Day 24 – Q.1 What do you understand by the food value chain? Explain with the help of suitable examples. What are the challenges related to the value chains of India’s food processing industry? Examine. 

What do you understand by the food value chain? Explain with the help of suitable examples. What are the challenges related to the value chains of India’s food processing industry? Examine. 

खाद्य मूल्य श्रृंखला से आप क्या समझते हैं? उपयुक्त उदाहरणों की सहायता से व्याख्या कीजिए। भारत के खाद्य प्रसंस्करण उद्योग की मूल्य श्रृंखलाओं से जुड़ी चुनौतियाँ क्या हैं? परीक्षण करें।

Approach

Candidates can start the answer with giving basic idea of food value chain also with giving an example highlight the challenges of FPI in India.

Introduction

Food value chain is the process of the flow of goods. It includes the movement and storage of raw materials, inventory and finished goods from point of origin to point of consumption.

Body

Example:

• Raw materials like grains, raw meat, fish etc are collected by different sources. These sources may do preliminary processing of these to make components of a food product. The manufacturer does the final processing of these components to make the food product. This completes only the first stage of supply management.
• Now the finished product has to be delivered to the consumer. Here there will be a number of middlemen and stages. The manufacturer normally hands over the food product to a wholesale dealer. The wholesaler passes the product to a retailer from where the consumer buys the processed food item for his personal use.
• Thus, Supply Chain Management is the management of the upstream and downstream value-added flow of materials from suppliers→ company→ retailer→ final consumers.

Challenges faced by India’s food processing sector:

• Underdeveloped processed food market: Indian processed food market is still evolving and still is at its infancy stage.
• Fragmented supply chain: The long and fragmented supply chain results in the wastage and price escalations. This is because of the large share of unorganised players in the supply chain and operating commercial viability challenges.
• Inadequate cold storage and warehousing facilities: Warehousing is a key requirement in the overall supply chain it is mostly dominated by unorganised players. 20% of warehousing is organized currently with 70% of the organised market controlled by the Government.
• Fragmented market: Indian retail sector is still dominated by small traders and Kirana shops. This poses a serious challenge in building of consumer base.
• Other issues: Apart from the above areas of concern, other issues such as Lack of applied research, Taxation issues, access to credit, obsolete technologies, etc. persist in the sector.

Logistics issues:

• Indian national highways account for only 2% of the total road network but carry 40% of all cargo.
• Port capacity may be increasing, lack of connectivity to these ports leads to cost escalations and delays in the goods transferred.
• Lack of last-mile connectivity from rail transporters.

Conclusion

Thus, FPI presents immense opportunities to boost processing levels and attract investments in this sector. Further, the growth of the food processing sector will be led by the demand in retail and the rise of health-conscious consumers.