Food Prcng Industry
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A Presentation on
Indian Indian Processed Processed Food Food Industry Industry By Mr.P.S.Mukherjee, President, CIFTI 12th AGM of Confederation of Indian Food Trade & Industry Federation House, New Delhi Wednesday, 28 July,2004
12th 12th AGM AGM of of CIFTI CIFTI -A -A Great Great Occasion Occasion To To Welcome Welcome The The New New Minister Minister • CIFTI – The Apex Food Industry Association of India • Set Up - By Leading Chamber Of Commerce In India – FICCI • With Unparalleled Initiatives for Agri business Sector: CIFTI – A specialised body for food processing State of the Art food testing laboratory – FRAC Dedicated agri information centre on international news and views – AIC Dedicated committees on Agriculture, Rural Development, Water Management & Biotechnology
Indian Indian Processed Processed Food Food Industry Industry Opportunity Opportunity That That The The World World Presents Presents • Food industry the Largest Sector – Attracting the Largest Multinationals in the World • Leading Countries Grabbing that Share – U S, Canada, Australia, UK etc • Indian Processed Food Industry -US $340 Billion
International International Food Food Trade Trade • WTO Report of 2004 , indicates Rise in Processed Food Segment in the World Trade of Agri food Products • Most countries in the world report an increase in share of processed goods in their agricultural trade between 1990 - 91 and 2001 - 02 • Largest shift observed in Asia – But India’s growth only 1% while India World’s third largest in total production of agricultural products
11 13 14 17 21 28
India Thailand Canada China Indonesia Mexico Malaysia
1
Countries
% Gain in shares(↑)
0
5
10
15
20
25
% Gain In Processed Food Exports % Gain in shares(↑)
30
How How Do Do We We Fare Fare in in World World Exports… Exports… Items
1998
2002
(% share in world exports) Rice
17.7
29.7
Tea
19.9
13.4
Spices
12.8
10
Crustaceans
6.3
8.9
Beef
1.2
1.9
Fruit/Nut-Fresh/Dried
1.7
1.8
Fruit/Prsvd /Prprn
1.2
1.4
1
1.1
Veg Fresh/Chld /Frzn Source: UN ITC
Exports -India &Competitors 16000000
Value in US$
14000000 12000000 10000000 8000000 6000000 4000000 2000000 0 1998
1999
2000
2001
2002
Year Brazil
China
Thailand
India
Post Post 1991 1991 Liberalisation Liberalisation -- A A New New Direction Direction & & Greater Greater Focus Focus Leading Leading to to Positive Positive Energy Energy & & Sense Sense of of Encouragement Encouragement
The The Positive Positive Indicators Indicators –– First First Five Five Years Years after after 1991 1991 • • • • •
Agribusiness – Priority Sector FDI Eased Up to 100% In Most Categories Small scale de-reservation in many Tax exemption on most food products Task Force announced by then Minister of Health on Amendments required in PFA Act and scope for Integration of Multiple Laws (1995) • Task Force under Former Chief Justice Venkataramaiah comprised of legal luminaries like Fali Nariman, Ashok Desai, Soli Sorabjee, etc. with CIFTI as Secretariat
The The Industry Industry –– Quick Quick to to Show Show Positive Positive Results Results • Immediate Growth - of More Than 20% per year • The Markets -For the first time saw influx of world class processed and packaged products • Huge investments came in – all major multinationals set up base • An Atmosphere of Hope And Encouragement • Task force report submitted within six months suggesting radical changes to PFA Act
Since Since 1997 1997 –– Constantly Constantly Changing Changing Policies Policies & & Directions Directions • 1997 - 98 - Excise concessions withdrawn • 2001 - 02 - concession introduced once again but only for Fruit & Vegetable based products • 2002 - 03 - Reduced rate of Excise only for biscuits, cakes & pastries • 2004 - 05 - Concession extended to Meat & Poultry products but withdrawn for Cakes & Pastries • New units exempted from profit tax but only for fruit & vegetable sector
Changing Changing Policies Policies & & Directions Directions • • • • • •
1995 - Task Force on Food Laws Submitted report - no action 2002 - 03 - GOM on Integrated Food Law announced 2002 - A draft of PFA Amendment circulated 2003 - Draft Integrated Food Bill Prepared Industry still awaiting the outcome Multiple authorities continue to regulate and fix standards
A A Recent Recent Case Case in in Hand.. Hand.. • Current Debate on Pesticide Residues in Food – whole country in turmoil • Each Ministry and Department following Different Directions, Formulating Different Standards for drinking water, Potable water & Carbonated Beverages • Industry undecided
Result Result –– aa Cloud Cloud of of Uncertainty Uncertainty • The industry today - at one of its lowest performance level • Projections based on huge raw material base failed to translate to reality • High amount of apprehension arising out of day to day changing policies • Multiple authorities enforcing multiple laws and standards sometimes on same issues and products • Constant changes in tax structure and indicators
The The Lesson Lesson • Processed Food Industry is - Not Low Technology, Low Investment Industry • The Products Are Not Luxury Items to be Highly Taxed • These are Basic Necessities offering Increased Convenience & Safety – of Highest Importance to Today’s Consumer • Like Automobiles & IT - Best Model is of Hub & Spoke Relation between Larger and Smaller Operators • The Country -Already Witnessing Changes Through Successful Operations like - ITC, HLL, Pepsi, Dabur, Britannia, Heinz etc.
Our Our Appeal Appeal on on Behalf Behalf of of All All Our Our Industry Industry Members Members to to the the Minister: Minister: The Industry Needs: – Direction – Stability – Hand holding – Clarity of Policies & Regulations Leaving Space for Innovation – Strict Regulation to Ensure only Safety and Hygiene and not Policing – Strictest Penalty for Deliberate Adulteration and Misinformation
There There isis the the Urgent Urgent Need Need to: to: • Encourage Direct Manufacturer - Farmer Linkage • Encourage More of Value Addition Through Incentives –Proportion of Incentives Could be Linked to Proportion of Value Addition • Need of Greater Financial Support from Ministrycurrently the maximum available for setting up a unit – Rs 50 lakhs & for infrastructure Rs 4 crores • More Incentives for Infrastructure for Packing Stations, Cold Storages, Refrigerated Transport Systems etc.
…And …And Most Most Importantly Importantly – Stable Policies – A One Time Amendment of Basic Food Law and Standards Integrating all Existing Regulations into One, Clearly Spelling out Responsibilities & Definite Direction for Future Amendments
Thank Thank You You
Indian Indian Processed Processed Food Food Industry Industry By Mr.P.S.Mukherjee, President, CIFTI 12th AGM of Confederation of Indian Food Trade & Industry Federation House, New Delhi Wednesday, 28 July,2004
12th 12th AGM AGM of of CIFTI CIFTI -A -A Great Great Occasion Occasion To To Welcome Welcome The The New New Minister Minister • CIFTI – The Apex Food Industry Association of India • Set Up - By Leading Chamber Of Commerce In India – FICCI • With Unparalleled Initiatives for Agri business Sector: CIFTI – A specialised body for food processing State of the Art food testing laboratory – FRAC Dedicated agri information centre on international news and views – AIC Dedicated committees on Agriculture, Rural Development, Water Management & Biotechnology
Indian Indian Processed Processed Food Food Industry Industry Opportunity Opportunity That That The The World World Presents Presents • Food industry the Largest Sector – Attracting the Largest Multinationals in the World • Leading Countries Grabbing that Share – U S, Canada, Australia, UK etc • Indian Processed Food Industry -US $340 Billion
International International Food Food Trade Trade • WTO Report of 2004 , indicates Rise in Processed Food Segment in the World Trade of Agri food Products • Most countries in the world report an increase in share of processed goods in their agricultural trade between 1990 - 91 and 2001 - 02 • Largest shift observed in Asia – But India’s growth only 1% while India World’s third largest in total production of agricultural products
11 13 14 17 21 28
India Thailand Canada China Indonesia Mexico Malaysia
1
Countries
% Gain in shares(↑)
0
5
10
15
20
25
% Gain In Processed Food Exports % Gain in shares(↑)
30
How How Do Do We We Fare Fare in in World World Exports… Exports… Items
1998
2002
(% share in world exports) Rice
17.7
29.7
Tea
19.9
13.4
Spices
12.8
10
Crustaceans
6.3
8.9
Beef
1.2
1.9
Fruit/Nut-Fresh/Dried
1.7
1.8
Fruit/Prsvd /Prprn
1.2
1.4
1
1.1
Veg Fresh/Chld /Frzn Source: UN ITC
Exports -India &Competitors 16000000
Value in US$
14000000 12000000 10000000 8000000 6000000 4000000 2000000 0 1998
1999
2000
2001
2002
Year Brazil
China
Thailand
India
Post Post 1991 1991 Liberalisation Liberalisation -- A A New New Direction Direction & & Greater Greater Focus Focus Leading Leading to to Positive Positive Energy Energy & & Sense Sense of of Encouragement Encouragement
The The Positive Positive Indicators Indicators –– First First Five Five Years Years after after 1991 1991 • • • • •
Agribusiness – Priority Sector FDI Eased Up to 100% In Most Categories Small scale de-reservation in many Tax exemption on most food products Task Force announced by then Minister of Health on Amendments required in PFA Act and scope for Integration of Multiple Laws (1995) • Task Force under Former Chief Justice Venkataramaiah comprised of legal luminaries like Fali Nariman, Ashok Desai, Soli Sorabjee, etc. with CIFTI as Secretariat
The The Industry Industry –– Quick Quick to to Show Show Positive Positive Results Results • Immediate Growth - of More Than 20% per year • The Markets -For the first time saw influx of world class processed and packaged products • Huge investments came in – all major multinationals set up base • An Atmosphere of Hope And Encouragement • Task force report submitted within six months suggesting radical changes to PFA Act
Since Since 1997 1997 –– Constantly Constantly Changing Changing Policies Policies & & Directions Directions • 1997 - 98 - Excise concessions withdrawn • 2001 - 02 - concession introduced once again but only for Fruit & Vegetable based products • 2002 - 03 - Reduced rate of Excise only for biscuits, cakes & pastries • 2004 - 05 - Concession extended to Meat & Poultry products but withdrawn for Cakes & Pastries • New units exempted from profit tax but only for fruit & vegetable sector
Changing Changing Policies Policies & & Directions Directions • • • • • •
1995 - Task Force on Food Laws Submitted report - no action 2002 - 03 - GOM on Integrated Food Law announced 2002 - A draft of PFA Amendment circulated 2003 - Draft Integrated Food Bill Prepared Industry still awaiting the outcome Multiple authorities continue to regulate and fix standards
A A Recent Recent Case Case in in Hand.. Hand.. • Current Debate on Pesticide Residues in Food – whole country in turmoil • Each Ministry and Department following Different Directions, Formulating Different Standards for drinking water, Potable water & Carbonated Beverages • Industry undecided
Result Result –– aa Cloud Cloud of of Uncertainty Uncertainty • The industry today - at one of its lowest performance level • Projections based on huge raw material base failed to translate to reality • High amount of apprehension arising out of day to day changing policies • Multiple authorities enforcing multiple laws and standards sometimes on same issues and products • Constant changes in tax structure and indicators
The The Lesson Lesson • Processed Food Industry is - Not Low Technology, Low Investment Industry • The Products Are Not Luxury Items to be Highly Taxed • These are Basic Necessities offering Increased Convenience & Safety – of Highest Importance to Today’s Consumer • Like Automobiles & IT - Best Model is of Hub & Spoke Relation between Larger and Smaller Operators • The Country -Already Witnessing Changes Through Successful Operations like - ITC, HLL, Pepsi, Dabur, Britannia, Heinz etc.
Our Our Appeal Appeal on on Behalf Behalf of of All All Our Our Industry Industry Members Members to to the the Minister: Minister: The Industry Needs: – Direction – Stability – Hand holding – Clarity of Policies & Regulations Leaving Space for Innovation – Strict Regulation to Ensure only Safety and Hygiene and not Policing – Strictest Penalty for Deliberate Adulteration and Misinformation
There There isis the the Urgent Urgent Need Need to: to: • Encourage Direct Manufacturer - Farmer Linkage • Encourage More of Value Addition Through Incentives –Proportion of Incentives Could be Linked to Proportion of Value Addition • Need of Greater Financial Support from Ministrycurrently the maximum available for setting up a unit – Rs 50 lakhs & for infrastructure Rs 4 crores • More Incentives for Infrastructure for Packing Stations, Cold Storages, Refrigerated Transport Systems etc.
…And …And Most Most Importantly Importantly – Stable Policies – A One Time Amendment of Basic Food Law and Standards Integrating all Existing Regulations into One, Clearly Spelling out Responsibilities & Definite Direction for Future Amendments
Thank Thank You You
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