Thursday, September 30, 2010


India is a country where there are hundreds of government institutions vested with different functions and responsibilities. Of course after the economic liberalization initiatives in early nineteen nineties, government role in industry development diminished some what though it still had the critical role of policy orchestration to facilitate the growth of various activities that contribute to the national GDP. The birth of Ministry of Food Processing Industry also owes its existence to the new initiatives at that time and is based on the premise that value addition to agricultural crops is the surest way to generate employment in the country. Now that, in spite of the high voltage proclamations of this ministry from time to time, the food industry does not seem to have emerged as a major economic player in the country's developmental trajectory. The industry body FICCI has now come out with a new proposal to create another Special Purpose Vehicle (SPV) to facilitate flow of credits to food processing sector which is claimed to be starved of funds from nationalized banks due to conservative credit policies pursued by them.

"Identifying food processing as a sunrise sector, industry body Ficci has recommended setting up a bank on the lines of the agriculture cooperative, Nabard, and promoting contract farming to boost growth. "The government should establish a national bank on the lines of Nabard to lend credit to food processing industries whose tremendous potential remains untapped," a Ficci report said. The bank will ensure speedy disbursals of the funds to the sector grappling with the issue of lack of access to credit from banks, Ficci said on the basis of a comprehensive survey. Survey-2010 on bottlenecks in Indian Food Processing Industry was conducted on 250 companies. To overcome the long and fragmented supply chain, contract farming can emerge as a significant opportunity for companies, whereby they can create direct farm linkages to source appropriate quality, quantity and varieties of inputs, the report said. It also recommended opening up multi-brand retail to bring in more global investments in the infrastructure and logistics domain. "Multi-brand retail is an easier way of creating ideal environment for the use of modern logistics infrastructure like transportation, hubs, IT, cold chain," it commented. Ficci, which works closely with the government on policy issues, observed that despite food and food products forming the largest consumption category in India involving 21 per cent of the country's gross domestic product, its growth potential remains untapped. Notwithstanding government undertaking several steps, including rationalisation of food laws, setting up mega food parks and allowing 100 per cent FDI in the food processing & cold chain infrastructure, the sector continues to be at a nascent stage, the report said".

NABARD, an institution created for funding agricultural activities has been functioning for decades but does not seem to have improved the lot of farmers dramatically as reflected by rash of suicides of farmers in different parts of the country. Its much touted Kisan Credit Cards provided to over 71 million farmers and over 28000 farmers Clubs in 555 districts are supposed to be a safety net for the rural families but how far these programs have been able to fulfill the original objectives of NABARD is debatable. If this system had worked properly what was the necessity for GOI to write off billions of rupees of loans given to the farmers during its last budget? Before creating another institution like NABARD for exclusive credit flow to food processing sector, GOI must make a review of the functioning of this agency. NABARD is also supposed to be offering credit to small scale food industries in rural areas, though it does not seem to have made any impact.

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