Day 48 – Q 3. What do understand by backward and forward integration? Illustrate with respect to the food processing industry.
3. What do understand by backward and forward integration? Illustrate with respect to the food processing industry.
बैकवर्ड और फॉरवर्ड एकीकरण से आप क्या समझते हैं? खाद्य प्रसंस्करण उद्योग के संबंध में उदाहरण दें।
Food processing is the transformation of raw ingredients into food, or of food into other forms (ie. food processing may denote direct manufacturing of food or value addition on existing food). Food processing typically takes harvested crops or butchered animal products and uses these to produce long shelf-life food products.
Forward linkage integration refers to consolidating the chain from processing industries to market while backward market integration refers to consolidating chains from farm to processing centres and to integration with ancillary industries.
Example of forward linkage integration
- Reduction of intermediaries by wholesale marketing or e-marketing or supermarkets etc.
- Provision of chilling infrastructure, transportation infrastructure etc.
- Provision of testing and standardisation facility to grade final product.
Examples of backward linkage integration:
- Development of infrastructure like road to transport farm produce to processing centres.
- Land consolidation and contract farming to ensure steady availability of surplus marketable produce.
- Availability of proper marketing infrastructure for farmers to realize fair price for their produce for e.g. e-NAthis forward and backwards linkageetc. to preserve the raw materials for longer durations.
Integration of these forward and backwards linkage are extremely vital for the success of food processing sector.
Benefits of backward linkage and forward linkage for food processing industries
- Reduces food inflation
- Preventing wastage of ones third of food
For e.g. Pepsi collaborated with Punjab for orange procurement
However various challenges still remain owing to lack of infrastructure, l large no. Of intermediaries, lack of testing and grading facility and land reform issues. which need to be overcome to reap the anticipated benefits of FPI in terms of improved efficiency of food supply chain and employment generation (and thereby reaping our demographic dividend).
Food processing industries are sunrise industries which has potential to grow from present 2% of GDP to optimising high output of farming sector. Government introduced PM krishi sampada scheme, mega food park scheme etc. to address a plethora of these issues.
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