• Effect of policies of developed and developing countries on India’s interests

• Devolution of finances up to local levels and challenges therein.

• Regulatory bodies

• Government policies in various sectors
• Effects of liberalization on the economy

• Government Budgeting

• issues relating to growth, development and employment.

1. food preservative chemical from India (known as TBHQ)- widely used in Chinese food industry.
2. Optical fiber imports from India after allegations from the local Chinese industry that they were being sold at artificially low prices.

1. Groundnut

2. Mangos

3. Indian Buffalo Meat

4. Indian Shrimp

5. Fish

6. poultry

• statutory body under Commerce Ministry
• for inspection- certification for marine, milk, meat, poultry, marine and egg products, and honey for export units.

EIC approved units have to implement following

1. international standards of CODEX laid down by FAO and WHO,
2. Good Management Practices (GMP)
3. Good Hygiene Practices (GHP)

EIC certificate is recognized in European Commission (EC) for marine products and basmati rice and by the US for black pepper.

• Agricultural and Processed Food Products Export Development Authority (APEDA)
• Statutory body under commerce ministry
• Provides financial assistance to food exporters.
• Bears the cost for doing analysis of peanuts, grapes for meeting HACCP/Codex standards.

• Bureau of Indian standards
• has adopted the CODEX, hazard analysis and critical control point (HACCP) and food hygiene standards
• helps Food processing units to adopt these systems on a voluntary basis

• Ministry of food processing industries
• Gives financial assistance for fee charged by Certification Agency, plant and machinery, technical civil works, and other expenditure towards implementation of Total Quality Management System, ISO, HACCP, GMP and GHP.

General Area: max 15 lakh assistance

NE, difficult area: max. 20 lakh

• Encourage importing countries (primarily USA, EU, Japan) to set up offices in India for certification of export consignments

• Food Safety and Standards Authority of India. We already saw its salient features in previous article, click me
• FSSAI needs to harmonize the differences between Codex standards and Indian food standards.

• Encourage food testing laboratories in India to obtain accreditation from international agencies.  Given high cost of international accreditation, Government can incentivize laboratories by part funding these costs.

• Government should introduce certification zoning systems: e.g. pesticide free zones, organic production zones, disease free zones to facilitate high value exports from India

• Food exporters to US/EU are first required to their samples to the importing country to get trade-approval. Government should provide financial assistance to small/medium exporters for this.

1. Genetically Modified seeds/plants= have to comply with
   1. Environment (Protection) Act
   2. Genetic Engineering Approval Committee (GEAC)
2. If seeds are imported then have to comply with National Seeds Policy

1. Animal rearing + dog breeding
2. Poultry breeding farms
3. Aquariums
4. Pisciculture (breeding, rearing, and transplantation of fish by artificial means  aka fish farming)
5. Apiculture  (bee keeping)

• No FDI is not allowed in any other plantation except Tea.
• In Tea sector:
  • 49% FDI via automatic route
  • 100% FDI with government approval.

• In Trivandrum, people use more than 10 different spices in their cuisine, while in New Delhi and Mumbai, barely 4-5 spices.
• Different communities in each state prefer different blending of spices, color/pungency in chilli-powder.

• Cottage and small units do well ^in such product segments because of their local traditional knowledge.
• But Bigger enterprises may find it difficult to enter into such fragmented and price conscious consumer base. Their large scale of economies may not be optimized for it.
• MNC’s economies of scale to be effective, they’ve to make something with large demand e.g. cream-biscuits, ice-cream or chocolates because kids from Kashmir to Kanyakumari like it irrespective location, community or religion.

• Wheat flour has daily and universal demand in India. But most Indians prefer to get wheat grains and get it milled in Local flour mills.
• MNCs are not likely to enter into such products, as it is difficult to charge premium prices for their brand image, advertisement costs and a narrow consumer base for readymade packaged flour.

• In IT/BPO cities like Banglore, Pune, Hyderabad =fast pace of life = big demand for processed/ready to eat food among working professionals/couples.
• But cities like Ahmedabad, Jaipur or Indore but pace of life is not that fast. Hence processed foods has not made as much an entry/demand.

• 100% via automatic route
• but only in Business to Business (B2B) e-commerce and not in retail trading.

• 100% via automatic route

• upto 49% via automatic route
• upto 100% with government approval

• 51% with government approval

• 100%

• they sell only their own products.
• Example in IKEA store you can buy sofa, bed, chair, table, cupboard etc- but they all belong to IKEA brand only.

• Multi-brand retail store like Walmart sell products from more than one brand
• e.g. mouse-keyboard from Dell, HP, Logitech and Microsoft.
• While Printer from HP, Cannon, Epson and so on…

• FDI upto 51% with government approval

• Similar condition on 30% procurement
• +additional conditions on location and backend infra.

• can be setup only the states that agreed. (list given below)

1. Andhra
2. Assam
3. Delhi
4. Haryana
5. HP
6. JK
7. Karnataka

8. Maharashtra
9. Manipur
10. Rajsthan
11. Uttarakhand
12. Diu-Daman-Nagar Haveli (UT)

(As of June 2013)

• desi food players are mostly small scale = poor economies of scale = they don’t have the money to invest in backend infrastructure.
• Government made FDI condition that Retail giant needs to invest part of his FDI investment into backend infrastructure (=processing, manufacturing, distribution, design improvement, quality control, packaging, logistics, storage, ware-house, agriculture market produce infrastructure etc.)

• These retail giants have deep pockets = large economies of scale = they use direct purchase / contract farming to get the fruits-veggies. Thus middleman eliminated=farmer gets more price.

• Government made FDI condition that Retail giants need to buy part of their goods from small scale industries.

• Increases direct/indirect employment opportunities in the supply chain, logistics, retail and wholesale.

• The Foreign giants bring their own IT technology, best management practices for running the business at extreme efficiency.
• Foreign giants will tie up with a local player (e.g. Bharti, Tata etc)=Indian managers/workers in those desi companies also learn new things
• Later some of thm might setup their own firms utilizing the work-experience=Thus foreign business knowledge, technology trickles down and benefits Indian economy.

• Walmarts can be opened only in cities with more than 10 lakh population (as per 2011 census)

• Matter left to the discretion of the state governments.
• Meaning Walmart can open retail stores even in cities with less than 10 lakh population (e.g. Gurgaon and Aurangabad), with the permission of the States or Union Territories.

• Walmarts will need to buy 30% of its goods from small vendors.
• *Small vendor= an Indian micro medium small enterprises (MSMEs) with total investment of $1 million.

• Walmart still needs to buy 30% of its goods from small vendors but Definition of small vendor relaxed.
• Small vendor now includes even a medium scale industry upto $2 million.
• And, during the course of this relationship, if that small supplier outgrows the investment of $2 million, even then such dealing/procurement is allowed.

• Walmarts needs to invest 50% of its FDI investment into backend infrastructure.
• example of backend infrastructure=processing, manufacturing, distribution, design improvement, quality control, packaging, logistics, storage, ware-house, agriculture market produce infrastructure etc.
• Expenditure on land cost and rentals, will not be counted as backend infrastructure.

• The 50% only for the first tranche of $100 million.
• In other words, if WalMart is bringing $100 million FDI in first go, then, 50%=$50 million will have to be spend in backend infrastructure.
• But after that, If WalMart brings another $50-100-200 million FDI, they don’t need to invest any part of that money in backend infrastructure in India.

• Small Industries Development Bank of India
• gives loan to Micro Small and Medium Enterprises (MSMEs) in the country
• although Food processing sector forms very small part of its loan portfolio

• Export Import Bank
• Helps in financing and facilitating foreign trade/export, including for food processing companies.

• National Cooperative Development Corporation
• helps in promoting, planning and financing the agricultural supply chain from production, processing, storage and trade
• also helps in marketing  fertilizers, pesticides and agricultural machinery etc.

• Agricultural and Processed Foods Products Export Development Authority (APEDA):
• helps to form market linkages between desi producers vs international market
• financial assistance for market development, infrastructure etc.

• Agricultural ministry
• runs many schemes for specific crops, seeds, irrigation, farm implements, inputs, infrastructure and training

• National Horticultural Board
• gives financial assistance for post-harvest management infrastructure, R&D, soft loans etc.
• with most of the schemes directed to specific horticulture subsector of the food processing industry.

• financial assistance  for HRD, Quality testing, food parks, slaughter houses, cold storage etc.

• Non-existent for food processing sector.

• Even when banks give loan, agriculture is a risky business because of pests, vagaries of monsoon=crop failure
• Government doesn’t immediately disburse insurance money to farmers=loan default=NPA.

• Rural bank branches have shortage of manpower to process loan papers quickly

• Farmers need small loans e.g. 10-20-50,000 rupees. =>banks need to employ a large staff to look after all the documents and processing work=>additional salary burden= cost of giving loan increases.
• Banks find it more lucrative to use the manpower in urban branches where individuals need loan in larger amount (e.g 12-15 lakhs  or more in each homeloan)

• If farmer mortgages his land to get loan, he has to pay stamp duty =additional burden on the farmer.
• Some states (Andhra, UP, TN, Gujarat, HP) have relaxed rules in this regard, other state governments need to take similar steps.

• many small-marginal farmers don’t have documentary proofs for their land/cattle ownership=  problem while filling up the loans-application forms.

1. National Agricultural Insurance Scheme (NAIS)

• available to all farmers, irrespective of their farm size.
• Practically all risks covered (drought, excess rainfall, flood, hail, pest infestation, etc.)

2. Weather Based Crop Insurance Scheme (WBCIS)

• Agro-insurance from incidence of adverse conditions of weather parameters like rainfall, temperature, frost, humidity etc.
• Challenge: Need lot of  automatic weather stations for successful implementation/assessment . (Right now barely ~3000, while we need atleast 10000)

3. Coconut Palm Insurance Scheme (CPIS)

• To provide insurance to coconut growers against natural calamities.

1. Seasonality

• Most of the Mango processing units in Andra run for barely 70 days per year. This type of ‘seasonal-businessmen’ are considered risky from banker’s point of view.

2. Strength

• Most of the food processing units hide actual sales in the account books (to evade taxes
• Banker never gets ‘true’ picture of a firm’s financial strength. He is not sure whether the given entrepreneur is loan worthy or not?

3. Credit Rating

• If an urban middle class man wants to take Car/Home loan, then bank can always check his ‘credit-history’ from the Credit Information Bureau of India Ltd. (CIBIL).
• But CIBIL doesn’t maintain such data/record for the food processing sector=> difficult for bank to find out whether given food entrepreneur has diligently paid his previous loans in from other banks or is he a scamster doing ‘iski topi uske sir pe?”

4. Excess Capacity

• In many food processing sectors, Government gives grants/tax exemption for first few years.
• As a result plenty of new small players emerge=>There is not enough raw material to run each plant @full capacity (e.g. Groundnut oil refining)
• Sooner or later ^these small players fall sick because of heavy competition=> loan defaults.

5. New Tech=Risky

• To improve yields: farmer/entrepreneur will need money for starting high density farming, greenhouse floriculture, controlled environment livestock farming, bio-technology, tissue culture, embryo transfer technology, bio-pesticides and bio-fertilizer, etc.
• But from Banker’s point of view, the success of new technology = not been tested in actual situations / widely popular in India.
• So he fears high chances of business failure= loan defaults=NPA.

• Assam, Bihar, Chhattisgarh and West Bengal have increased their contribution to rice production.

• Interest subvention scheme for short-term crop loans
• Borrowers from private sector scheduled commercial banks also eligible.

• Nutri-Farms will cultivate new crop varieties rich in micro-nutrients such as iron-rich bajra, protein-rich maize and zinc-rich wheat.
• Pilot projects in districts most affected by malnutrition.

• National Institute of Biotic Stress Management @Raipur to addressing plant protection issues.
• setup Indian Institute of Agricultural Bio-technology@ Ranchi

• Scheme to replant and rejuvenate coconut gardens in Kerala + Andaman & Nicobar.

• To support poultry, dairy farming and fisheries.
• It’ll have sub-missions for
  • increasing availability of feed + fodder
  • Improving animal breeds to raise milk yields.

(Don’t you think this overlaps with the national dairy mission that we saw in last article!)

• NABARD to finance construction of warehouses, godowns, silos and cold storage units designed to store agricultural produce, both in the public and the private sectors.

• Target of skilling 50 million people in the 12th Plan period, including 9 million in 2013-14.
• (^food processing sector will benefit)

• Backward Regions Grant Fund
• New criteria for determining backwardness to be evolved.
• more details on BRGF at bottom of the article.

1. Hazelnuts
2. De-hulled oat grain

1. raw sugar, white or refined sugar will not attract any export duty. But, in future, exemption may be withdrawn to regulate its export in case of shortage within India.
2. De-oiled rice bran oil cake

• Agro operations: cultivation, harvesting, threshing, seed testing etc.
• supply of farm labor
• Agro-machinery: renting/leasing

• processing @Farm: drying, fumigation, curing, packaging etc. which do not alter essential characteristics of agricultural produce but make it only marketable for the primary market;

• loading, unloading, packing, storage or warehousing of agro produce;
• Services of Agro-commission agent

• transport of chemical fertilizer and oilcakes;
• transport  of various agro products, tea, coffee, sugar, milk, salt and edible oil etc. (except liquor.)

• Testing activities for agriculture and agricultural produce. (this is new serviced added in the negative list)
• agricultural extension services

1. District-Component

2. State-Component

1. Bihar
2. Odisha: the Kalahandi-Bolangir-Koraput (KBK) districts
3. West Bengal
4. UP: Bundelkhand Package

1. from Union to State Consolidated Funds
2. from state to Panchayats.
3. Each district given min.1 crore.

• System of electronic tagging and tracking to ensure funds go to each Panchayat without delay or diversion.
• (jholachhap) NGOs to help in account-keeping and social audit.

• improving infrastructure: water, sanitation, schools, street lights
• agrarian reforms
• can use money to fill gap/add value to other programs

1. Green Revolution

2. Pulses

3. Edible Oil

4. Veggies

5. Nutri-Cereals

6. Protein

7. Fodder

8. Rainfed

9. Saffron

10. Vidarbha

11. PPP

1. projects on piggery,
2. wayside market sheds,
3. area expansion through land terracing
4. promotion of off-season vegetable cultivation,

5. low cost onion storage structures
6. farm ponds to  tackle water stress

7. System of Rice Intensification (SRI)

8. vegetable cultivation through pandals and trellises.

9. underground pipe lines for irrigation
10. Promoting elite breed of murrah buffaloes
11. Community animal housing

12. check salinity ingress in coastal areas

13. Custom hiring centers providing farm machinery (to solve labour shortage problem.)