In an exclusive interview, Union Food Processing Industries Minister Harsimrat Kaur Badal talks about the transformation of the Indian food economy, the growth of the F&B industry and more
By SHAFQUAT ALI
FOOD REVOLUTION
With the food revolution sweeping India, how are you improving the food-processing sector to try and match up to international standards?
The mandate of my ministry is to promote creation of modern infrastructure for food processing. This is required to increase value addition, reduce wastage and to ensure safe and hygienic food for the consumers. As a step in this direction, my ministry is assisting creation of 42 mega food parks and 238 cold chains. Out of these, nine mega food parks, 102 cold chains are already operational. My target is to complete all the projects in next two-three years. We are also supporting setting up of food-testing labs. State-of-the-art infrastructure coupled with modern food testing labs would ensure that the food products produced from these projects match up to international standards.
India, according to you, is all set to become a Global Food Factory. How soon do you see this become a reality?
Given the huge agricultural resource base, over 100 agro-climatic zones, huge consumer base of 1.3 billion, growing middle class with disposable income, strategic geographical location, proximity to food importing nations and huge and cheap work force, India possesses everything that is required to make it a Global Food Factory. Only thing missing was an enabling environment for the businesses to grow and prosper. In the last three years, due to the relentless efforts of our Hon’ble Prime Minister Shri Narendra Modiji, India’s standing in global order has increased. Initiatives like ‘Make in India’, Skill India, repealing of over 1,100 old and obsolete laws, rationalisation of taxes, implementation of Goods & Services Tax (GST), etc. have created an environment for ease of doing business in India and a stable and predictable environment for attracting foreign investment. So, I feel that the time has arrived for India to become a Global Food Factory. We are asking global businesses to come and ‘Make in India’ for domestic consumption as well as for exports to their own country and to others as well. In 2016-17, in food processing sector, the growth of FDI was 43 percent. We hope to attract US$10 billion FDI in next three-four years in addition to domestic investment. All this would fuel growth of this sector.
You are keen oversee the transformation of the Indian food economy. Can you please elaborate on the measures you have taken in this direction?
Indian food economy is very diverse and vast. We are the second largest producer of food in the world, second only to China but our processing level is only about 10 percent. Our food wastage is also huge. A study by CIPHET, Ludhiana, valued the food wastage at Rs92,600 crore at 2014 wholesale prices. This food wastage has to be stopped. So,By increasing the processing level, food wastage will be reduced, farmers would get remunerative prices for their produce and this will also help stabilise food prices.
My ministry is assisting in creation of modern infrastructure like mega food parks, cold chains and food testing labs. During the past three years, we have sanctioned 25 new mega food parks and 133 new cold chains. To give impetus to this sector and keeping in line with the vision of the Hon’ble Prime Minister to double farmers income by 2022, Government has recently approved, Kisan Sampada Yojana, which has, in addition to the existing schemes of the ministry, three new components namely (i) creation / expansion of food processing units (ii) creation of agro-processing clusters and (iii) backward and forward linkage.
On my request, the Hon’ble Prime Minister has also permitted 100 percent FDI in multi-brand retail including e-commerce of food products that are produced and/or manufactured in India. This decision would not only facilitate huge investment, create retail markets but also in creation of backward linkages like warehouses, cold room/storage, refrigerated transport, etc. Moreover, increase in retail chains would also fuel growth of manufacturing and food processing.
In addition, we are also organising a mega international event, World Food India (WFI) from November 3-5 this year at Vigyan Bhawan, New Delhi, to attract investment across the food value chain to transform India’s food economy.
What has been initial response from the various stakeholders to WFI?
It is extremely encouraging. Every country is looking towards India as a preferred destination for partnership and investment. So far, Italy has confirmed to be a focus country at WFI. In addition, business delegations from 14 countries have been confirmed their participation. About 20 global CEOs have also confirmed their presence, as have domestic stakeholders.
With such events you plan to take food to the next level to make in India, process in India, make for India or for other food importing nations, which are close to the country. Are you getting necessary support from the government to realise this dream?
Yes, I am getting full support from the Hon’ble Prime Minister who has the vision and focus to make India a global food-processing hub. Keeping this in mind, the policy of FDI in retail of food produced and /or manufactured in India was approved by the government in 2016. Within one year of approval of this FDI policy in food retail, the government has received proposals worth US$700 million (approx.) from five companies. Investment in food processing sector has also seen a rise of 43 percent in 2016-17. Entrepreneurs from countries like Japan, the UAE and Bahrain have shown interest in sourcing from India either by setting up their own units here under ‘Make in India’ or through joint ventures.
STREAMLINING THE FOOD SECTOR
With the food sector being governed by multiple ministries – agriculture, food processing and consumer affairs – is it fair to say that there is a situation of ‘too many cooks spoiling the broth’?
I don’t agree entirely. However, I do agree that doing away with multiplicity of authority will lead to faster growth of the sector.
So what are the measures that have been proposed to streamline policy regulations governing the sector that are scattered between various ministries, including the Ministry of Food Processing Industries (MOFPI)?
It is a fact that food processing is a subject that is linked with many ministries / departments. For example development of processable variety of crops falls under the purview of Ministry of Agriculture. Food safety and standards comes under the purview of Ministry of Health. Similarly, the Ministry of Micro, Small and Medium Enterprises (MSME) is involved as most of the processing happens in the MSME sector. Then, for exports of processed food, Department of Commerce is the nodal department. Likewise, Department of Consumer Affairs comes into picture because of labelling and packing regulations. FDI comes under the purview of Industrial Policy & Promotion.
The most precarious situation is for the organised retail sector as there is no single ministry /department for them to deal with. They have to deal with multiple departments at centre besides dealing with numerous departments in the states. Also, there are various incentive/ promotional schemes being run by different departments for creation of infrastructure for food processing and preservation.
It would be easier if there were one single facilitator at the central level for the entire food processing value chain. I have already written to the Hon’ble Prime Minister about the creation of a National Food Grid Development Authority on the lines of National Highways Authority of India for developing food-processing sector in a seamless manner.
The Maggi controversy or the issue of heavy metal in Coke, Pepsi brought into focus a host of issues including the working of the food regulator, Food Safety and Standards Authority of India (FSSAI). What are the steps you have taken to see that things had been sorted out since?
When the Maggi issue cropped up, the whole industry was shaken. FSSAI comes under the purview of Ministry of Health & Family Welfare but any decision it takes has a huge bearing on the growth of food processing sector, therefore, we took up the matter with Ministry of Health and FSSAI and I am happy that FSSAI has come a long way since then. It has notified over 8,000 ingredients.
Now, instead of product-by-product approval, FSSAI has permitted manufacturing of any product without its approval if they are produced using the notified ingredients. FSSAI has also harmonised the Indian food standards with International Codex standards and they are continuously improving it. FSSAI has also eased testing restrictions on imported ingredients and packaged food. The feedback I receive from the industry shows that the industry is by and large satisfied with the functioning of FSSAI now.
What are the measures you are taking to develop a food grid to facilitate seamless transfer of high quality food products from production centres to restaurants, while ensuring safety and health of the people?
The cold chain and food-processing infrastructure that is being created would help seamless transfer of food from production area to consumption areas. I am also trying to encourage progressive farmers and Farmers Producer Organisations (FPOs) to become food processors and my vision is to link them directly to market whether it is a retail chain or hotel or restaurants without involving any middlemen. If my proposal is accepted and a nodal body like Food Grid Development Authority is set up, then it will transform the whole food processing eco system right from production of processable variety crops to processing to storage to logistics to retail. The increase in efficiency of supply chain will certainly facilitate supply of good quality produce to the consumers at reasonable prices.
FUTURE OF F&B INDUSTRY
How has implementation of the GST impacted certain processed food items especially those that food and hospitality industry – i.e. hoteliers and restaurateurs – procure in bulk?
GST has subsumed central excise duty, additional duties of excise, service tax, central surcharges and cesses, state VAT, central sales tax, entry tax (all forms), taxes on advertisement and purchase tax and the new rate has been fixed on the principal of revenue neutrality aiming to reduce cumulative tax incidence. Processed food sector is no exception e.g. concentrated milk and cream has been fixed at 5 percent and carbonated beverages, beverages containing milk and other non-alcoholic beverages including fruit juice have been put 12 percent and/or 28 percent category whereas cumulative tax incidence on those products at pre-GST regime was much larger (i.e. for concentrated milk and cream, it was more than 35 percent and for other beverages more than 50 percent on average). Similarly, the GST for frozen meat put up in unit container is 12 percent as against the pre-GST tax incidence of more than 35 percent. The fresh fruits and vegetables and meat purchased in bulk by these industries (not frozen or preserved) are completely exempted from GST ambit and as such this will reduce the cost of processing of food.
How is GST likely to affect the food and hospitality industry in general in the days to come?
Of all the food categories taken together under different chapter heads/sub-heads, 28.44 percent of the food items have been exempted from GST (0 percent) and 30.17 percent of the food items shall attract GST of 5 percent. In other words, almost 60 percent of the food items will be under lowest tax slab of 0 percent or 5 percent. These items constitute bulk of raw material that goes into further value addition. Hence, cost of production of processed item is expected to fall and this will help the growth of food and hospitality industry.
Given that food processing and food security play a key role in making high quality processed food and raw produce available to hotels and restaurants to satisfy the palate of discerning guests, how is MOFPI seeing to it that the food restaurants serve comply with and meet set standards?
All the Food Business Operators (FBOs) right from processors to sellers of food like hotels, restaurants, etc. are required to comply with the standards of food safety and hygiene set by FSSAI. This is to ensure that the customer gets quality and hygienic food. FSSAI has now come with the guidelines for even street food vendors. The government is creating awareness among concerned stakeholders about food safety and hygiene. Anybody who violates the provisions of food safety act is liable for penal action.
As more and more hotels around the country are embracing the farm-to-fork concept, hoteliers and chefs are increasingly turning to organic produce. How, according to you, will this trend impact the food and hospitality industry?
Organic food is not only good for health but also better in taste. It also commands higher prices as compared to other agri produce. Realising the benefits and potential of the organic food sector, the government is promoting it in a big way. Our target is to develop 10,000 organic clusters throughout the country in the next two-three years. It is a good opportunity for the hotel and hospitality industry to tie up with these clusters for sourcing of raw material directly. It will allow the industry to get the produce of their choice directly from farms and at the same time benefit farmers by way of realising better prices. So this kind of collaboration is win-win situation for both.
What, according to you, are the other latest global food and beverage trends that are impacting India’s food and hospitality industry?
Foreign cuisine are getting increasingly popular in the country be it Italian, Japanese, Thai or Mexican food. Similarly, Indian food is very popular abroad not only among Indians but foreigners as well. This provides an opportunity to chefs and food technologists to experiment and create neo food or fusion food by using Indian ingredients in foreign cuisine and vice versa. I have a gut feeling that this new trend will be a rage. I also feel that, in the coming years, food diplomacy will be a major tool to bring people of the universe together. It is a time that the food and hospitality industry should take advantage of changing consumer preferences and expand their base.
F&B has become a key revenue earner for the hospitality industry and, according to a recent report, India’s F&B industry is expanding at an average annual pace of 24 percent. Do you feel this growth can be sustained over time?
There is huge scope in this sector. As compared to foreign countries, the number of F&B outlets per 1,000 persons is still far less than the developed countries. With rise in the income and changing lifestyle of the people this industry will see huge growth in the years to come. Of the US$600 billion retail sector, 70 percent is food retail. This is set to treble by 2020. The demand of food will increase by 40 percent in the end of five years, so there is a huge opportunity of growth.
With luxury hotels changing the rules of the F&B game by innovating and redefining modern dining experience, do you see the industry heading in the right direction?
Yes. We are living in the era of innovation. More and more innovation would redefine the F&B sector.
