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Government Policies to Meet the Challenges of the Food Processing Sector

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  • Last Updated : 24 Nov, 2021

Food processing is a type of manufacturing in which raw materials are processed into intermediate foods or edible items using scientific knowledge and technology. Bulky, perishable, and occasionally inedible food resources are converted into more usable, concentrated, shelf-stable, and pleasant meals or beverages using a variety of techniques. Food processing, for the most part, improves the storability, portability, palatability, and convenience of the finished product. General features of raw food resources, principles of food preservation, processing elements that impact quality, packaging, water and waste management, excellent manufacturing methods, and sanitary protocols are all important for food processing professionals to know.

The Food Processing Industry (FPI) is a rising business that has gained traction in recent years. Because of the critical links and synergies that it fosters between the two pillars of our economy, industry, and agriculture, the industry is extremely important. It has a lot of potential for stimulating economic growth, which has prompted the government to take a number of legislative steps to support the food processing industry.

The Indian food sector ranks fifth in terms of scale, contributing almost 6% of GDP, 13% of Indian exports, and 6% of overall industrial investment in the country. Furthermore, it is expected to develop at a pace of 20%, with the processed food category accounting for 25%. Milk and milk products, snack foods, bread goods, fruit and vegetable products, fish and meat processing, and food processing machinery and related equipment are all important aspects of this business. Exports are increasing, which creates more job opportunities.

Challenges with the food processing sector:  

1. Fragmentation of landholdings:

Land fragmentation is a problem because it reduces agricultural output and limits economic potential. Since India’s independence, land fragmentation has been a problem. Because of inheritance regulations, the amount of arable land shrinks with each generation.

2. Climatic variations: 

Climate change is affecting food production. Due to intense heat, harsh weather, and droughts, wheat, maize, and other crop yields have been dropping in several nations. According to some predictions, worldwide yields might drop by up to 30% by 2050 if appropriate adaptation is not implemented.

3. Poor laboratories quality standards:

The large number of entities participating in the food value chain, particularly in the big unorganized portion, makes enforcing quality and safety standards challenging. As a result, procedures like milk adulteration and the use of carbide for fruit ripening have become increasingly common.

4. Poor marketability of processed products:

Gaps in supply chain infrastructure in the food processing sector include insufficient primary processing, storage, and distribution facilities; an insufficient link between production and processing; seasonality of operations and poor capacity utilization; and institutional supply chain gaps.

5. Low access to credit and subsidized financing:

Despite the introduction of the Food Processing Fund a few years ago, the industry has been suffering from a lack of resources. Even if a foreign investment has increased recently, it still falls short of the industry’s needs.

Steps were taken by Government to boost:

1. Pradhan Mantri Kisan Sampada Yojana (PMKSY):

It is an umbrella plan and was introduced in 2017 and encompasses both existing and new programs. It has a budget of Rs. 6000 crore for 2016-20, with the goal of benefiting 20 lakh farmers. The goal of PMKSY is to complement agriculture, modernize processes, and reduce agri-waste. It also aids in the provision of higher pricing to farmers and the creation of good job prospects.

It is a complete bundle that includes the following seven components:

  • Mega food parks.
  • Infrastructure for cold chain integration and price addition.
  • Food processing and preservation facilities are being built or expanded.
  • Agro-processing Cluster Infrastructure
  • Establishing backward and forward links.
  • Infrastructure for ensuring food safety and quality.
  • Institutional and human resources.

2. Mega food parks scheme (MFPS):

Horticultural crops are usually farmed in clusters of comparable farmers, dealers, and industries in certain places. The mega food park concept was established to give world-class infrastructural facilities to these clusters.  

Its goals are as follows:

  • Increasing the quantity of additional value,
  • In order to reduce waste,
  • To increase the revenue of farmers.

Government intervention in other areas:

  • The industries (development and regulation) act of 1951 exempted all processed food goods from licensing.
  • Foreign direct investment is permitted.
  • NABARD has established a special fund with a corpus of Rs. 2000 crores to give low-cost financing to approved food parks and agro-processing facilities.
  • Lower GST for raw and processed goods—nearly 80% of food items are covered by the lower tax slabs of 0%, 5%, and 12%.
  • Under the 1961 Income Tax Act, there are tax holidays and investment-related deductions.
  • Nivesh Bandhu site — for spreading information on state-specific resource potential, regulatory assistance, and tax advantages available to food processors.
  • Maintaining a steady temperature is the most crucial part of supply chain management.
  • During transit, storage, and processing, this is ensured by cold chain facilities.

Status of food processing sector in India:  

  • India is the world’s second-largest producer of fruits and vegetables, after China, yet just 2% of the crop gets processed.
  • Despite a significant manufacturing base, the processing is little (less than 10 percent). Processing accounts for around 2% of fruits and vegetables, 8% of marine products, 35% of milk, and 6% of poultry.
  • India has the world’s greatest livestock population, with 50% of buffaloes and 20% of cattle, but only around 1% of the entire meat population is transformed to value-added goods.
  • The unorganized sector represents more than 75% of the industry.


Food processing has long been a small-scale or domestic industry in India. Sweets, papads, pickles, fried snacks, roasted and puffed cereals were manufactured and marketed for local consumption despite a lack of basic expertise in food processing activities. The output of raw materials has improved as agriculture, horticulture, and pisciculture have grown in popularity. In addition, the government provides financial incentives, training, infrastructure, and marketing facilities to entrepreneurs who wish to start their own businesses. State governments also participate by making space available to individuals who want it.

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