OPPORTUNITIES FOR MSME IN FOOD PROCESSING IN POST COVID ERA
India is predominantly an agriculture-based economy, with over 60 per cent employed in this sector, contributing to nearly 17 per cent of the total GDP. This figure in itself highlights the imbalance between employment and the corresponding GDP ratio.
Before divulging into the strategic management of this problematic ratio, I would like to disclose some figures for a better understanding of the challenges faced in this sector.
The central government is giving financial support in the form of subsidy around Rs. 2 lakh crores to agriculture and related sector in various forms with an additional Rs.15 lakh crores as a credit to farmers furthermore Rs. 1.25 lakh crores as infrastructure funds for agriculture and allied activities.
India’s total food grain production is about 300 million tons; however, the storage capacity is just 85 million tons. India produces about 350 million tons of perishable fruits and vegetables, and the storage capacity is less than 70 million tons. Only about 7 to 10 per cent of food is processed in the organized sector.
The central government has brought out various schemes to address these gaps:
1. Upgradation of individual Micro Food Processing Units through credit-linked subsidies (PM FME Scheme)
2. Capacity building and training support for the micro-enterprise through entrepreneurship development, marketing, UdyogAadhar, GST Registration and more
3. Common Infrastructure Support
4. Seed Capital to Self Help Groups
5. Various incentives on sales and investment
6. Production Linked Incentive Scheme for Food Processing Industry to support the creation of global food manufacturing giants and support Indian brands of food products in the international markets
7. Strengthening of institutions focussing on R&D in the area of Food Processing
8. Skill Development to produce a skilled workforce for various processes involved in food processing
9. Concept of Mega Food Park based on Cluster approach for setting up of modern food processing units in the industrial plots provided in a park with well-established supply chain infrastructure including collection centres, primary processing sectors, cold chains & more.
Even with all the initiatives put forth by the government, achieving the full potential of this sector would require Indian companies to improve their competitive strength vis-à-vis their global counterpart in terms of the scale of output, productivity, value addition and their linkages with the global value chain.
The new challenges
It is needless to say that the projection of market and industry look different in the post COVID era. With the changing dynamics, the plan of action for boosting the food processing industry needs to be strategized in a new light.
The initiatives taken by the government are carved around to address the current struggles faced by the sector. Be it the need for skill development or incorporation of better technology for higher quality processed products. These areas are where our MSMEs have always excelled in: Skilled Manpower and Better Advanced Technology. MSME sector has manufacturing and marketing strength, both of which are a miss in Agriculture sector.
In a given typical scenario, there are roughly 7-8 members of a family all engaged in farming a single piece of land. There is limited produce obtained at a higher cost of labour involved.
In an alternate scenario where there are advanced technologies at play, only 1-2 members of a family would be engaged in farming activities. The other family members can be trained to be engaged in the food processing business of goods obtained from the same piece of land.
In the alternate scenario, the cost invested in terms of human labour goes down, added profits from the sale of processed foods, an increase in contributing GDP from the same land.
The convergence of these two sectors can benefit crores of people. India’s MSME sector is in trouble due to the COVID pandemic. Nearly 11 crore people dependent on it will become unemployed, some of which became unemployed last year, some might face the repercussions this year. The trained workforce in the MSME sector is struggling with unemployment; they are looking for opportunities.
On other hand, farmers are facing issues where they are unable to get a good price for their crop. It is time to strengthen the Food Processing sector by merging MSME and agriculture sectors, the joint strength can be used to benefit the country.
In Agriculture Sector, there will be a value addition and farmers will get better prices for their produce, advancements in Food Processing industry will help produce higher quality and economically viable products, marketing, food safety and Quality Assurance Infrastructure would be provided by the skilled MSME workforce.
This would boost the outreach of processed goods in local market, higher exports to the international market through insulated/ refrigerated transport, which are the key strengths of the MSME sector.
This is untapped potential with huge success projections of all three sectors: Food Processing, Agriculture and MSME.
Deepak Jain is the Director-General of the Federation of Indian Industry