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Exploiting World Market:Processed Food Industry NEEDS A Push, by Dr. Vinod Mehta, 18 May 2006 Print E-mail

ECONOMIC HIGHLIGHTS

New Delhi, 18 May 2006

Exploiting World Market

Processed Food Industry NEEDS A Push

By Dr. Vinod Mehta

India is the world’s largest producer of milk, the second largest producer of fruits and vegetables, a major producer of spices, tea and coffee and large livestock population and vast marine wealth.  In fact, India, one can say, is almost sitting on a goldmine of processed food.  There is not only a potential vast domestic market for it but also huge foreign market.

The industry can become a top foreign exchange earner provided we follow appropriate policies and capture foreign market.  The effort is totally indigenous, does not involve any import of any inputs to any significant extent and with little investment one can earn lot of hard currency.  The world processed food business runs into billions of US dollars and India's share in it is not even one per cent as of today.

India as a signatory to the WTO has to open up its economy to imports of agricultural products from all over the world within a few years time. When the WTO Agreement was signed it was said that India stands to gain by the opening of the agricultural sector as the Indian products will be relatively cheaper than the similar products produced elsewhere.  The reasoning was that other countries especially the developed ones will be forced to eliminate or lower down their subsidies on agricultural products while the subsidies on products in India are already much lower than allowed by the WTO. 

This is true to a very large extent.  The WTO has only opened up the opportunities to be exploited by us.  However, whether India will be able to exploit this advantage will depend upon a large number of factors.  The relatively lower prices, on their own, will not be of any help unless we make a sustained effort in the international market and produce goods which are in demand in those countries.  This implies increase in the productivities of various agricultural products, improving their quality, tastes, etc., application of highly efficient processing technologies and improving the packaging of those agricultural products.

Both the developed and developing countries have now increased their pressure on India to open up its economy to their agricultural products sooner, as India has comfortable foreign exchange position. For instance, Malaysia is keen to increase its export of palm oil while Mexico is keen to increase its export of soybean oil to India.  Australia and New Zealand are looking for opportunities to export milk and milk products as well as kiwi fruit to India. The USA is looking for exporting its almonds and orange juice to India, which has allowed import of agricultural products but these countries expect much more.

It must be understood that India will have to open up its economy to import agricultural produce from these countries sooner or later, for India cannot afford to ban their entry for as long as India itself is an exporter of agricultural products (though not up to their level) like basmati rice, fruits and vegetables, milk and milk products, tea, coffee, spices and so on.  But India is not yet a major player in these products in the international market even though it has the potential.  Its record of consistency in quality, adherence to supply schedules is very bad which puts off the foreign importer.

This is a minus point with our exporters which comes in our way of tapping export market.  Thailand and the Philippines are exporting Pineapple juice on a large scale for the past several years while India is unable to do so in any good measure because of the non-professional attitude of our business community.  How can we enter the international markets with this kind of attitude?

The Government has already initiated policy measures to provide boost to the processed food industry.  In the latest budget, food processing industry has been declared priority sector; 100 per cent FDI has been permitted through automatic route, zero excise duty and so on.

Though incentives have been provided in the past to encourage the growth of food processing industry yet it is still lagging behind by international standards. With the new incentives as provided in the budget, the processed food industry can hope for a big boost.  But there are other minus points. The food preservation technology in most of the cases is more than two decades old.  Similarly, packaging of the products is much below the international standards.  On the top of it no attempt has ever been made to develop brand names in foreign countries. 

It is only for the past few years that some of the companies have started marketing their products in the international market under their brand names.  For instance, till recently the Indian tea was being auctioned in bulk to foreign buyers rather than selling them in a packaged form.  The Tatas have now started selling packaged Tea in the international market under its own brand names.  Similarly, the cooperative sector producer of milk and milk products Amul has also started marketing its product in the international market under its own brand name.  But these are only few exercises in brand building  and cannot be said to establish markets for Indian agricultural products in a very big way. 

Therefore what the country needs to do immediately is to chalk out a concrete programme for the development of processed food products industry, so that India can become a major player in the international market in the next three to four years. 

As a first step India should concentrate on increasing the productivity of those agricultural products in which it has a comparative advantage.  It could be Basmati rice or tea or coffee or it could be mangoes or bananas.  Some of the energies of our agriculture research centres should be concentrated on developing high yielding varieties of these products.  In fact Indian agricultural scientists have successfully developed a new strain of basmati rice which provides 25 to 30% more yield per hectare without any compromise on quality or aroma.

The second step should be the development of new preservative technologies which are of international standards and can prolong the shelf life of those products without any much refrigeration.  For instance, we are producing large number of oranges including Kino yet 30% of this fruit goes waste as we have not been able to develop any technology to preserve its juice.  Therefore, before bottled orange juice from Florida (USA) enters the Indian market we must perfect the technology to preserve the citrus fruit juice in India so that we can compete effectively the US producers not only in our own domestic market but also in the international market. 

Third step needs to be to improve the food processing technology and bring it up to international standards.  One public sector organization is engaged in the development of such technologies but it has had very little impact till date. 

Finally, the food processing industry will have to pay attention to packaging of the processed food products.  At the moment the packaging of most of the processed food products is so repulsive such that even if we have very good product to offer it will not sell in the international market because of its poor packaging. 

India has a comparative advantage in selling its agricultural products at competitive prices in the international market but it will not be able to capture by itself the vast international market for various agriculture products without first improving the quality of its products and its packaging in every aspect.  We have a lot to learn in this respect from countries like Thailand, Philippines and Malaysia which have well established food processing industry.  We must now move fast enough to take advantage of our comparative advantage in the agricultural sector.---INFA

 

(Copyright, India News and Feature Alliance)

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