A maximum grant of R50 crore is given for setting up a MFP, in minimum 50 acres of contiguous land with only 50% contribution to the total project cost.
It’s no surprise that after China, India is the second largest food producer in the world, with food and groceries forming about 31% of the consumption basket. However, compared to the US and China which process 65% and 23%, respectively, of their perishables, India is able to process only 7%, which is insignificant. Even the Philippines processes 78%. Unfortunately, poor systems and techniques of handling, storage, and distribution result in around 25-30% of the vegetables and fruits being lost as spoilage. Realising the urgent need and vast potential, a separate ministry of food processing industries was set up as early as in 1988. Over the years, with judicious incentives, and recognising food processing industry as a priority sector under the National Manufacturing Policy in 2011,
India has managed to set up eight mega food parks (MFPs) and 139 cold storages in the public as well as private domain. As a result, from 2008 to 2013, processed food more than doubled to $30 billion. Based on a cluster approach, the MFPs are located at Haridwar, Fazilka, Chitoor, Nalbari, Khargaon, Tumkur, Ranchi, and Murshidabad. These are equipped with state-of- the-art processing facilities, infrastructure and supply chain. Creation of 34 more such MFPs is in the pipeline, giving a major boost to the food availability and even exports of surplus perishables. Some countries, such as Malaysia, have focused on development of palm oil and halal meat clusters primarily for exports as production outstrips local demand.
The world over, many such parks are developed in SEZs (Special Economic Zones) or EPZs (Export Promotion Zones). In India, too, there is a Pearl City Food Port SEZ Ltd in Chennai to take advantage of the export incentives. Prior to the MFP scheme, as early as 1992-97, the ministry of food and processing industries had set up central sector food park, with the primary objective of development of infrastructure and common facilities for use by small and medium enterprises, to undertake value addition such as preservation, packaging, etc. However, as often happens with government initiatives, these facilities had few takers and consequently were underutilised. In addition, the funds routed through the state governments resulted in leakages, and amounts doled out as incentives were considerably low.
Under the MFP scheme, a special purpose vehicle (SPV) duly registered under the Companies Act was set up for execution, management and monitoring of MFPs. In order to prevent fly-by-night operators from taking advantage of the scheme, an external institution with extensive experience in project development, management, financing and implementation of infrastructure projects was engaged to assist the ministry. In addition, a project management consultant was hired to prepare detailed project report and assist in implementation of various projects, while a technical committee headed by the additional/joint secretary of the ministry scrutinised the proposals and detailed project reports, recommending them to an Inter-Ministerial Approval Committee for final approval.
In its turn, the Inter-Ministerial Approval Committee, headed by the minister, selected the projects, sanctioned the grants-in-principle, gave final approvals and also monitored implementation at regular intervals. However, the MFP is again a typical government initiative of one-size-fits-all scheme following a 50-50-50 rule. A maximum grant of R50 crore is given for setting up a MFP, in minimum 50 acres of contiguous land with only 50% contribution to the total project cost. This may or may not interest an investor who have their own plans of what the processing unit would look like, and is especially of no interest to MNCs and Indian investors with deep pockets.
A number of developing countries have set up food processing zones and agro-parks with foreign collaboration, leading to technology transfer, indigenisation and introduction of best management practices. Moreover, private sector has found that the business model proposed under the scheme is very restrictive, particularly for the MNCs, which have their own specialised business models successfully connecting farmer to the markets. In this regard, McCain Foods and PepsiCo have been highly successful in implementing their own business model, instead of following that mandated by the ministry. Time is perhaps now ripe for less governmental fiats, especially in this vital sector, to prevent wastage, ensure nation’s food security, and boost export earnings.
The author is former member, Railway Board. Views are personal