Kurukshetra December 2019 Agro-based Industries (Download PDF)


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Agro-Industries To Increase Farmer’s Income: Agro-industries are getting has larger scope for acceleration in future given thrust on doubling farmer’s income w/corporate sector keen on investing in agribusiness to harness emerging opportunities in domestic & global markets, reforms that would provide healthy business environment for sector. 68th Round of NSSO survey on employment estimated about 48.9 % workers major livelihood support coming from agriculture. Fortunately, country is miles ahead on agenda of zero hunger & food security to all from 2.78 to 47.57 times increase in various food items over 1950 - 51.

Agro-Industries To Increase Farmer’s Income

Agro-Industries To Increase Farmer’s Income

Agro-Industries To Increase Farmer’s Income

  • Famine Enquiry Commission (India), 1944 defined agro-based industry as “those industries w/are involved in supplying farm w/agricultural inputs besides handling product of farm may be termed as agro-based industry”.
  • International Standard Industrial Classification (ISIC) included agro-industrial production under manufacture of food, beverages & tobacco, textiles, wearing apparels, leather industries, manufacturing of wood & wood products, manufacturing of paper & paper products, printing & publishing, manufacturing of rubber products.
  • One of critical areas that can enhance income of rural households is to provide higher opportunity in agro-based food & non-food activities.
  • From 2016 - 17 onwards, significant emphasis on agriculture thru reorientation of Govt. interventions in farm and non-farm sectors was laid so as to double income of farmers by 2022 by creation of new infrastructure for irrigation and providing value addition and connectivity from farm to markets.
  • Agro-food processing industries have potential to generate directly significant employments in production activities and also indirect employment thru its forward and backward linkages. This employment will be in rural areas when these industries have to be located in near source of raw materials, especially perishable agriculture products. These industries would help in reducing post-harvest losses & wastes as well as in using by-products more efficiently. This can increase rural income by fetching better prices to producers and also consumer welfare by increasing availability of agriculture consumer goods.
  • Investments in infrastructure comprising roads, electricity & communication would reduce agribusiness costs & induce private sector to invest in agro-processing, cold storage facilities, refrigerated transportation, and retail chains.
  • Food Processing Industry is one of major employment intensive segments contributing 11.69 % of employment generated in all Registered Factory sector in 2012 - 13.
  • Food processing industries covers a wide range of activities utilizing farm, animal & forestry based products as raw materials. There are certain traditional agro-based industries such as rice & flourmills, khandsari & in cereals sector Gur, manufacture of edible oils & processing of plantation crops like tea, coffee & cashew nuts.
  • Since processing of by products in cereals sector constitutes introduction of new manufacturing activities, or expansion of existing ones, such activities would generate additional employment. India’s food processing industry employs more than 64 lakh people directly and indirectly.

Textile and Clothing Industry: Challenges & Opportunities

  • Domestic household demand in terms of value is increasing at 7.7 % compound annual growth (CAGR) in last five years. share of household, non-household & exports in this overall market size in 2017 was USD 89.88 bn (55%), USD 39.96 bn (24.4%) &, about USD 40 bn (20.7%), respectively.

Growth Potentials of T&C Industry

  • India’s textiles fiber consumption has recorded growth rate of about 5 % CAGR during 1990 - 2017,2000 - 2010 & 2010 - 2017. China’s fiber consumption has shown growth rate of about 7 - 8 % CAGR during 1990 - 2017. Determined efforts can see textile fiber consumption growth in India by 7 % CAGR in next 12 - 15 years to reach at about 32 mn tons from about 12 mn tons presently. This scenario corresponds to achieving about 10 % share in world trade of textile and size clothing by 2032. Market of textile industry may grown from about USD 120 - 130 bn (depend on segments included) at present to USD 350 bn by 2030 - 32 and would be able to create about 90 lacs to 1.1 crore jobs directly.

Initiatives to Realize Growth Potential

  • Ministry of textiles presently provides support for technology up-gradation, infrastructure, R&D, technical textiles and capacity building.
  • Technology Up-gradation Fund Scheme (TUF)
  • Fabric Sector
  • Infrastructure and Logistics
  • Cotton Sector
  • Environmental Concerns
  • High growth potential of technical textiles remains to be tapped.
  • Low FDI in T&C Sector
  • Lack of commensurate growth in textile machinery sector in India

Changing Global Retailers’ Sourcing Pattern

  • Nomination business model’ in which garment manufacturing may take place anywhere but textiles intermediaries like yarn & fabrics have to be sourced from nominated suppliers. In such a situation, if a nation fails to offer competitive textiles products like yarn and fabric, it is less likely to win garment order which may go to competitive suppliers or some other country having bigger advantage in garment manufacturing cost.
  • Some of areas, which need immediate attention are mentioned below:
  • Cotton Continues to be Fiber of Privilege Especially in Wearable Segments
  • High Energy cost Burdened with Cross Subsidy

Agro-Based Industries in India: An Overview

  • Low income from primary farm produce and lack of investment in processing and agri-value chains has caused rapid reduction in farm profits and farm occupation has now come under severe pressure.

Agro-based Industry- definition & Types

  • An omnibus expression – ‘agro-industry’ covers a variety of industrial processing & manufacturing activities based on agriculture raw materials & also those activities & services that come back to agriculture as inputs. Agriculture provides inputs to industry & industrial outputs are used in agriculture to expand its production & productivity base. Thus, agro-based industry encompasses not only activities that utilize raw materials sourced from agriculture. But also those that provide inputs for modern agronomic practices.
  • Based on input-output linkages & interdependence b/w agriculture & industry, agro-industries can be of two types (A) processing industries or agro-based industries & (B) inputs supply industries or agro-industries.
  • As per international standard industrial classification (ISIC) framework, agro-based industries consists of manufacturing/processing of food & beverages, textile, footwear & apparel, leathers, rubber, paper & wood & tobacco products.

Why Promote Agro-Based Industries?

  • India has world’s 10th Largest arable land, 20 agro-climatic regions & 15 major climates.
  • Central Institute of post harvest Engineering & technology (CIPHET) of India Council of Agriculture Research (ICAR) has reported, in its 2015 Report entitled “Assessment of Quantitative Harvest & Post-Harvest Losses of Major Crops & Commodities in India”, that harvest & post-harvest losses for agriculture commodities range from 4.65 - 5.99 % for cereals, 6.36 - 8.41 % for pulses, 3.08 - 9.96 % for oilseeds, 6.7 - 15.88 % for fruits & 4.58 - 12.44 % for vegetables.

Agro-based industry: Characteristics

  • In India, agro-based industries can be grouped under three categories viz. (a) Agri-processing units covering fruits & vegetable processing units, dairy plants, rice mills, dal mills, etc. ; (b) Agri-manufacturing units covering sugar, dairy, bakery, solvent extraction, textiles units, etc. ; (c) Agri-input manufacturing units covering mechanization of agriculture, agriculture implements, seed industry, irrigation, equipment, fertilizer, pesticides etc.

Category of Agro-based Select Industry & Finished Output

Category of Agro-based Select Industry & Finished Output

Category of Agro-based Select Industry & Finished Output

Category of Agro-based Select Industry & Finished Output

Agro-based Select Industry & Finished Output

Agro-based Select Industry & Finished Output

Agro-based Select Industry & Finished Output

  • Rural & agro-based industries help create employment opportunity at production, distribution, manufacturing & marketing stages.

Review of Select Govt. Initiatives

(a) Food Processing & Beverages: Pradhan Mantri Kisan Sampada Yojana (PMKSY) with an allocation of Rs. 6,000 cr. for period 2016 - 20. Scheme components include setting up (a) Mega Food Parks (b) Integrated Cold Chain & Value Addition Infrastructure (c) Food Safety & Quality Assurance Infrastructure (d) Human Resources Development & Institutions. PMKSY encompasses Three new Schemes namely: Infrastructure for agro-Processing clusters, Creations of Forward & Backward Linkages & Creations/Expansion of food Processing & Prevention Capacities Focusing on creating robust modern infrastructure for food Processing/preservation units. PMKSY is very crucial in reducing harvest & post-harvest losses of agriculture procedures & ensuring remunerative income & adequate employment in rural non-farm sector.

(B) Textiles Industry: With a view to make Textile Industry Globally competitive, boost exports & Facilitate modernization, Govt. has rolled out a number of initiatives: Scheme for Integrated Textile park, Integrated Processing Development Scheme, Group Work shed Scheme, Common Facility Centre & Amended Technology Up-gradation Fund Scheme, Scheme for development of power loom Sector (Power Sector), SAMARATH- Scheme for Capacity Building in textile sector (SCBTS), Comprehensive Handloom Cluster Development Scheme (CHCDS), Rebate of state & centre Taxes & Levies (ROSCTL) etc.

(c) Jute Industry: National Jute Board’s Schematic interventions, inter alia, provide capital subsidy to jute mills to address their issues & challenges at hand.

(d) Khadi & Village Industry: Ministry of MSME’s Khadi & village Industries Commission (KVIC) promotes setting up of various post-harvest agro & food based micro industries like processing of pulses & cereals, Fruits & vegetable, village oil Industry, bread baking, etc.

(E) Animal Husbandry, Dairying & Fisheries.

Issues and Types of problems faced by Agro - Based industries

Issues and Types of Problems Faced by Agro - Based Industries

Issues and Types of problems faced by Agro - Based industries

Issues & Types of problems faced by Agro-based industries

Issues & Types of Problems Faced by Agro-based Industries

Issues & Types of problems faced by Agro-based industries

Promoting Agro-Industries

  • According to International Standard Industrial Classification (ISIC) agro-industry consists of: Food & beverages; Tobacco products; Paper & wood products; Textiles, footwear & apparel; Leather products; Rubber products, etc.

Govt. policy for Agro-based Industries

  • Ministry of food Processing Industries is implementing several schemes for development of food processing in India, which are as follows:
  • Scheme for Infrastructure Development;
  • Scheme for Technology Up-gradation Establishment/Modernization of Food processing Industries;
  • Scheme for Quality Assurance, Codex Standards & Research & Development;
  • Scheme for Human Resource Development;
  • Scheme for Strengthening of Nodal Agencies;
  • Scheme for Backward & Forward Integration & other Promotional Activities.

Latest Development

  • Budget 2019 focused on reviving traditional industries w/a cluster-based approach, thru. Scheme of Fund for Regeneration on Traditional Industries (SFURTI) for development of khadi, village industries, & coir clusters by providing them w/improved equipment, common facilities centres, business development services, training, capacity building & design, & marketing support etc, equipment, common facilities centres, business development services, training, capacity building & design & marketing support, etc.
  • A Scheme for Promoting Innovation, Rural Industry & Entrepreneurship (ASPIRE) is launched w/an aim to create new jobs & reduce unemployment, promote entrepreneurship culture, in India, boost grassroots economic development at district level, facilitate innovative business solutions for unmet social needs, & promote innovation to further strengthen competitiveness of MSME sector.
  • Budget 2019 proposed that 80 livelihood business incubators & 20 technology business incubators will be set up in 201 - 20 under it w/intent to develop & train 75,000 skilled entrepreneurs in agro-rural industries.
  • Prime Minister’s Employment Generation Programme (PMEGP) started in 2008 as a credit-linked subsidy programme w/a aim to generate self-employment opportunities thru. Establishment of micro-enterprises in various sectors, including agro-based industries, it is implemented by KVIC that is functioning as nodal agency at national level.
  • Latest milestone is GoI. Approved Pradhan Mantri Kisan SAMPADA Yojana (Scheme for Agro-Marine Processing & Development of Agro-Processing Clusters) W/an allocation of Rs. 6.000 cr. For period 2016 - 20. It is a comprehensive package which will result in creation of modern infrastructure w/efficient supply chain mgmt. from farm gate to retail outlets.
  • Apart from GoI. Small Industries Development Bank of India (SIDBI), National Bank for Agriculture & Rural Development (NABARD), Khadi & Village Industries Commission (KVIC), National Agricultural cooperative Marketing Federation of India Ltd. (NAFED) are major promoting agencies in sphere.
  • Growth of food processing industry may be hampered by (a) inadequate infrastructure such as stores, power & water services, / Communications & similar; (b) Limited Government support (c) poor location & (d) lack of appropriate technologies.

Agro-Based Industries: Unfair Trade Practices & Remedies

Unfair Trade Practices

  • Agro-based industries lose their competitive edge due to unfair trade practices adopted by exporters of other countries. Such practices manifest in following two forms:
  • I. Dumping- It is observed that exporters from other countries often dump their products in Indian markets at rates cheaper than those at which they sell their products in their domestic markets.
  • II. Subsidies- Governments of those countries from where imports are sourced by India are observed to be providing subsidies to their exporters.

Trade Remedies

  • India’s Customs Tariff Act, 1975 & related Anti-Dumping Rules & CVD Rules, 1995 provide legal backing for GoI. To protect domestic manufacturer against unfair trade practices of exporters of other countries.

- Published/Last Modified on: January 7, 2020


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