Agro & Food Processing
The Current Status
- The Indian food market is estimated at over US$ 182 billion, and accounts for about two thirds of the total Indian retail market. Further, according to consultancy firm McKinsey & Co, the retail food sector in India is likely to grow from around US$ 70 billion in 2008 to US$ 150 billion by 2025, accounting for a large chunk of the world food industry, which would grow to US$ 400 billion from US$ 175 billion by 2025.
- Though India is the second largest country in terms of population, at present, per capita consumption of Agro and Processed Food products in India is one of the lowest offering huge potential.
Per capita Consumption: India and Other countries Food product India Other countries Grains 178 kg USA:1046 kg, China:348.7 kg Vegetables 107 kg China:311 kg, USA:201 kg Meat 1.6 kg USA:42.6 kg, China:43.3 kg Poultry – chicken
USA:45.4 kg, China:9.5 kg
Milk 97.96 litres EU:93 litres, UK:11 litres, Australia:106 litres, Canada:95 litres, China:21.7 litres Vegetable Oils 11 kg USA:41 kg Ice cream 250 ml USA:23 litres, Australia:18 litres, Sweden:14 litres Biscuits 2.1 kg USA, UK and Western European countries:10 KG Sugar 18 kg World Average:22 kg
India is one of the key food producers in the world, with the second largest arable land area. It is the largest producer of milk, pulses, sugarcane and tea in the world and the second largest producer of wheat, rice, fruits and vegetables.
- According to industry estimates, the processed food market accounts for 32 percent (EUR 21.8 billion) of the total food market which is valued at EUR 67.9 billion. India is the world's second largest producer of food next to China, but accounts for only 1.6 percent of international food trade. The Government aims at increasing this share to 3 percent in the next 8 years. This indicates vast potential for both investors and exporters.
- The food processing industry is presently growing at 14 per cent against 6-7 per cent growth in 2003-04. The industry received Foreign Direct Investments (FDI) totalling US$ 143.80 million in 2007-08 against US$ 5.70 million in the previous fiscal. The cumulative FDI received by the industry from April 2000-January 2009 stood at US$ 760.32 million.
- However, India’s share in exports of processed food in global trade is only 1.5 per cent; whereas the size of the global processed-food market is estimated at US$ 3.2 trillion and nearly 80 per cent of agricultural products in the developed countries get processed and packaged.
- India’s Food Processing industry is one of the largest industries in the country. Within Manufacturing sector, it is ranked fifth in terms of production, consumption, export and expected growth. The Indian food industry is estimated to be worth over US$ 200 billion and is expected to grow to US$ 310 billion by 2015. India is one of the world’s major food producers but accounts for only 1.7 per cent (valued at US$ 7.5 billion) of world trade in this sector – this share is slated to increase to 3 per cent (US$ 20 billion) by 2015.
- The Indian food processing industry is estimated at US$ 70 billion. It contributed 6.3 per cent to India’s GDP in 2003 and had a share of 6 per cent in the total industrial production. The industry employs 1.6 million workers directly.
- The Ministry of Food Processing, Government of India has defined the following segments within the Food Processing industry:
- Dairy, fruits & vegetable processing
- Grain processing
- Meat & poultry processing
- Consumer foods including packaged foods, beverages and packaged drinking water.
- Out of the country’s total agriculture and food produce, only 2 per cent is processed. The highest share of processed food is in the Dairy sector, where 37 per cent of the total produce is processed, of which 15 per cent is processed by the organised sector.
- Fruits and Vegetables processing: India produces the widest range of fruits and vegetables in the world. It is the second largest vegetable and third largest fruit producer accounting for 8.4 per cent of the world’s food and vegetable production. The share of organised sector in fruit processing is estimated to be nearly 48 per cent.
- India currently produces about 50 million tonnes of fruits, which is about 9% of the world’s production of fruits and 90 million tonnes of vegetables, which accounts for 11% of the world’s vegetable production. Though India has a strong raw material base, it has been unable to tap the potential for processing and value addition in perishables like fruits and vegetables. Only about 2 percent of the fruits and vegetables in India are processed,
which is much lower when compared to countries like USA, China and others.
Fruit/Vegetable % share in global production Mangoes 54% Cauliflower 30% Bananas 23% Green peas 36% Onions 10%
- India has moved away from subsistence levels of production of fruits and vegetables to a stage where surpluses are available though in specific pockets. India’s share in some of the agricultural and horticultural produce in the world is as follows:
- Snacks and Confectionery: The Indian market holds enormous growth potential for snack food, which is estimated to be worth US$ 3 billion. The market is clearly and equally divided into the organised and unorganised sector. The organised sector of the snack food market is growing at 15-20 per cent a year while the growth rate of the US$ 1.56 billion unorganised sector is 7-8 per cent.
- Dairy: India is with highest livestock populations in the world, it accounts 50% of the buffaloes and 20% of the world’s cattle population, most of which are milch cows and milch buffaloes. India stands first in the world in terms of milk production. The output is expected to be about 108 million tonnes (estimate for 2007), growing at a compounded annual growth rate of 5 per cent. According to Dairy India 2007 estimates, the current size of the Indian dairy sector is US$ 62.67 billion. The dairy sector ranks first in terms of processed foods with 37 per cent of the produce being processed. The organised sector processes an estimated 15 per cent of the total milk output in India. Milk and milk products contribute to a significant 17 per cent of the country’s total expenditure on food. Traditional dairy products account for about 50 per cent of the total milk produced. The market for dairy products is expected to grow at 15-20 per cent over the next three years.
- The milk surplus states in India are Uttar Pradesh, Punjab, Haryana, Gujarat, Maharashtra, Andhra Pradesh and Tamil Nadu. The manufacturing of milk products is very much concentrated in these states due to the availability of milk in huge quantity.
- The dairy exports in 2007–08 rose to US$ 210.5 million against US$ 113.57 last fiscal, whereas the domestic dairy sector is slated to cross US$ 108 billion in revenues by 2011.
- Ghee is the most widely marketed and branded product with a nation-wide penetration of 24.1 per cent. It is estimated to be growing at a rate of 8 per cent per annum.
- The dairy whitener market comprises of sweetened milk powders, condensed milk and creamers. Its market size is estimated at US$ 450 million for 2006-07.
- The cheese market is estimated at US$ 2.49 million for 2006-07 (54000 tonnes in volume terms), growing at a rate of nearly 10 per cent per annum. The organized cheese market is dominated by processed cheese which accounts for 74 per cent market share.
- The ice-cream market in India is estimated at US$ 226 million in 2006-07, with the organised market at US$ 158.2 billion This is currently growing at 20 per cent.
- India’s dairy industry is considered as one of the most successful development industry in the post-Independence era. and has been growing at a rate of 5 per cent a year.
- Beverages: According to industry experts, the market for carbonated drinks in India is worth US$ 1.5 billion while the juice and juice-based drinks market accounts for US$ 0.25 billion. Growing at a rate of 25 per cent, the fruit-drinks category is one of the fastest growing in the beverages market. Sports and energy drinks, which currently have a low penetration in the Indian market, have sufficient potential to grow.
- Meat and Poultry Processing: India has the largest number of livestock population in the world accounting for 50 per cent of buffaloes and 16 per cent of the goat population. Consumption per head of both fresh and processed meat is very low at 1.5 kg compared with world average of 35.5 kg. Indian poultry meat market was approximately US$ 2.03 billion in 2006. Indian broiler industry has seen a rapid growth in the last few years - CAGR of more than 10 per cent a year since 1998.
- Spices: Despite a global slowdown, Indian spice exports are growing. During April-February 2008-09, India exported spices and spice products valued at US$ 1.02 billion. In 2007-08, India exported 444,250 tonne of spices and spice products valued at US$ 1.10 billion.
- Confectionery: The chocolate market in India is dominated by two major players, Cadbury India Ltd and Nestle India Ltd, which together account for about 90 percent of the total chocolate market. The total market for sugar boiled confectionery (comprising plain/hard boiled candies, toffees, eclairs and gums) is estimated at EUR 1.15 bn of which the organised sector is around EUR 460 mn.
- Retail Landscape: Food Chains and Restaurants : The food and grocery market in India is the sixth largest in the world. Food and grocery retail contributes to 70 per cent of the total retail sales. According to industry estimates, the segment is growing at a rate of 104 per cent and is expected to grow to US$ 482 billion by 2020. According to a BMI forecast, India is likely to see a huge 443 per cent increase in mass grocery retail (MGR) sales during the 2007-2012 period.
- At present, India’s Per capita consumption is one of the lowest. The growing per capita income has increased the purchasing power thereby offering huge potential to investors.
- According to the India Food and Drink Report Q3 2008 by research analysis firm Research and Markets, by 2012, India’s processed food output is likely to grow by 44.2 per cent to touch US$ 90.1 billion, while packaged food sales will increase by 67.5 per cent to reach US$ 21.7 billion. On a per capita basis, per capita packaged food spending is expected to grow by 56.5 per cent to US$ 18.06 by 2012.
- India has the largest irrigated land in the world. It is also world’s largest producer of milk, tea and pulses. India has large marine product and processing potential with varied fish resources along the 8,041 km coastline, 28,000 km of rivers and millions of hectares of reservoirs and brackish water.
India also possesses the largest livestock population in the world with 50 per cent of world’s buffaloes and 20 per cent of cattle.
All these agro resource endowments offer significant investment potential.
- With only 2.2 percent of processing levels for Fruit and Vegetable (F&V), 35 percent for milk, 21 percent for meat, 6 percent for poultry products and 38 percent for agri-produce, India's levels are significantly low compared to international levels offering huge potential for value-added processed products.
- The market for alcoholic beverages has been growing consistently. 'The Future of Wine', a report on the state of the wine industry over 50 years, suggests that the market for wine in India was growing at over 25 per cent per year.
Why Tamil Nadu?
- Tamil Nadu with Seven agro-climatic conditions and varied soil types is better placed for production of fruits, vegetables, spices, plantation crops, flowers, medicinal and aromatic plants. Tamil Nadu is one of the largest producers of agro and horticulture products in India.
S.No Crops Production in Lakh MT 2008-09 2009-10 Forecast 1 Fruits 73.88 80.53 2 Vegetables 83.32 90.82 3 Spices 8.05 8.77 4 Plantation crops 8.07 9.48 5 Flowers 2.28 2.49 6 Medicinal plants 0.17 0.18 Total 175.77 192.28
- Sugar Industry: There are 41 Sugar Mills in Tamil Nadu comprising of 16 Sugar Mills in Co-operative Sector, 3 Sugar Mills in Public Sector and 22 Sugar Mills in Private Sector. Presently 38 Sugar Mills are functioning. During 2007-08, sugar cane was cultivated in 2.89 Lakh Hectares of land and production was 229.68 Lakh MT (166.49 lakh MT in 2008-09) yielding sugar output of 21.41 Lakh MT (16.16 Lakh MT in 2008-09).
- With rich agro resource endowments, Tamil Nadu offers excellent potential for Food processing industries.
- Tamil Nadu is a major exporter of agro and Processed Food products. During 2007-08, Tamil Nadu exported :
Product Tamil Nadu Exports during 2007-08 Rs. In Crores Agro and processed Food 4782 Marine Products 1729 Total 6511
- Attractive Package of Incentives depending on the size of Investment and employment as per Industrial Policy 2007.
- Incentives under Tamil Nadu agro and Agro processing Policy 2008.
- Income Tax rebate is allowed, 100% of profits for 5 years and 25% of profits for the next years, for new industries to process, preserve and package fruits and vegetables.
- Declared as priority sector for priority lending from Financial Institutions.
- 100% FDI on automatic route.
- Excise duty waived on fruits and vegetables processing from 2000 – 01.
- Income tax holiday for fruits and vegetables processing from 2004 – 05.
- Customs duty reduced on freezer van from 20% to 10% from 2005 – 06.
- Implementation of Fruit Products Order.
- Implementation of Meat Food Products Order.
- Enactment of FSS Bill 2005.
- Food Safety and Standards Bill, 2005.
- Super-mega Policy – Government offers special incentives for projects with investments between Rs.1500 to 4000 Crores.
- Land allotment in different Industrial parks and SEZs. SIPCOT has promoted a Food Park at Nilakottai near Dindugul. Government is promoting Agro Processing clusters in industrial parks and special economic zones keeping in view value-addition of meat and seafood (Ramanathanpuram), Poultry products (Namakkal), Turmeric (Erode), Sago (Salem), Bananas (Trichy), Mangoes (Krishnagiri), Cashew (Panruti), Palm products, Medicinal plants and seafood (Thoothukudi), Milk Products, Grapes (Theni), etc.
- Agri Export Zone for Cashew: TIDCO with the assistance of APEDA and the State Agriculture Department is setting up an Agri Export Zone for cashew at Cuddalore district covering Cuddalore, Thanjavur, Perambalur, Pudukottai and Sivaganga districts at a project cost of Rs.16.54 Crores. The project is being implemented through an Associate Sector Joint Venture Company, M/s.Sattva Agro Expo Private Limited. Phase I of the project includes Raw Cashew Nut Processing, Common Processing and Pack House (CPPH) and is nearing completion.
- Standalone SME cold storages for agro processing shall be provided power tariff subsidy of 30%, 20% and 10% in the first, second and third year of commercial operation. 100% exemption from payment of Electricity Tax shall be provided for all new agro-processing units for a period of 5 year from the date of commercial production.
- Infrastructure support in the form of power, water, connecting roads, drainage, etc.
- Single window facilitation through Guidance Bureau.