Challenges before the food ingredient sector

By Raja Ghoshal

The Indian food ingredient industry has a big scope for growth, since India is an agro based country and has a huge base for raw materials required for this industry. However, a recent report prepared by Frost and Sullivan, in association with CIFTI (Confederation of Food Trade Industry), the food wing of industry chamber FICCI has come up with a few strategic recommendations for this industry to address the challenges faced by this industry.





The key recommendations are:

1. The rules for contract farming should be relaxed and commercial tie-up with farmers should be encouraged. It has suggested that a govt agency should act as a mediator in this.
   
2. Infrastructure development for cold storage facilities and up graded transportation options in order to reduce agro produce loss.

Taxation benefits and export incentives that have been revised for the food processing industry should be extended to the food ingredients industry as well.

3. To encourage cold chains, the ministry of food processing industry has proposed to exempt excise duty on refrigeration equipment, with a refrigeration utilizing power of 50 KW and above. The Frost and Sullivan report recommends that the same benefit could be extended to food ingredient manufacturers as well, since they are the direct link for complete integration from the farm to the end product level.
   
4. The report has also asked for relaxation of food laws and incorporation of new standards under the FSAA (Food Safety and Standards Act, 2006) It is expected that this would bring in significant investments in the food ingredients industry, which in turn would boost agricultural growth.

Food ingredients form an integral part of any food or beverage. Food ingredients are indispensable to preserve texture, quality or stability of the food. They play a prime part in giving a distinct colour and flavour to the foodstuff. Food ingredients also aid in preserving or enhancing the nutritional quality of the food. Globally food ingredient is a multi billion dollar industry.

The Frost and Sullivan report says that apart from the food flavours market, there has not been major investments in the other markets, within the food ingredient sector. The few MNC majors who have set up their subsidiaries in India includes Danisco, Chr Hansen, Cargill Foods, The Solae Company, DSM etc. However these companies are importing the food ingredients rather than having their manufacturing bases here.

Industry chamber FICCI has also expressed similar viewpoints in a set of agenda it has given to government to provide a thrust to this sector. It has asked to create India specific plans to attract domestic and foreign investment in this sector. What is noteworthy is that the industry chamber has asked the government to promote a special food additive and ingredient park.