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Wednesday, 30 Mar 2016
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Farmers to gain from 100% FDI in Food Processing

The Union finance minister in his Budget 2016-17, announced 100 per cent FDI through the FIPB route in marketing of food products i.e. multi-brand retail trading, provided they are produced and manufactured in India. The Budget proposes that retailers can sell their own food products without any restriction in India as long as they are produced within the country.




India is one of the largest producers of fruits and vegetables in the world. However, it has a very limited integrated cold chain infrastructure and storage facilities, thereby causing heavy losses to farmers in terms of wastage in the quality and quantity of fruits and vegetables. To make the matter worse, this chain is highly fragmented. Thus, the perishable horticultural products find it difficult to link to far-away markets, including foreign markets, round the year.


Advantages of the Policy


FDI in multi-brand retail trading will enable the farmers get better remunerations for their produce. It will also result in the strengthening of the backend infrastructure i.e. the supply-chain infrastructure ranging from storage to processing and lead to direct purchase by the retailers reducing the number of middlemen, thus ensuring a win-win situation to both farmers and consumers.


The policy would especially benefit the SMEs as it would provide the necessary scales for these entities to expand their capacities in manufacturing and also get advantages of technology upgradation, which would give them an upper hand in productivity and local value addition, thereby raising their profitability and earnings. It would also increase employment in the country.


Major Investments announced for Maharashtra


Patanjali Yogpeeth is setting up food processing units in the Vidarbha region of East Maharashtra at Multi-modal International Cargo Hub and Airport at Nagpur (MIHAN), Amravati, Katol and Gadchiroli. Further, Patanjali Ayurved has plans of raising Rs 320 crore for research and development of new products and expansion.


The Union Minister for Food Processing, Harsimrat Kaur, in February 2016, announced that Maharashtra will have food parks at Wardha, Satara and Aurangabad. Each park to be set up at Rs 5000 crore is expected to generate 6,000 jobs and benefit around 25,000 to 30,000 farmers.


Further, in Feb 2016, Pepsi and biotechnology giant Monsanto had announced stepping up their investment in Maharashtra during the ‘Make In India Week’. Pepsi will set up one more unit to make mango and pomegranate juices, and also orange-based citrus juice, at an investment of around Rs 500 crore. Though the project site has not yet been decided, the unit is likely to come up in the underdeveloped Vidarbha or Marathwada region. Monsanto will establish a seed unit in Deulgaon Raja, Buldhana district of Vidarbha region.


Other Major FMCG Projex announced


Parle has decided to set up a new manufacturing facility at the Sitarganj integrated industrial estate in Uttarakhand. Under the Mega Industrial and Investment Policy, 2015 of the state, the new Parle unit would come under ultra mega projects. Parle will invest Rs 200 crore in the new plant and would soon start the construction work.


In Feb 2016, Britannia announced it will invest Rs 900 crore on setting up fresh manufacturing and research and development facilities over the next two years. The company will make fresh investments in biscuits, cake, rusk and dairy. The investments will include Rs 300 crore on diary, and majority of the Rs 900 crore investments will be infused into greenfield plants. Besides setting up plants in Tamil Nadu and Karnataka, the company also plans to set up new manufacturing units in Guwahati, Andhra Pradesh and Maharashtra. For exports, it is looking to set up a site in Gujarat.


Further, in Feb 2016, Mother Dairy Fruit and Vegetable (MDFVPL) announced setting up of a 25,000 tonne per annum integrated food and vegetable processing plant in Ranchi, Jharkhand at an estimated cost of Rs 75.65 crore. The first phase of the project (freezing line) is expected to be operational by December 2016 while the pulp and concentrate processing line will be operational a year later. Through this state-of-the-art facility, the company will strive to explore better opportunities for almost 50,000 farmers and their produce.


Quote of the week:

"Allowing 100 percent FDI in multi brand retail with 100 percent local sourcing condition will enable greater foreign direct investment that will result in a faster growth for the sector"

- Harsimrat Kaur Badal, Union Cabinet Minister of Food Processing, Government of India
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