Processing and Value Addition

An Overview of Post Harvest Value Addition in India

Need of the hour is to encourage introduction of yield-boosting bio-fertilisers and germplasm banks and ensure supply of high quality transgenic seeds and other nature-friendly agricultural inputs such as bio-pesticides. The onus, therefore, has got to be on hi-tech harvest and post-harvest technologies. Production of organic foods besides development of nutraceuticals and functional foods deserve attention as demand and market for such foods is increasing rapidly with increasing health consciousness and growing concern about environmental issues.

Post-harvest value addition includes primary, secondary, and tertiary processing, operations performed on farm produce. It is to provide longer shelf life, maintain/ improve quality, and enhance form, space and time utility of the produce for food, feed, fibre, fuel and industrial purposes. Farm produce includes food crops, horticultural produce, sugarcane, plantation crops, spices and condiments, medicinal and aromatic produce, livestock and fish produce, fibre, fuel crops and others. The post harvest operations include on-farm handling, cleaning, grading, moisture conditioning, milling, extraction, cooling, freezing, roasting, puffing, flaking, retort processing, packaging, transport and storage.

The sector however, has been facing the problems of erratic and inadequate supply of quality raw materials, inadequate infrastructure, inadequate investment in organized sector, fragmented research and development (R&D), lack of adequately trained human resource, lack of quality testing and certification laboratories, long chain of intermediaries contributing to high costs and inefficiencies, high costs of carrying inventories, working capital, and taxation, and overshadowing of consumption patterns by cultural practices.

Kerala has a big export market as well as a huge domestic consumer base. With regard to the export of marine products, the share of Kerala during 2001-02 has been 15.97 percent in value. Kerala is rich in coconut and is a traditional exporter of spices, seafoods and processed foods. Studies held in the recent past have shown that though Kerala makes up to only 3.5 percent of India's total export, the State's contribution in the field of food exports makes up to 20-25 percent of the total export every year despite the fact that it accounts for comparatively much lower land area.

Food processing industry in India

The food processing industry is one of the largest industries in India - it is ranked fifth in terms of production, consumption, export and expected growth. The industry is worth Rs 350,000 crores including Rs. 99,000 crores worth of value added products.  Food processing is a large sector that covers activities such as agriculture, horticulture, plantation, animal husbandry and fisheries. It also includes other industries that use agriculture inputs for manufacturing of edible products.

Processed food industry in India contributes 6.3% of the GDP, and accounts for 13% of export and 6% of the capital investment. India produces about 600 million tonnes of farm produce annually. The production of different agricultural commodities in the year 2004-2005 (in million tonnes) includes:

• Food grains (204.6), Oilseeds (26.1), Sugarcane (232.3), Fruits (53.1), Vegetables (91.6)
• Milk (90.7), Fish (6.3), Eggs (45,000 million nos.), Poultry (489 million stock), Meat (6.0),
• Honey (9,000 t), Wool (0.0526),
• Mushrooms (40,000 t), Spices (4.1),
• Tea (0.83), Coffee (0.281),
• Loose flowers (0.73), Cut flowers (2060 million nos.), and a variety of other products.

Level of processing in food processing sector in India

Item	Level of processing in organized sector	Level of processing in unorganized sector	Total processing
Fruits & Vegetables	1.2%	0.6%	1.8%
Dairy products	15%	22%	37%
Meat	21%		21%
Poultry	6%		6%
Marine fisheries	1.7%	9%	10.7%
Shrimps	0.4%	1%	1.4%

Source: Cygnus Report, Indian Food Processing Sector, 2005

There were 7,521 regulated markets and 27,294 rural periodic markets in the country for handling part of these produce.

There are an estimated 40,000 food processing units in India, out of which 1,300 function in Kerala. Besides there were 1,000 cold stores, 369 units for freezing of fish, 499 frozen storages, including 125 Integrated Quick Frozen (IQF) plants, 30 fish meal units, 5 fish canning units, 471 pre-processing and dry fish storages, 900 prawn peeling sheds, 165 units for meat processing in organized sector, 144 pork processing units, 54,000 bakery production units, and 530 dairy products processing units.

In addition there are 100 units for aerated cold beverages (2500 million litre production capacity), 215 units for packages potable water, 12 joint ventures for production of alcoholic beverages (capacity: 33,919 kilo litre), and 56 beer units.

Inspite of these facilities, the level of processing has been as low as 2% in case of fruits and vegetables in comparison to 60% in U.K. and USA, 80% in Malaysia, and 30% in Thailand. The level of processing in other commodities has been to the tune of 14% in milk, 4% in fish and 1% in meat and poultry. Thus, India’s contribution to processing of farm produces in the year 2004-2005 has been only about 1% at the global level and 2% at the national level.

The export of processed food from India is also growing at more than 10-12 per cent per annum. While Kerala's potential in the areas of agriculture and livestock commodities is under-utilised, export of fresh fruits and vegetables was to the tune of Rs. 143 crores last year.

According to the Reserve Bank of India, the actual inflow of foreign direct investment (FDI) in the food and food-processing sector has been over US$ 711.4 million (Rs. 3187 crores) till March 2004. Nearly 30 percent of FDI in this sector comes from EU countries such as Netherlands, Germany, Italy and France.

Value Addition

The market for processed foods in 2014-2015 in comparison to 2003-2004 is expected to go up 11 times for fruits and vegetables, 4 times for dairy, 15 times for poultry, 4.3 times for buffalo meat, 1.4 times for milled rice, 1.5 times for milled wheat, 16 times for ready-to-eat (RTE) foods, 5.4 times for marine products, 9.3 times for sugar and sugar based products, 4.8 times for alcoholic beverages, 2.5 times for aerated cold beverages, twice for pulses and 4.5 times for spices.

The growth per annum in processed foods would be about 10%, primary processed foods 7%, and value added foods 15%.

The share of value added products would increase from the existing 38% to 58% by 2014-2015.

The level of processing in organized sector is expected to be in fruits and vegetables (15%), dairy (30%), buffalo meat (45%), poultry (25%), and marine products (20%).

Fresh steps in value addition

• Food Policy is proposed to support projects for reduction in post-harvest losses, enhance the level of processing, encourage value addition, employment generation and ensure remunerative price to farmers. In the Government of India Budget 2006-2007, Food Processing has been placed as a priority sector for bank credit. 

• National Bank for Agriculture and Rural Development (NABARD) has set aside Rs. 1,000 crore, especially for agro-processing infrastructure and market development.

• Excise duties have been significantly reduced. For instance, on Dairy Processing equipment, excise duty has been reduced from 16% to zero, food grade hexane from 32 to 16%, and meat, poultry and fish from 16 to 8%, packaging machinery from 15 to 5% and so on.

• Excise duty has been reduced to zero in case of condensed milk, ice cream, preparations of meat, fish and poultry, pectins, pasta and yeast.

• Cess on coffee export @ Rs. 500 per tonne was abolished. Additional excise duty levied on tea during 2005-2006 is also withdrawn.

• Presently, food and food processing is regulated by 13 different laws and regulatory orders. Efforts are being made to integrate them.

• The Ministry of Food Processing Industries has already approved establishment of 47 Food Parks in different parts of the country having facilities for cold storing, IQF, packaging and so on at one place. 

Quality Standards

The quality standards that govern the food industry include;

• Prevention of Food Adulteration Act, 1954 (PFA), Vegetables Product Order, 1967 (VPO), Food Products Order, 1955 (FPO), Meat and Food Products Order, 1973 (MFPO), Meat and Meat Product Order, 1992 (MMPO). Agri-produce (Grading and Marketing) Act, 1937, Bureau of Indian Standard (BIS), Export (Quality Control and Inspection Act) (1963)

• There are few standards for unprocessed/ raw food materials. Good Manufacturing Practices (GMP), Good Hygiene Practices (GHP), Hazard Analysis Critical Control Point (HACCP), Codex, International Standards Organisation (ISO) 9000 are some other certification procedures applicable to processing of foods and products.

• Codex covers 234 foods, 32 functional groups (additives), 36 flavouring agents, 6 labeling standards, 49 codes of practices, and 41 guidelines.

• BIS has about 700 Indian Standards for use in the area of agricultural produce and value added products.

• The key issues addressed by these standards include preventing adulteration, regulate hygienic conditions, inform consumers about the product, manufacturer etc., provide product specifications as well as export specifications

• An integrated food law viz., Food Safety and Standards Act 2005 has come into existence that consolidates most of the food related laws in India to meet the international standards.

Organic products

Out of about 200 products under “Organic” certification, the major items produced in India by the year 2005 included tea, coffee, rice, wheat, cardamom, black pepper, white pepper, ginger, turmeric, vanilla, red gram, black gram, tamarind, clove, cinnamon, nutmegs, mace, chilli, mango, banana, pineapple, passion fruit, sugarcane, orange, cashew, walnuts, okra, brinjal, garlic, onion, tomato, potato, mustard, sesame, castor, sunflower, cotton, and some of the herbal extracts.
Globally, the area under organic cultivation has been growing rapidly. India, with 5147 certified “organic farms” in 2005, ranked 33 in the world having 0.114 million ha under organic cultivation out of total 31 million ha in the world.

Lack of quality testing and certification laboratories, certified seeds and planting materials, cool chain facilities including reefer vans, and poor road conditions have been the major problems faced by the sector that need priority attention. 

Employment generation

The food processing industry ranks fifth in its contribution to value addition but tops the list in terms of employment opportunities with approximately 15 lakhs employed consisting of 19 percent of the total investment in the industrial sector but contributes 18 percent to the GDP.