G opening its own factory retail outlet like nike, adidas or Apple small company has to rely on third party retailers and need to give them margin from sales profit decrease and poor economies of scale continues. But why do we have this poor economies of scale? For long, many food processing items were reserved for Small scale industries only. High input costs due to multiple taxes, middle men. Profit level is lowcant expand. Government schemes, subsidies, grants have low-ceilings Individual person cant setup big plants Hard to get bank loans. (more elaboration in later article) Bigger the plant, bigger the headache in terms of tax-liabilities.
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Low Technology cant invest in r d to develop new products (e.g. Chilli chewing gum or tomato cream biscuit!) Cant do marketing research / survey to find out what consumers want? Marketing Cant invest in advertisement campaigns to create new demand. Kellogs is aggressively advertising its cornflakes in India, highlighting weightloss benefits. But on the other hand, an Indian Halwai (sweet maker) cant do same level of marketing in usa to create demand for jalebi or peda. Un-Export quality cant do backward linkage. Contract farming: giving seeds/fertilizer/pesticide to farmer. Instead small company relies on multiple small supplier hence raw materialnon-uniform in quality. Then their products are rejected in US/EU market for not meeting the codex/haccp standards. Mango juice rejected for stone weevil, buffalo meat rejected for food-n-mouth disease, fish rejected for heavy metal contamination and.) retailing Cant do forward front linkage.
You bought a ice cream machine for 10 lakh- whether you make 100 liters ice cream or 1000 liters ice-cream per day- its upto you but the essays more ice cream you produce, the average unit cost decreases. (think of 100/5. 100/50) hence bigger the plant, cheaper to produce. Most of Indian food processing are small sized meaning poor economies of scale. It leads to following problems: Aspect problems of small company / poor economies of scale Pricing Since unit production cost is high, he cant sell his products cheap unlike a big mnc, and Indian consumers are price sensitive. Brand-building Small playerssmall profit, seasonal business. In global market they cant establish themselves as a long-term player they only do opportunistic businesses, undercut each other.
More scope points, specific to individual sector (i.e. Dairy, meat, fish etc) later articles. So far everything sounds hunky dory but if our food processing industry was so awesome, then upsc wouldnt roles have included it in the syllabus. Then, what are the. Country _ of total fruits/vegetables processed India barely 6-7 China 20 usa 60 so, why low level of food processing in India? Economies of scale When you produce something on large scale, the unit production cost decreases. . When you purchase raw material in large bulk, you negotiate/bargain with supplier. Fixed cost remains same (building rent, cost of lights, initial cost of buying machinery etc.).
Rising incomes, middle class and rich familiescan afford processed food. Emergence of tier 1 and tier 2 cities, shopping mall culture. Growing migration from rural to urban India rising income demand for bread, butter etc. Media penetration, advertisements demand is created for health-drinks, noodles, cream-biscuits, cornflakes etc. Celebrity chefs, cookery channels new dishes, international cuisines introduced demand for their ingredients, vegetables in India. Diabetes, obesity, blood pressure, lifestyle diseases demand for healthy food. As a result, food processing industry is expected to reach year turnover usd 2015 2gt;300 billion government Initiatives Many food processing sectors that were earlier reserved for small scale industries (SSI) have been de-reserved fdi limits have been relaxed, Excise duties have been reduced, export. Many states have reformed their outdated apmc laws. And so on (all these elaborated in later articles.) Together they facilitate the expansion of food processing industry in India.
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Increase value: milk vs butter moveing. Abundant Raw Material Indias world Rank in production of 1 milk, ginger, chickpea, banana, guava, papaya, mango, buffalo meat 2 rice, wheat, potato, garlic, cashew nut, groundnut, dry onion, green peas, pumpkin, gourds, cauliflowers, sugarcane, tea among top five coffee, tobacco, spices, oilseeds With such. (But we havent, because of the time obstacles discussed later). Geographical advantages 46 out of 60 soil types are present in India. More than 26 types of climatic conditions can cultivate large variety of fruits, crops, vegetables. Large coastline, villagers in 13 states engaged in fishing as their secondary activity.
Variety domestic animals such as cows, buffaloes, goats, chicken, lamb, sheep. Large irrigated area under cultivation. Ample supply of fresh water for human, plant and animals. New Demand In the upcoming years, there will be good demand for healthy, modern food products due to following reasons: youth population (age group 15 25 doesnt shy away from trying new food products. More nuclear families: usually working couple less cooking time expensive maidsneed ready to eat / ready to cook food.
Food inflation is eventually passed through into manufactured goods through higher money wages. Therefore persistent high food inflation bad for general macroeconomic stability. Well-developed food industry compact supply chainreduces food inflation via: Disintermediation (meaning no middlemen/commission agents) less wastage/spoilage of perishable products Thus food industry is significant for reducing food inflation. Crop-diversification Indian villagers are away from market have to grow cereals. (as we learned in Von Thunen model ) In recent years, government increased Minimum support prices for rice and wheat.
That leads to surplus grain production Pvt. Players give less price to farmer government has to buy wheat @Minimum support price (MSP) but fci didnt have enough storage capacity result: Wheat gets rotten @godowns and railway stations. On the other hand, weve to rely on imported oilseeds because of higher msp, farmers prefer to grow rice/wheat than oilseeds higher oilseed import adds to current account deficit and leads to 162 rupees crude oil expensivepetrol expensiveeverything transported through petrol/diesel gets expensivethus the cycle. Coming to the original point: we need crop diversification, all farmers shouldnt be growing just rice and wheat. But if want to seduce the farmers into growing other crops, then following must be done Promote food industry with backward linkages to farmers growing fruits, vegetables, milk, fish, meat, poultry, grain, etc. Aggressively market the processed food in India abroad once weve done 1 2 then even the farmers away from market area will see good income opportunity in growing non-cereal crops crop diversification the excessive rotting-wheat surplus problem is solved. Some filler significance points: food processing. Increases shelf life: milk vs butter.
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Note: All those food processing related pdfs have been uploaded on t/0sL2N0Ej5XwsWc 12th five year plan uploaded on t/0sLrYY0ffjrric size has more than 35000 registered units Output of 5-6 lakh crores food processing contributes about 9-10 of gpd, in Agro-Mfg. Location Location wise: Maximum factories in (ie. More than 1000 in given state)Coastal states: Andhra, maharashtra, karnataka, kerala, gujarat, punjab, wbnon-coastal States: up, punjab Observe majorities of the food processing factories are concentrated in the coastal states. Increasing Employment food processing industry provides plenty of direct and indirect employment opportunities, because it acts as bridge between Agriculture and Manufacturing As per asi survey in 2010, food processing industry generated highest employment among all industry. Giving employment to almost 17 lakh people. 12th five year plan (FYP) wants to create more than 50 million jobs. Out of that, food processing sector is to create one million jobs. Curbing Migration When food processing plants are setup near agro/rural regions, they reduce: poverty among villagers, disguised unemployment exploitation of farmers rural-urban migration unplanned urbanization, slums/hygiene/social problems in cities Curbing food Inflation In the last few years food inflation has been a reviews major problem.
Food processing: Opportunities and Challenges (icfai university press). Some chapters deal with food industries in China, australia etc but hardly any good fodder pointsSome chapters provide details of individual food processing sector but mere copy paste job from Vision 2015 pdf document. Ignou mba booklets (Coursecode: ms-55) for theory on supply chain management, upstream-downstream requirements. Pdfs, state of Indian agriculture 2012-13 (by agricultural Ministry) annotated for agro-livestock-fish-production information and schemes Vision 2015 for food industries: part 1 and 2 for opportunities and obstacles in individual sector: dairy, meat, wine etc. Flavors of Incredible India: A report by Ernst young and ficci for supply chain diagrams of individual food processing sector Additional points for opportunities, obstacles. Planning commissions report on Encouraging Investments In Supply Chains and cold storages plenty of fodder on supply chain, opportunities, obstacles various schemes 12th fyp documents doesnt have much specific fodder points for food processing though. Ibef report on food processing industry some fancy charts, numbers. Web, indian express for government schemes, salient features, export/dumping issues.
start basic theory of supply chain management (scm and upstream downstream issues of individual food processing sub-sectors viz. Dairy, fruit and Veggies, Egg-meat-Fishes, confectionary, wine, edible oil etc. References used for this article series. Source, title comment, books, a manual for Entrepreneurs: food Processing Industry (Tata McGraw-Hill Publication). Initial chapters provide the challenges/problems with food processing industry. Rest goes into actual management, accounting, sales, marketing strategy for a food entrepreneuruseless from upsc point of view.
Upstream and downstream requirements, but thats not the end. Food processing topic also overlaps with, gS-2. Ministries and Departments of the government. Government policies and interventions for development in various sectors and issues arising out of their design and implementation. Gs-3 storage, transport and marketing of agricultural produce and issues and related constraints; Sci-tech research. Food irradiation, developing new crop hybrids, animal-breeds etc. same food processing points can be selectively used for discussing rural-unemployment, food inflation, general inflation, fdi in multi-brand retail; even current account deficit and rupee depreciation: whether its essay / interview or group discussion (in case essay of sbi/CAT) hell even rbi officer phase ii descriptive.
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Prologue, indian food processing industry: Significance, increasing Employment. Curbing Migration, curbing food Inflation, crop-diversification, scope/Potential. Abundant Raw Material, geographical advantages, new Demand, government Initiatives. Obstacles to food processing? Economies of scale, lack of organized retail, lack of food testing facilities. Lack of skilled Manpower, lack of r d, transport problems. Export Problems, in the new mains syllabus, upsc has included: food processing and related industries in India- their Scope, significance, location, supply summary chain management (SCM).