Day 15 – Q 2.What are the supply chain constraints of India’s food processing sector? What steps have been taken to address those? Examine.

2. What are the supply chain constraints of India’s food processing sector? What steps have been taken to address those? Examine. 

भारत के खाद्य प्रसंस्करण क्षेत्र की आपूर्ति श्रृंखला समबन्धित बाधाएँ क्या हैं? उनको हल करने के लिए क्या कदम उठाए गए हैं? जांच करें।

Introduction:

The food processing industry is valued at US$258 billion and is the fifth-largest industry domestically in terms of production, consumption, export and expected growth in the country.  It contributes to around 14 % of manufacturing Gross Domestic Product (GDP) and 13 % of India’s total food exports.

Body:

Supply chain management (SCM) is the management of the flow of goods. It includes the movement and storage of raw materials, inventory and finished goods from point of origin to point of consumption.

Supply chain constraints of India’s food processing sector:

• Fragmented supply chain: The long and fragmented supply chain results in the wastages and price escalations. This is because of the large share of unorganised players in the supply chain and operating commercial viability challenges.
• Inadequate cold storage and warehousing facilities: Warehousing is a key requirement in the overall supply chain it is mostly dominated by unorganized players. 20% of warehousing is organized currently with 70% of the organized market controlled by the Government.

• Logistics in India still face challenges related to quality and connectivity:

• Indian national highways account for only 2% of the total road network but carry 40% of all cargo. 
• Port capacity may be increasing, lack of connectivity to these ports leads to cost escalations and delays in the goods transferred.
• Lack of last-mile connectivity from rail transporters. 

• Slowdown in production growth: With around 67 percent of landholdings being marginal (<1 hectare), with an average size of 0.4 hectares, more than half of marginal farmers are likely to not have any excess income to spare beyond subsistence, hindering the improvements in farm-level productivity 

Apart from the above-mentioned areas of concern, other issues such as Lack of applied research, Taxation issues, Access to credit, Processing plants with obsolete technologies, etc., persist in the sector.

Steps taken to address supply chain constraints:

• PM Kisan SAMPADA Yojana is a 6000 crore Umbrella scheme incorporating ongoing and new schemes of the ministry of food processing and industry.
• Some important schemes under SAMPADA yojana:

• Mega food parks – consist of supply chain infrastructure including collection centres, primary processing centres, central processing centres, and food processing units.
• Cold chain – creation of infrastructure facility along the entire supply chain ( pre-cooling, weighing, sorting, grading, waxing facilities, mobile cooler vans etc.,)
• Scheme for Creation of Backward and Forward Linkages –  to perishable horticulture and non-horticulture produce by plugging the gaps in the supply chain in terms of availability of raw material and linkages with the market.
• Infrastructure for agro-processing based on cluster approach

• The National Agricultural market (eNam)  which creates a pan India market facilitates removal of intermediaries, thereby streamlining the entire supply chain
• The new Contract Farming Act  further helps in improving the backward and forward  integration of the supply chain
• Electronic Negotiable Warehouse Receipt (e-NWR) System to facilitate an easy pledge financing by banks and other financial institutions 
• Inclusion of food processing and agro-warehousing under priority sector lending by RBI
• The Logistics challenge of the supply chain is being taken care of by leveraging the existing PM-Gram Sadak yojana, BHARATMALA, and SAGARMALA schemes
• Promotion of Agri Export Zones, one-time capital grants, etc., are being undertaken.
• 100% FDI in this sector.

Conclusion:

The Government of India has identified the food processing sector as the sunrise sector. Several initiatives are being put in place for promoting primary as well as secondary processing. For unhindered growth, it becomes important to address the demand and supply side constraints of food processing in India.