1. PM Narendra Modi is trying so hard to woo investors in food processing; here is why

PM Narendra Modi is trying so hard to woo investors in food processing; here is why

Given the tens of thousand crore rupees famers lose each year due to waste in fruits and vegetables, the wide disparity between mandi and retail prices and the tremendous value addition that is possible—just look at the difference between the price of tomatoes and ketchup—it is not surprising that prime minister Narendra Modi is trying so hard to woo investors in food processing.

By: | Published: November 7, 2017 4:58 AM

Given the tens of thousand crore rupees famers lose each year due to waste in fruits and vegetables, the wide disparity between mandi and retail prices and the tremendous value addition that is possible—just look at the difference between the price of tomatoes and ketchup—it is not surprising that prime minister Narendra Modi is trying so hard to woo investors in food processing. If most of the $10-billion of investment promises made during the mega food festival inaugurated by Modi over the weekend are to fructify, it will be a big boost to farmer incomes. But getting investors to move from the commitment stage to actual investment will take a lot of policy change, not just on the central government’s part but also from state governments. A relatively easy one, and it is not clear why that has been delayed as much as it has, is relaxing rules for FDI in both multi-brand- as well as food-retail. While multi-brand seems to have got caught in the BJP’s anti-retail-FDI policies, food minister Harsimrat Kaur has been recommending allowing food-FDI units the flexibility to sell non-food items as well, up to 30% of their total revenues—if people coming to buy vegetables can also pick up, say, shaving blades, it will help boost revenues. Also, if processed foods are to be given a fillip, GST rates will also need to be relooked.

For the processed foods industry to take off, farmers will need to produce fruits and vegetables of a certain type and consistency—this will, then, require a certain type of seed and also huge tracts of land. That, in turn, means various state governments have to agree to change their laws to allow land-leasing and contract-farming; to begin with, digitalisation of land records is critical since, if ownership details are not clear, farmers will not lease out their lands. Getting all states on board will be impossible, but a start could be made by BJP-ruled states. Since certain types of seeds will be required—to ensure, for instance, every tomato has the same amount of pulp and is of similar size—IPR laws also need to be clear; the Monsanto experience of the government riding roughshod over its IPR has been unfortunate in this context.

Needless to say, agriculture policies cannot be as whimsical as they are today as companies have to be able to buy and stock unlimited amounts of fruits and vegetables and also be free to export them. The government also has to help the industry organise itself the way it did for the milk sector—whether it was creating processing facilities or cold chains, and a lot more that was required for Operation Flood, the government subsidised all of this; a good way to do this is to create a corpus for the funding and a task force whose job is to deliver on targets like, say, 30% of Madhya Pradesh’s vegetables being processed by 2022. A significant bump-up in the amount of fruits and vegetables processed in the country will do wonders to the incomes of farmers, but being able to achieve this requires a lot of policy changes and coordination between various arms of the government and also between state governments.

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