Agri industrialisation is need of the hour, and this calls for focus on secondary agriculture

August 13, 2020 6:15 AM

India’s food processing industry (FPI) is relatively at a nascent stage, and currently processes less than 10% of its agri-produce. In 2017-18, the FPI accounted for 7.9% of manufacturing GVA and 9.5% in agricultural value added.

The combined claim ratio in the first three years of the scheme implementation is 88.3%.India’s food processing industry (FPI) is relatively at a nascent stage, and currently processes less than 10% of its agri-produce.


By Ashok Dalwai

In part one of this article (Secondary agriculture is of primary importance; August 10;, the need to expand the market range both horizontally (territorial extension) and vertically (functional expansion), as also the role of agro-processing in achieving the latter in particular, were discussed. In this part, the article dwells upon promoting secondary agriculture on the shoulders of food and non-food processing.

Current status of agro-processing

The processing sector in India still veers around food processing, and there is minuscule production of high-value products like chemicals from ethanol. The country imports most such products including proteins, starch, enzymes, adhesives, agar, biochemical, etc. India’s food processing industry (FPI) is relatively at a nascent stage, and currently processes less than 10% of its agri-produce. In 2017-18, the FPI accounted for 7.9% of manufacturing GVA and 9.5% in agricultural value added. As a percentage of the nation’s overall GVA, the FPI contributed just 1.59, but accounted for 1.8 million and 5.1 million jobs in registered and un-incorporated sectors, respectively. Obviously, the potential that the country’s bio-resources hold (758 million tonnes of crop residues and 1.2 billion tonnes of primary agri-produce) awaits fulsome utilisation.

Growing from primary to secondary agriculture—options

The way forward to secondary agriculture is to strengthen food processing and then graduate to non-food processing for bio-materials, biochemical and fuel. That no integrated effort has so far been made can be best illustrated by taking the case of seaweed. While the utility of seaweed in producing agar and further value-added products like agarose and sepharose is well known, the paradox is that despite India having a coastal length of around 8,000 km, it still imports seaweed from Spain.

The country needs to drive three alternate entrepreneurial modes so as to harvest the potential, and not necessarily in a sequence. These include (1) cottage & village-level industries with low level of capital & technology, to meet near-market demand of processed food & non-food items; (2) micro, small & medium scale enterprises (MSME) that are fed raw materials after aggregation from the fragmented fields; and (3) high-end processing that deploys intensive technology and capital, and manufacture specialised products like bio-based industrial enzymes, chemicals, fuel, etc.

Promoting MSMEs and high-end sector is predicated upon infrastructure, policy support and technology. Infrastructure includes the generic needs of road, transport, electricity and digital facilities. Hereunder, stable supply of electricity remains a concern in rural areas, where industry is best placed in close proximity to the production hinterlands, from the perspective of cost efficiency.

Technology is available for the relatively less-intensive units, but not for high-end industries for specialised products. Domestic research institutes have not been very successful in offering state-of-the-art technology, alluding to the need for partnership between ICAR/SAUs and CSIR, besides a platform of academia, industry and government. In the interim, easy import of technology and machinery from the global market becomes critical.

A progressive policy is a sine qua non for rapid stride of agro-processing. The recent post-production free trade-centric reforms will enable processors to connect with producers and marketplaces, and source standardised quality materials needed for a specific industrial product. Supplementary initiatives besides liberalisation include (1) allowing 100% FDI under the automatic route in FPI; (2) permitting 100% FDI in manufacture of food products and for trading (including through e-commerce) of food products manufactured and/or processed in India; (3) an umbrella scheme called PM-Kisan Sampada Yojana to incentivise private sector investments in food processing; (4) Rs 10,000 crore for micro-food enterprises; (5) priority sector lending for the food sector; (6) ‘One district, one cluster’ system for horticulture production for volumes and quality commodities; (7) promotion of herbal cultivation (Rs 4,000 crore under Atmanirbhar Bharat); and (8) facilitative provisions under GST, income tax and customs duty. Another positive change in favour of secondary agriculture is the paradigm shift in the country’s food standards and regulations from ‘checking adulteration’ to ‘ensuring safety’.

The amendment to the Sugar Control Order in 2018 allowing ethanol production from B-heavy molasses and sugarcane juice has triggered ethanol units. This is a creative policy that continues to support cane production, without adding to sugar glut—a clear win-win case.

An accelerated growth warrants proactive support to entrepreneurs through a single-window system. The Ministry of Food Processing Industries may, therefore, be authorised to cover even non-food processing industries in addition to food processing. It, in a way, becomes the Ministry of Agro-Processing as exists in some states, and drives the country’s bio-economy.

Cottage and village level: In synch with Mahatma Gandhi’s philosophy of rural industrialisation, India has promoted khadi and village industries. Infusing it with better technology, business principles, branding and marketing will incentivise its growth. The agriculture sector, with diverse raw materials, provides ample scope for this. The Committee on Doubling Farmers’ Income has laid great stress on secondary agriculture and defines it as a productive activity that (1) utilises both primary & by-products raised on the farms and in the neighbourhood; and (2) deploys locally-available manpower after skilling them to operate and manage the production of goods & services. The committee has suggested three types of microenterprises: (i) Type A: value addition to primary agriculture production system (like different types of nurseries, vermi-compost, garlic extract, turmeric powder, etc); (2) Type B: farm-linked alternate enterprises (like beekeeping, lac cultivation, bull servicing, etc); (3) Type C: enterprises that use crop residues and wastes of livestock, fish, etc).

The National Commission on Agriculture, in its 1976 report, estimated the requirement of beehive colonies at 155 million, and the count in existence is around 4.6 million. Using properly Rs 500 crore available under Atmanirbhar Bharat, millions of rural jobs can be created. This is only an example to highlight the immeasurable scope that exists for secondary agriculture in the country, if only standardisation of quality, GI-based labelling and marketing strategies are emphasised. The palpable aspiration among the rural youth today is a right recipe for agricultural-enterprises. This can be facilitated by training and financing to create off-season jobs and supplementary farm incomes. A Division of Secondary Agriculture in the agriculture & allied ministries would do well to anchor such a responsibility.

In sum

The agriculture sector needs to be re-mandated as an economic activity that has to generate jobs and incomes, while meeting the food and nutrition security of the country. This necessitates industrialisation of agriculture for its transformation into a mature economic segment. This can be realised by adopting secondary agriculture as it can create value, deliver value and capture value, which describe the basic tenets of any business.

The author is CEO, National Rainfed Area Authority (NRAA), & chairman, Empowered Body, Doubling Farmers’ Income

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