing level of

food products from the existing 2 per cent to 10 per cent within 10 years.

Substantial quantity of agro-food materials is lost during harvesting,

transportation, storage and distribution. The extent of wastage varies between 5

per cent and 40 per cent from cereals to horticultural produce. This loss is very

high compared to the figures of the developed countries.

In India, it is estimated that around 2 per cent of the total production is

processed into value added products as compared to 50-80 per cent processed by

developed countries. The extent of value addition during processing is minimal as

majority of the products are processed at the primary processing level only. A

study conducted by the Government of India in this regard has indicated that an

estimated investment of Rs.l, 40,000 crores would be required to achieve this

objective. This study has also indicated that Karnataka has a potential to attract

investment of approximately Rs.lO, 000 crores in the next 10 years.

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 Farmers and food processing industries are not effectively tapping various

technologies available in R&D institutions. Hence lab to land conversion of the

knowledge base has to be focused. Government of India had recently organized a

National Level Seminar to discuss the proposed National Policy on Agro-

Processing Industry and also a special Act for the Food Processing Sector. Among

other thmgs the draft policy has suggested the following initiatives to promote

agro-food processing industry.

• Single window clearances for permitting production of agriculture raw

materials for captive consumption.

• Provide for long-term contractual agreement between industry and

fanners for supply for right variety of raw material.

• Declare agro-food processing industry as a seasonal industry to make

them eligible for relief from payment of minimum charges of electricity
and water during closure period.

• State government to review their Agriculture Produces Market Act and

consider giving benefits for setting up of regional commodity
exchanges, auction houses and terminal market as part of the agri-
infrastructure to ensure reduction / elimination of middle-men between
the farmers and consumers, with a view to provide better return to the
farmer.

• Strengthen and promote establishment of cold storages in appropriate

locations.

• Formulate a package of incentives for sales tax concession, concession

from stamp duty and registration charges, and incentive for captive
power generation etc.

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 One of the major thrusts given by Government of India for development of

world class infrastructure for agro-food processing industries is establishment of

"Agro Food Technology Parks" for which financial assistance of Rs.4 crores per

park would be available from Government of India. The state has proposed to

establish 6 such parks in Malur, Bagalkot, Belgaum, Maddur, Jewargi and

Chitradurga. Project proposals in respect of these parks have already been

forwarded to Government of India. Seeking approval and sanction of financial

assistance, Government of India has already approved 3 food agro technology

parks at Malur, Bagalkot and Jewargi and approval of the remaining 3 parks is

being pursued.

The main objective of establishing Food Agro Technology Park is to

promote agro-food processing industries to clusters in areas where there is

predominant production of processable agriculture and horticulture products.

These parks will also provide the required infrastructural and common facilities,

which are essential for sustenance of these industries. The common facilities

would include uninterrupted power and water supply, quality assurance

laboratories, warehouse including cold storages, common effluent treatment plants

etc. Another important aspect of the food agro technology parks is creating

awareness among the farmers and producers of agricultural and horticultural

products about the advantages of cultivating / growing the right varieties of

primary products, which are amenable for processing and thus ensure that the twin

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objectives of assuring a better return to the farmers and assured supply of raw

materials to the processor are achieved. To achieve this, it is proposed that

agricultural and horticultural farms, which are located within a radius of 80-

lOOKms from the proposed food agro technology parks be linked to these parks so

that these farms could not only be used to produce the seeds required by the

farmers, but also for demonstration, nurseries and more importantly to conduct

agri-expositions. It is proposed that such agri-expositions are held in potential

location on an annual basis to create awareness among the farmers regarding the

advantages of processing agricultural products, the need for increasing

productivity and improving quality and the potential such products have both in

the domestic and export markets. Such expositions would attract R&D

institutions, technology suppliers, machinery manufacturers, and financial

institutions and more important those involved in the business of promoting

processed foods and thus help in creation of new collaborations and ventures.

The State Government has realized that the establishment of these agro-

food technology parks is only one step in the direction of promotions and

development of food processing industry itself. It is convinced that proper

environment for the industry to grow has to be created particularly in relation to

contract farming, whereby the industry can obtain the raw materials required by it

on a continuous and permanent basis with guaranteed prices and quality. The

State Government is also of the firm opinion that the private sector has to take

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technology and professional management skill to these segments. The State

Government has therefore felt that there is a need to formulate a comprehensive

policy.

Objectives of industrial promotion policy for agro-food processing Industries

The main objectives of the industries promotion policy for agro-food

processing industries would be -

• To ensure a better return to the growers and farmers of agriculture and

horticulture produce.

• To avoid wastage of primary agricultural - horticultural produce in all

stages namely pre-harvest and post-harvest including transport and
storage.

• To make available well balanced and nutritious processed food products

to the people.

• To tap the full potential of the rich bio-diversity of the state.

• Augment exports of both primary and processed food products.

• To encourage technology up-gradation in all stages of food production.

• The state will strive to create brand image for unique agro food products
ofKamataka.

• To encourage farmers enterprises in all aspects of policy

implementation.

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Strategy

The following strategy is proposed to adopt to fulfill the above objectives.

• To promote comprehensive and integrated food technology parks in

important locations in the state by creating common facilities to attract
investment for establishment of agro-food processing industries.

• To establish agri-export zones for those crops, which are predominantly

cultivated in the different agro-climate zones and which have further
potential for growth.
• To encourage the concept of "contract farming" so that the benefits of
increased consumption of agricultural and horticultural products are
shared equitably by the growers / farmers and the processors and
• To improve the general infrastructure facilities in areas where food
agro-technology parks and agri-export zones are to be set up with a
view to providing quick access to these parks / zones both for
movement of primary raw materials and processed products.

• To promote and encourage use of processed foods in the state.

• To encourage networking of organization involved in development of
technologies for agro-food processing sector.
• To take up with Government of India for harmonization of food laws to
achieve standardization.
• To encourage existing food technology base and information available
at institutions like CFTRI, DFRL etc., in the state.

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Policy initiatives

• Agricultural and horticultural farms located within 100 Kms of the

proposed agro food technology parks shall be earmarked as dedicated /

captive farms to these parks.

• Agro-food processing industries will be permitted to utilize up to a

maximum of 25 per cent of their lands for captive cultivation of the

required raw materials.

• Agro food processing industries will be encouraged to utilize the latest

technologies through bio-informatics and biotechnology.

• R&D activities undertaken in the agricultural universities and other

institutions would be fully tapped for promotion and growth of agro

food processing industries.

• R&D institutions in the agro-food processing sector namely CFTRI,

IHRI, UAS, CIMAP will be encouraged to develop appropriate human

resources through design of appropriate technical and diploma courses

to meet the shop floor requirements of technical personnel and also

degree courses to meet the growing needs of the agro food processing

industries sector.

• Government will encourage establishment of food processing parks in

every district.

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 • Encouragement will be given to the private sector for promotion of

agro-food processing industrial parks.

• Conduct of agri-food exposition will be made a permanent feature

similar to the IT.Com exhibition and seminar.

Action plan

The following programmes are taken up in a time bound manner to

effectively implement the policy initiatives:

Agro-food technology parks

Six comprehensive and integrated agro food technology parks are

established in the in the state at Malur, Bagalkot, Belgaum, Maddur, Jewargi and

Chitradurga. While financial assistance from the State and Central Governments

is made available for these projects through the KIADB, private sector would be

encouraged to establish and manage these parks. The parks will have all necessary

infrastructure and common facilities including R&D warehousing, cold storages,

quality assurance laboratory, common effluent treatment plan etc.

Establishment ofagri export zones

In order to tap the export potential for primary agricultural-horticultural

products, agri export zones are be established in potential locations. To begin with

agri export zones are established at Chitradurga, Kolar, Bangalore, Tumkur and

Bijapur to tap the export potential in Mango, Grapes, Pomegranate, Acid Lime,

Gherkins and Bangalore Rose Onion. Kamataka State Agricultural Produce

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Processing and Export Corporation Ltd. is the nodal agency to establish and

manage these agri export zones with assistance from APEDA. Private sector

participation is encouraged in establishment and management of these agri export

zones.

Infrastructure

A comprehensive infrastructure development plan is drawn up and

implemented within 5 years to provide speedy access to the Ago-Food Parks /

Agri Export Zones from the nearest state-national highway; marketing centers and

nearest airport.

Power supply

Power supply to the food agro technology parks and agri export zones will

be arranged through dedicated feeders by the KPTCL / ESCOMS.

Human resource development

The State Government has introduced food engineering management as a

specialized subject in the engineering colleges in the state. It will also establish

with assistance of the industry and in collaboration with other Universities and

institutions in developed countries and association with the F.A.O. world class

food processing industrial technology institutes, which will conduct specialized

courses in different streams of the food processing industry and processing

technologies and cater to the needs of the industry in specialized skills, technical

manpower and managerial capacities. State Government will also update the

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syllabus of food sciences in the degree and post graduate degree courses, with the

objective of meeting the dynamic needs of the food processing industry.

Information dissemination

The State Government will also enable conduct of international seminars

and technology summits in different segments, covering all aspects of the industry.

Creating linkages

The State Government has also decided to dovetail its efforts on watershed

development, minor irrigation tank development and toe encourage long-term

contractual agreement between the farmers and the processors for supply of right

variety of raw material and agricultural marketing to the needs of the food

processing industry by creating appropriate linkages.

Market development

Joint Venture Company, Food Kamataka Ltd., will be the nodal agency to

develop markets for the primary and processed food both within and outside the

country. Food Kamataka Ltd., will also provide appropriate market intelligence

both to farmers and processors.

The facility of single window agency clearance as is available to other

industries will also be extended to the industries in the agro food-processing

sector.

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Policy implementation and monitoring

A task force on agro-food processing industries has already been

constituted under the chairmanship of the Minister for Agriculture and Principal

Secretary / Secretary (Agro Processing and Post Harvest Technology) as Member

Secretary. This empowered committee will be renamed as Food Processing

Monitoring Council (FPMC) comprising of the following members

• Research institutes

• Food processing industries

• Universities and academia

• Government of Kamataka (Various Monitoring Departments)

• Financiers

This council will have the following terms of reference

• To setup norms.

• To advertise and for setting up of food processing industries.

• To hold seminars and interact with government departments and

industries for monitoring with a focused approach.

• To advise government bodies on various aspects of research

development, formulation and implementation regulations and
monitoring sector wise food processing system.

• To advise on quality related aspects such as food laws and food safety.

• To advise and encourage the food processing industry to adopt eco-

friendly technologies and create pollution free environment.

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 The EPMC will closely monitor the implementation of all policy initiatives

and action plans under this policy. EPMC will also periodically review the

financial and other implication of the policy in practices so that the benefits under

the policy are measurable and could be suitably modified in the light of the

experience gained. At the field level, a nodal agency comprising representatives

of the agriculture and horticulture department, and the industries department will

be set up to take care of day-to-day monitoring of the implementation.

Incentives and concessions

Government of India in the ministry of food processing industries has

formulated a number of schemes for extending assistance in the form of grant,

subsidy and soft loan to agro food processing industries and allied infrastructural

facilities established by public, private and joint sector industries as also co-

operatives and NGOs. Efforts are made to fully utilize the benefits available under

the schemes of Government of India.

The promotional and assistance schemes listed in this chapter clearly

indicate that there is a positive support from the government for the food

processing industry in the country. This has disproved the third hypothesis '''There

is in-adequate support for maize processing by the government".

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Formalities for setting up of food processing units

Ministry of food processing industries offers grant up to 25 per cent / 33.33

per cent of the capital cost and technical civil works or Rs.50-75 lakhs, which ever

is lower, for general / difficult areas respectively.

SI. Particulars
No.

01 For setting up / expansion / modernization of units in various sectors of food

processing industries like -

a) Fruits and Vegetable Products - Frozen / Dehydrated / Canned Fruits and

Vegetables, Fruit Juices / Concentrates / Pulps, Ready to Eat Vegetable Pickles,
Jams, Jellies, Squashes etc.

b) Milk Product - Mozzarella Cheese, Frozen Deserts, Yogurts, Whey Protein,

Casein Malted Foods, Other Value Added Milk Products.

c) Grain Milling - Value Added Products from Cereals such as Maize, Wheat, Paddy,
Millets, Pulse Seeds etc.

d) Cereal Products - Bakery Products, Breakfast / Energy / Supplementary Foods,

Snack Foods, Starch and its derivatives. Value Added Guar gum Products etc.

e) Meat and Poultry Products - Fish Processing Units, Fish Handling / Pre-
processing Units, Low Value Fish Utilization, Propagation of Traditional Fish
Processing Technologies.

f) Oil Seeds Processing - Processing and Value Addition of Oil Seeds Including the
Tree Born Oilseeds. Post-Harvest Infrastructure

g) For setting-up of food park with common facilities like warehouse, cold storage,
quality control lab, effluent treatment plant, packaging facilities etc. (up to Rs.1.00
crores grant from MFPI for the common facilities).

h) For setting up post-harvest infrastructure (such as grading / sorting and packaging

facilities).

i) Integrated cold chain (mobile / stationery coolers, refrigerated transport, freezer

cabinets at the retail ends etc.

j^ For setting up cold storages.

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SI.
Particulars
No.

k) For non-horticulture products (provided by national horticulture board for

horticulture produce).

1) As an integral part of the food processing unit or food park.

m) Special type of cold storages with modified controlled atmosphere facility.

n) Backward linkages - Reimbursement to the processors for contract farming at 10

per cent of the value of raw materials procured up to Rs.lO lakhs per year for 5
years. Processors have to provide best extension service / practices, technical
know-how and physical inputs (like seed, fertilizer, pesticide etc.) to the producers
of the raw materials.

o) Quality up gradation -Existing food processing units wish to upgrade to ISO /

HACCP Certificate grant is admissible up to Rs.lO lakhs.

Source: Agro food processing policy manual, 2003.

Ministry of Food Processing Industry (MFPI)

Ministry of food processing industry is established by the central

Govermnent during S"^ five-year plan. MFPI, accordingly been operating several

plan schemes for the development of processed food industries in private sector.

The following are the important plan schemes for extending financial

assistance to various sectors of food processing sector.

Schemes for development of infrastructure facility

• Scheme for selling up / expansion / modernization of food processing

industry.

• Scheme for R&D in food processing industry.

• Scheme for person power development in food processing industry.

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 • Scheme for generic advertisement on processed foods and marketing

assistance.

• Scheme for strengthening of backward linkages in food processing

industry.

• Scheme for promotion of food processing industry.

Tenth plan initiatives

On the basis of a study conducted by NCAER in October 2001, it is

estimated that a total investment of Rs.38, 531 crores has been made in food

processing sector during ninth plan and an investment of Rs.62,105 crores in

projected during the tenth plan period assuming the GDP growth of 6 per cent. If

the GDP growth is 8 per cent per annum the investment projection is likely to go

up to Rs.92, 208 crores. The growth of the food processing industries falling

under purview of ministry of food processing industries has been worked out at

8.5 per cent per annum during 1996-97 to 2001-02 as compared to GDP growth of

6 per cent during the same period. The likely growth during the tenth plan period

is projected at 8.8 per cent and 11.9 per cent on the basis of GDP growth rate of 6

per cent and 8 per cent respectively. The Planning Commission constituted a

working group on food processing industries for the 10th five-year plan.

Simultaneously^ an exercise of zero-based budgeting was undertaken by the

Plaiming Commission to weed out such schemes as may have become irrelevant

and consider other components, which may be more relevant. As a result of these

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two exercises, and the finding of NCAER study, a macro management approach

has been adopted resulting in reduction in the number of plan schemes from 19 to

6. The quality approved for the plan period has gone up from Rs.235 crores in the

9th plan to Rs.650 crores for the 10th plan. This approach is expected to

contribute positively to growth in the sector as a whole and assist such

components of each sub-sector as are most critical.

Table - 6.1: Planned outlay during 10*'' plan

Year Outlay (Rs. Crores) Expenditure (Rs. Crores)

1997-1998 39.09 22.87

1998-1999 30.00 30.00

1999-2000 40.00 37.78

2000-2001 50.00 50.00

2001-2002 55.00 55.00

Source: Ministry of Food Processing, Annual Report 2004.

Table-6.1 shows that, the planned out lay for food processing industry is

continuously increasing year by year. It indicates that these are good support for

food processing industry by the government.

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Agricultural and Processed Food Products Export Development Authority
(APEDA)

The Agricultural and Processed Food Products Export Development

Authority (APEDA) came in to existence in 1986 to further develop agricultural

commodities and processed foods, and to promote their exports. It's goals are to

maximize foreign exchange earnings through increasing agro exports, to provide

better income to the farmers through higher unit value realization and to create

employment opportunities in rural areas by encouraging value added exports of

farm produce.

APEDA went about achieving these by identifying new markets, providing

better support systems to our exporters and manufacturers, and introducing new

products to the international market.

No wonder the exports have shown a rising trend. It has increased from

Rs.2047 crores in 1994-95 to Rs. 10,391 crores in 2003-2004.

Development programmes ofAPEDA

APEDA undertakes the following development programmes:

• Development of database on products markets and services.

• Publicity and information dissemination.

• Invites official and business delegations from abroad.

• Organization of product promotions abroad and visits official and trade
delegations abroad.

• Participation of buyer-seller meets and other business interactions.

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 • Information, dissemination, through APEDA's newsletter, feedback
series and library.

• Distribution of annual APEDA awards.

• Provides recommendatory, advisory and other support services to the

trade and industry.

• Problem solving in government agencies and organizations, RBI,

customs, Import / Export procedures, problems with importers through
Indian missions abroad.

Assistance schemes ofAPEDA

APEDA offers financial assistance under various schemes, which seek to

promote and develop agro-exports. Financial assistance under these schemes is

available to exporters, growers, trade associations, governmental agencies etc.

Some of the activities, which are eligible for financial assistance are -

• Export promotion and market development through supply of samples

to potential importers, brand publicity etc.

• Strengthening of market intelligence and data based through studies,

surveys etc.

• Quality up-gradation.

• Development of infi:astructural facilities.

• Research and development.

• Development of packaging quality.

• Manpower development.

• Up-gradation of meat processing facilities.

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 In India, government support for food processing industry is highly

accorded. The government, designed policies for promoting agro-based food

processing industry at national and state levels. Promotional policies consists both

monitory and no-monitory measures.

References
Ministry of Food Processing Industry - India, Annual Report 2004.
Directorate of Industries and Commerce, Bangalore, Agro Food Processing Industry, 1999. Policy Manual.
Industrial Promotion Policy for Agro Food Processing Industries, Kaigarika Varthe, July - August 2003.
Ministry of Commerce, Government of India, APEDA Information Brochure, 2003.
S.Bhattacharji, Promotional Strategies for Processing and Marketing of Fresh Produces of North Eastern
Region of India, Research Article, Indian Food Packer, January - February 2001.
Attractive Incentives for Food Processing Industries, TECSOK Report, Kaigarika Varthe, April - May
2003.

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