1. What is market size of processed food & related products in India?

  2. How has food processing sector in India performed in the recent years?

  3. Which are the factors responsible for attracting investment in food processing sector in India?

  4. What are the other comparative advantages of India for attracting investment in food processing sector?

  5. What is the current exports scenario in the food processing sector?

  6. Which are the major Central sector schemes from the Government to support food processing in the country?

  7. What are main features of the Mega Food Park scheme?

  8. What are the eligibility criteria and scale of assistance under Mega Food Park scheme?

  9. What are the main features of the Cold Chain scheme?

  10. What are the eligibility criteria and scale of assistance under Cold Chain scheme?

  11. What are the main features of National Mission on Food Processing (NMFP)?

  12. What is the funding pattern under National Mission on Food Processing (NMFP)?

  13. What are the different schemes under National Mission on Food Processing (NMFP)?

  14. Are any fiscal incentives currently available for food processing sector?

  15. Is there any online support/ portal which facilitate investors to setting up food processing units and information on raw material, market, infrastructure etc.?

  16. Has Government taken any proactive step to attract investment in food processing sector?

  17. Is there any restriction on Foreign Direct Investment (FDI) in food processing sector?

  18. What is the extent of inflow of FDI to food processing sector in India?

  19. Which are the major food processing companies including MNCs having presence in India?

  20. What are the entry strategies for foreign companies to operate in India?

  21. Which is the first point of contact for foreign investors interested for setting up of food processing unit in India?



  1. What is market size of processed food & related products in India?

Answer: India is one of the world’s largest producers as well as consumer of food products, with the sector playing an important role in contributing to the development of the economy. Rapid urbanization, rising income, rise of nuclear family, increased mobility, change in tastes, preferences and practices in consumption have contributed significantly to the growth of the market for processed food products. Food and food products are the largest consumption category in India, with a market size of US $ 181 billion. Domestically, the spending on food and food products amounts to nearly 21 per cent of the gross domestic product of the country and constitutes the largest portion of the Indian consumer spending more than a 31 per cent share of wallet. Going forward, the Indian domestic food market is expected to grow by nearly 40 per cent of the current market size by 2015, to touch US $ 258 billion by 2015 (FICCI- EY Report, 2009).

  1. How has food processing sector in India performed in the recent years?

Answer: Food Processing Sector forms an important segment of the Indian economy in terms of its contribution to GDP, employment and investment. The sector constitutes as much as 9.0 and 11.0 per cent of GDP in Manufacturing and Agriculture sector respectively. During the last 5 years ending 2012-13, Food Processing Industries sector has been growing at an Average Annual Growth Rate (AAGR) of around 8.4 per cent. As per latest Annual Survey of Industries (ASI): 2011-12, the total number of factories and persons employed in the registered FP sector in the country is 36,881 and 1.8 million respectively.

  1. Which are the factors responsible for attracting investment in food processing sector in India?

Answer: India is a richly endowed agricultural nation. In 2012, India is top producer of Bananas, Mango, Papaya, Chick-peas, Ginger, Okra, Milk (Fresh & whole of Buffalo and Goat) and Buffalo Meat in the world. Further, India ranks no. 2 in the world in production of sugarcane, Rice (Paddy), Potato, Wheat, Garlic, Groundnuts, Dry Onion, Green Peas, Pumpkins, Gourds, Cauliflowers, Tea, Tomatoes, Lentils, Wheat and Cow Milk. Strong raw material base for food processing sector and a huge market for food products are prime factors for attracting domestic as well as foreign investment in the sector.

  1. What are the other comparative advantages of India for attracting investment in food processing sector?

Answer: Apart from this, there are some other factors which play important role to encourage investment in food processing sector, are as under:

  • Sunshine hours, day length and fairly god rainfall are ideally suited for round the year cultivation;

  • One fifth of world’s irrigated land: 61 million hectare;

  • Major producer of Fruits & vegetables;

  • More than 50 types of spices with annual production of 3.2 million tons;

  • Top producer of Pulses (17.6 million tonnes; 25.9 per cent share);

  • Major producer of cereals: (288 Million tonnes; Share 11.1 per cent);

  • Leading Cattle Population: 211 million (14.7 per cent) Third largest);

  • Largest Buffaloes population: 113 Million (58 per cent);

  • Largest goats population 157 Million (17 per cent);

  • Second largest in sheep population 75 Million (6.8 per cent);

  • Fifth in chicken heads: 942 Million (4.5 per cent);

  • Top producer of Milk: 132.4 Million tonnes;

  • Second Largest Producer of fish 8.85 Million Tonnes;

  • Strategic geographic location and proximity to food importing nations, makes India favourable for export of processed foods;

  • Extensive network of food processing training, academic and research institutes;

  • Cost of skilled manpower is relatively low as compared to other countries.

Given the resource endowment, India has all the potential to become one of the largest food processing countries in the world.

  1. What is the current exports scenario in the food processing sector?

Answer: The value of exports from the sector has increased from US $ 15 billion in 2009-10 to US $ 38 billion with Average Annual Growth Rate (AAGR) of 20.53 per cent. India’s Share in world exports of processed food products has improved from 1.38 per cent in 2005 to 2.28 per cent in 2012.

  1. Which are the major Central sector schemes from the Government to support food processing in the country?

Answer: Government has been implementing two major central sector schemes namely Mega Food Park & Cold Chain scheme under which financial assistance in the form of grant is extended for creation of infrastructure in food processing sector to encourage the growth of this sector.

  1. What are main features of the Mega Food Park scheme?

Answer: The Scheme of Mega Food Park aims to provide modern infrastructure facilities for the food processing along the value chain from the farm to the market in identified agriculture clusters. It includes creation of processing infrastructure near the farm, transportation, logistics and centralized processing centres. The promoter of the MFP creates all the common infrastructure in the park like provision of road, electricity, water, ETP, shed and common facilities like Cleaning, Grading, Sorting and Packing Facilities, Dry Warehouses, specialized storage facilities including Controlled Atmosphere Chambers, Pressure Ventilators, variable Humidity Stores, pre-cooling Chambers, Ripening Chambers, Cold Chain Infrastructure including Reefer Vans, Packaging Unit, Irradiation Facilities, Steam Sterilization Units, Steam Generating Units, Testing Laboratory, Food Incubation cum Development Centres. The individual entrepreneurs can set up their units and avail the common facility by paying user fee. The infrastructure and common facility centre in MFP benefit the entrepreneur in terms of setting up of units and availing services in a cost effective way.

  1. What are the eligibility criteria and scale of assistance under Mega Food Park scheme?

Answer: Any company registered under Company Act, State Government/ State Govt. entities/ Cooperatives are eligible for assistance under Mega Food Scheme. The Scheme provides a capital grant at the rate of 50 per cent of the eligible project cost in general areas and at the rate of 75 per cent of eligible project cost in difficult and hilly areas i.e. North East Region including Sikkim, J&K, Himachal Pradesh, Uttarakhand and ITDP notified areas of the States subject to a maximum of Rs.50 crore per project.

  1. What are the main features of the Cold Chain scheme?

Answer: The scheme seeks to provide integrated cold chain and preservation infrastructure facilities without any break from the farm gate to the consumer. It covers pre-cooling facilities at production sites, reefer vans, mobile cooling units as well as value addition centres which includes infrastructural facilities like Processing/ Multi-line Processing/ Collection Centres, etc. for horticulture, organic produce, marine, dairy, meat and poultry etc.

  1. What are the eligibility criteria and scale of assistance under Cold Chain scheme?

Answer: Individual, Groups of Entrepreneurs, Cooperative Societies, Self Help Groups (SHGs), Farmers Producer Organizations (FPOs), NGOs, Central/State PSUs etc. with business interest in Cold Chain solutions are eligible to setup integrated cold chain and preservation infrastructure and avail grant under the Scheme.

Financial assistance (grant-in-aid) of 50 per cent the total cost of plant and machinery and technical civil works in General areas and 75 per cent for NE region including Sikkim and difficult areas (J&K, Himachal Pradesh and Uttarakhand) subject to a maximum of Rs.10 crore is extended under the scheme.

  1. What are the main features of National Mission on Food Processing (NMFP)?

Answer: Ministry of Food Processing Industries (MOFPI) has launched a centrally sponsored scheme-National Mission on Food Processing (NMFP) - for implementation through state/ UT governments. The objective is to provide more flexibility to the state government to meet the local requirements and also for integrating food processing sector with agricultural and horticultural production of the states.

  1. What is the funding pattern under National Mission on Food Processing (NMFP)?

Answer: NMFP is implemented as a new centrally sponsored scheme with financial contribution of Government of India and States/ UTs in the ratio of 75:25, except for North Eastern States, where the ratio is 90:10. Further, in UTs administered by Government of India it is funded 100 per cent by Government of India.

  1. What are the different schemes under National Mission on Food Processing (NMFP)?

Answer: The different schemes under NMFP are (i) Technology Up-gradation/ Establishment/ Modernisation of Food Processing Industries; (ii) Cold Chain, Value Addition and Preservation Infrastructure for Non-Horticultural Products; (iii) Modernization of Abattoirs; (iv) Human Resource Development; (v) Promotional Activities; (vi) old food parks; (vii) Creating Primary Processing/ Collection Centres in Rural Areas; (viii) Modernization of Meat Shops and Reefer vehicles.

For details of schemes visit Ministry’s website at mofpi.nic.in

  1. Are any fiscal incentives currently available for food processing sector?

Answer: Yes.Government of India has announced a number of fiscal incentives for promoting investment in food processing sector. Some of these are, as under:

Income Tax:

New units in the business of processing, preservations and packaging of fruits or vegetables, meat & meat product, poultry, marine or dairy products meat, meat products, poultry, marine products are permitted to claim deduction from Income tax. This tax incentive is available as 100% tax exemption for the first 5 years’ of operation, and after that, at the rate of 25% of the profits being exempted from tax; 30% in case of a company.

Investment-linked Income Tax incentives of 100% deduction of capital expenditure are extended for Cold Chain Units, warehousing facilities for storing agricultural produce. Such Businesses are allowed 150% deduction provided the taxpayer has commenced its business on or after 01.04.2012.

Custom Duty:

Government has extended Project Imports’ benefits to Cold storage, cold room (including for farm level pre-cooling) or industrial projects for preservation, storage or processing of agricultural, apiary, horticultural, dairy, poultry, aquatic and marine produce and meat. Consequently, all goods related to Food Processing, imported as part of the project, irrespective of their tariff classification, are entitled to uniform assessment at concessional basic customs duty. (Ref. Notification No 12/2012 dated 17.3.2012)

Excise Duty:

Food Products: In order to promote food processing industry, the Government has given concessions in Central Excise Duty from time to time. To excise duty is levied on Milk, Milk Products (Chapter 4), Vegetables (Chapter 7), Nuts and Fruits, fresh & Dried (Chapter 8). As against standard excise rate of 12%, Processed Fruits & Vegetables (Chapter 20) carries a merit rate of 2% without CENVAT or 6% with CENVAT. Soya Milk Drinks, Flavoured Milk of Animal origin also carries a duty of 2% without CENVAT or 6% with CENVAT.

Food processing machineries: All refrigeration machineries and Parts used for installation of cold storage, cold room or refrigerated vehicle, for the preservation, storage, transport or processing of agricultural, apiary, horticultural, dairy, poultry, aquatic and marine produce and meat are exempted from Excise Duty. Pasteuring, drying, evaporating, etc. machinery used in Dairy sector is exempted from Excise Duty.

Excise duty on machinery for the preparation of meat, poultry, fruits, nuts or vegetables and on presses, crushers and similar machinery used in the manufacture of wine, cider, fruit juices or similar beverages and on packing machinery has been reduced from 10% to 6%.

[For Central Excise duty visit: http://www.cbec.gov.in/excise/cxt2013-14/cxt-1314-idx.htm and read with Notification No 12/2012-Central Excise dated 17.3.2012, 12/2013-Central Excise dated 1.3.2013& No 12/2014-Central excise dated 11th July 2014]

  1. Is there any online support/ portal which facilitate investors to setting up food processing units and information on raw material, market, infrastructure etc.?

Answer: An ‘Investors’ Portal’ was launched on 15th October, 2013 to support the investors. The portal is intended to disseminate information on the state specific resource potential, policy support and fiscal incentives for food processing sector. The investors, both domestic & foreign, can also seek guidance on specific issues by posting their queries in the ‘Investor’ Query’ of the portal which will be promptly responded by experts, engaged by ‘Invest India’ exclusively for the purpose on behalf of the Ministry. Investors can access and avail these services through investors’ Portal (http://foodprocessingindia.co.in/).

  1. Has Government taken any proactive step to attract investment in food processing sector?

Answer: Yes.Ministry of Food Processing Industries has set up an “Investors’ Help Desk” in association with “Invest India” in December 2013 for offering support to investors in food processing sector, both domestic and foreign, with regard to their queries on infrastructure facilities for setting up food processing units, availability of raw materials, marketing infrastructure, sector specific state agencies and fiscal incentives in a user friendly mode. The Help Desk also guides investors, provides hand holding services, escorts visit of investors to states/sites of investment.

  1. Is there any restriction on Foreign Direct Investment (FDI) in food processing sector?

Answer: Foreign Direct Investment (FDI) is permissible for all the processed food products up to 100 per cent on automatic route except for very few items reserved for Micro and Small Enterprises (MSEs) subject to applicable laws/ regulatories, securities and other conditionalities. For manufacture of items reserved for Micro Small Medium enterprises, FDI is permissible under automatic route up to 24 per cent of the capital. If foreign investment is more than 24 per cent, Industrial License under Industries (Development & Regulation), Act 1951 is required.

  1. What is the extent of inflow of FDI to food processing sector in India?

Answer: Food processing sector has been attracting FDI significantly in the recent years. Average inflow of FDI which was US $ 117 Million for 11 years ending 2011-12 increased to US $ 401 Million in 2012-13. During 2013-14 (Apr-Mar), the total inflow of FDI to India was a record US $ 4.89 Billion.

  1. Which are the major food processing companies including MNCs having presence in India?

Answer: Major Indian companies are operating in food processing sector ITC, Dabur, Godrej, Britannia, Parle, Amul, Haldiram, Godrej Capital Foods, Future Group, Temptation Foods, Keventer Agro, Zydus, Cadilla.

Apart from these, major MNCs are already present in the country. These are Nestle, Pepsi, Coke, Kellogg's, Delmonte, Conagro, Unilever, Wal-Mart, Perfetti, Glaxo Smith Kline, Heinz, Wyeth Ajinomoto, Nissin Met, Le Bon Griffith Laboratories, and many others are in pipeline.

  1. What are the entry strategies for foreign companies to operate in India?

Answer: Foreign companies can enter in India by two following options:

  • Setting up a non-corporate entity:

    Liaison Office: A liaison or a representative office can be opened in India subject to approval by Reserve Bank of India to represent parent/group companies, promote import/export, promote technical/financial collaborations on parent company/group’s behalf and coordinate communications between parent/group companies and Indian companies.

    Branch Office: Foreign companies can conduct their business in India through its branch office which can be opened after obtaining a specific approval from Reserve Bank of India.

    Project office: If a foreign company is engaged by an Indian company to execute a project in India, it may set up a project office without obtaining approval from Reserve Bank of India subject to prescribed reporting compliances.

  • Setting up a corporate entity:

    Wholly owned subsidiary: Foreign companies can set up wholly owned subsidiary companies in India in form of private companies subject to FDI guidelines.

    Joint Venture with Indian partner: Foreign companies can also set up joint venture with Indian or foreign companies in India.

    Foreign Institutional Investors (FII): FII’s can invest in India in financial markets such as pension funds, mutual funds, investment trusts and asset management companies or their power of attorney holders.

 

  1. Which is the first point of contact for foreign investors interested for setting up of food processing unit in India?

Answer: Investors can express their interest in the “Investors’ Query” of the Investors’ Portal which can be accessed through http://foodprocessingindia.co.in.