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Dried and Preserved Vegetables

School of Management Studies, JNTU Page 1

Chapter 1

Introduction and Research Methodology

1.1 Introduction

India is the worlds second largest producer of food next to China, and has the potential of being

the biggest with the food and agricultural sector. The food processing industry is one of the

largest industries in India-it is ranked fifth in terms of production, consumption, export and

expected growth. The food industry is on a high as Indians continue to have a feast. Fuelled by

what can be termed as a perfect ingredient for any industrylarge disposable incomes - the food

sector has been witnessing a marked change in consumption patterns, especially in terms of food.

The food processing industry in the country is on track to ensure profitability in the coming

decades. The sector is expected to attract phenomenal investments of about Rs 1,400 billion inthe next decade.

1.1.1 What is Food Processing?

Food processing is the set of methods and techniques used to transform raw ingredients into food

or to transform food into other forms for consumption by humans or animals either in the home

or by the food processing industry. Food processing typically takes clean, harvested crops or

butchered animal products and uses these to produce attractive, marketable and often long shelf-

life food products. Similar processes are used to produce animal feed.

1.1.2 India has the following advantages in the Food Processing Sector:

India is one of the largest food producers in the world.

India has diverse agro-climatic conditions and has a large and diverse raw material base

suitable for food processing companies.

India has huge scientific and research talent pool.

A largely untapped domestic market of 1000 million consumers.

300 million upper and middle class consume processed food.

200 million more consumers expected to shift to processed food by 2010.

Well developed infrastructure and distribution network.

Rapid urbanization, increased literacy, changing life style, increased number of women in

workforce, rising per capital income- leading to rapid growth and new opportunities in

food and beverages sector.

Strategic geographic location (proximity of India to markets in Europe and Far East,

South East and West Asia)


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1.1.3 Factors Driving Demand for Processed Foods

Changing age profile - A relatively larger share of young population which has the

ability to spend on processed foods

Increase in income - The middle and upper middle income groups growing at a faster

rate than in developed countries resulting in higher spending on food and also switching

over to animal protein and processed foods from staples.

Social changes - Increasing number of working women.

Life style factors - Increasing health consciousness and need for convenience food.

Organized Retail outlets - These provide the much needed forward linkages.

1.1.4 Dried and preserved Vegetables

Vegetable processing in India is almost equally divided between the organized and unorganized

sectors, with the organized sector holding 48 per cent of the share. While products like juices and

pulp concentrate are largely manufactured by the organized sector, the unorganized sectors foot

hold is in the traditional areas of processed items like pickles, sauces and squashes. By size,

pickles form the strongest category. The installed capacity of vegetable processing industry has

increased from 1.11million tones in 1993 to 2.33 million tones in 2004. Over the last few years,

the industry has seen a positive growth in ready-to-serve beverages, dehydrated and frozen

vegetable products, pickles, processed mushrooms and curried vegetables.

The government expects the processing in this sector to grow to 10 per cent in 2010 and 25 per

cent of the total produce by 2025. Most of the units engaged in above are currently export

oriented. Domestic consumption of processed vegetable products is low, indicating a potentialfor growth through increased penetration of the domestic market.

India is the major producer of dried & Preserved Vegetable Like Preserved Onions, Cucumber &

Gherkins, provisionally preserved, Mushrooms of the gensus agaricus, Other mushrooms and

truffles, Green Pepper in Brine, Dried Truffles, Asparagus Dried, Dehydrated Garlic Powder,

Dehydrated Garlic Flakes, Garlic Dried, Potatoes Dried, Grams, Grams Dal, Onion

Prepared/Preserved etc. Many non-traditional vegetables mainly processed cucumber and

gherkins and other vegetables produced like asparagus, celery, bell pepper, sweet corn, green and

lime beans and organically grown vegetables are also being increasingly exported.


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1.2 Literature Survey

1.2.1 Processed food industry

Among the various industrial sectors, food processing is somewhat unique in that, unlike others,it covers a fairly broad spectrum of products based on a wide range of raw materials from

agriculture. As much, for a country like India, endowed with diverse climate regions and a long

coastline and producing a variety of crops, fruits, vegetables, flowers, livestock and seafood, this

sector has not only a great potential but is also of significance in improving the rural economy.

In fact, food processing as such is not new in India. It has been carried on for centuries but by

adopting low-cost homegrown technologies. However, in the early 1980s the Government of

India felt the need for sustained and organized efforts to give a boost to this sector, with the twin

objective of reducing wastage of, and adding value to, farm produce and setting up an exclusive

Department of Food Processing Industries in the Ministry of Agriculture.

From all accounts the initiatives taken since then have led to a positive growth in this sector. This

is evident from the number and variety of bakery and confectionery products, snacks and drinks

available in the market under different brand names and from the increasing interest evinced by

private entrepreneurs in this sector. Still, as against the potential, the present level of processing

is admittedly too low. Right now only two percent of the fruits and vegetables produced in the

country are now processed, as compared to 30 per cent in Thailand, 70 per cent in Brazil, 78

percent in Philippines and 80 per cent in Malaysia. The value addition in the food sector in India

is a mere 7 percent. The output of fruits and vegetables is projected to increase substantially in

the coming years. Currently it constitutes 6.6 percent of total food grain production and this

figure is expected to reach 80 per cent by the year 2010. Now there is huge increment is expected

in food processing from 2% to the 10 percent by the year 2010 and 25% by the year 2025 thanks

to the government policies initiated by the food ministry.

Set for a quantum jump- The development of the food processing sector assumes importance

in the context of the li beralized global tr ade regime under the WTO agreement

---B. S. Padmanabhan (Noted cr iti c), The H indu 2006.

Liberalization has brought in through the entry of large multinational and transnationalcorporations, foreign investment in this sector. This resulted in competition, technological

upgradation and market expansion. In the face of the competition, domestic Industries are

gradually losing market share and thus selling their businesses to the new entrant MNCs well

before the value of the brand and businesses drops further due to ongoing onslaught of

multinational brands. This is happening because MNCs have much eater resources to put behind

their brand and business and also have long term vision and sustainability. Domestic industries


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are no comparison.

Globalization has changed the Indian Processed Food Industrys scenario by bringing in the

Worlds best known multinational brands

----R. Seshasayee, president, Confederation of I ndian I ndustr ies, 2006.

Technology and research play very vital role in the development of Processed Food Industry and

the role of technology and research can not be ignored since the consumers are price conscious

and they are equally quality conscious, so company must ensure the quality of the product which

can only be possible with the help of latest updated technology.

Technology is playing its role to ensure quality in Processed Food Industry

----Prof. V. Subramaniam, fi rst Director of CFTRI (Central Food Technological Research

I nstitute), 2006.

Consumers improved life standard and their earnings are making the packaged food businessmore demanding and challenging. And for the big giants like ITC and HLL cost of the

acquisition does not bother them at all.

I have an open mandate for acquisitions, and for a company like ITC, money to buy

companies is not an issue,"

----Ravi Naware, divisional chief executi ve (foods), I TC, 2006.

1.3 Objectives of the study

1.3.1 Key objective:

The main objective of this report is to conduct a study on dried and preserved vegetables

throughout India and also about the export prospects.

1.3.2 Sub-objectives:

The report will give an idea to improve the infrastructural needs which will result in

better preservation and thereby meeting the export value.

Making food processing sector in India an attractive sector for investment and offers

significant growth potential to investors.

To highlight the importance of the most crucial challenge today, that the Indian foodprocessing industry is facing is thelack of suitable infrastructure.

1.4 Scope of the study

The report covers the following areas:


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Historical data on exports, production and productivity of dried & Preserved Vegetable

Like Preserved Onions, Cucumber & Gherkins, mushrooms and truffles, Green Pepper in

Brine, Dried Truffles, Asparagus Dried, Dehydrated Garlic Powder, Dehydrated Garlic

Flakes, Garlic Dried, Potatoes Dried, Grams, Grams Dal, Onion Prepared/Preserved,

processed cucumber and gherkins and other vegetables produced like asparagus, celery,

bell pepper, sweet corn, green and lime beans.

Information about main varieties grown in India.

Country-wise export statistics giving export quantity and value for the years 2007-2008,

2008-2009,2009-2010.

Exim policy, and export promotion council for processed food (APEDA).

Detail study on issues in focus which are related to dried and preserved vegetables sector

like infrastructure, taxation, research and development, packaging etc.

Report also covers the government initiative schemes which are formed because of

various developments needed in this sector.

Statistical Data Analysis and Discussion of Results are been recorded in the study by

using different methods of data analysis.

Swot analysis is been designed for the dried and preserved vegetables sector.

1.5 Period of the study

The period of the study is confined to four months that is in the year 2011. As per the given

schedule everything is been analyzed and a detailed report is prepared.

1.6 Data Collection

1.6.1 Primary data:

For this study there is no primary data available.

1.6.2 Secondary data: Data someone else has collected is known is secondary data.

Secondary data were collected through websites, magazines, newspaper articles, periodic

journals, data bases, Indias statistical reports, Exim bank reports etc.


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dependent variable, and what proportion is due to the independent variables. The relation

between the variables can be illustrated graphically, or more usually using an equation.

1.7.2.3 Strengths and limitations of the approach

1.7.2.3.1 Strengths

Regression analysis provides an opportunity to specify hypotheses concerning the nature

of effects (action theory), as well as explanatory factors.

When it is successfully executed (with a statistically valid adjustment), regression

analysis can produce a quantitative estimate of net effects.

1.7.2.3.2 Limitations

The technique is demanding because it requires quantitative data relating to several

thousand individuals.

Implementing the data collection can be time-consuming and expensive.

Regression analysis is likely to reach the conclusion that there is a strong link between

two variables; whereas the influence of other, more important, variables may not have

been estimated (this error is called "data snooping"). The tool should therefore be used

with care.

Relations between the different explained and explanatory variables are often circular (X

explains Y and Y explains X). In this case, the method is inapplicable.

1.8 Limitations of the study:

Primary data is not collected.

Only two tests are performed under statistical data analysis that is correlation and

regression analysis.

Report is not concentrated on import prospects because India is the 2nd largest producer

of vegetables and it has wide scope in exports.


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Chapter 2

Profile of the Industry

2.1 Introduction

Almost all vegetable processing is highly automated, and because new plants are more fully

automated they are also more capital intensive. Some new processing techniques - such as retort

cooking - have been introduced into vegetable processing. However, the major innovations in

technology have been associated with sorting and grading vegetables for processing and in

packaging, handling and storage of processed vegetables. Packaging, innovations, such as

microwave-proof plastic that provides an extended shelf life.

2.1.1 Why India?

Largest Global Consumer Market of 1.2 bn with over 600 mn consumers below the age

of 40 yrs.

3rd Largest farm producer globally with a potential to become the major Food Bowl to

the world.(601 Ml. Tons)

Large Scale Modernisation & Up-gradation in technology & systems being embraced by

Food Processing Companies in India very rapidly.

Continuous high growth in the Food Processing market through the global recession.

2.1.2 Varieties

The major varieties under Dried and Preserved Vegetables products are as follows Mushroom

(Button Mushroom, Oyster Mushroom, Paddy straw mushroom and milky mushroom) Garlic

(Agrifound White (G-41), Yamuna Safed (G-1), Yamuna Safed 2 (G-50), Yamuna Safed 3 (G-

282), Agrifound Parvati (G-313) and Yamuna Safed 4 (G 323).

2.1.3 Individual products under this sub head are

Preserved Onions Cucumber & Gherkins, Mushrooms of the gensus agaricus, Other mushrooms

and truffles, Green Pepper in Brine, Dried Truffles, Asparagus Dried, Dehydrated Garlic

Powder, Dehydrated Garlic Flakes, Garlic Dried, Potatoes Dried, Grams, Grams Dal.

2.1.4 Areas of cultivation and processing:


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The raw vegetables are typically grown in field conditions and are mainly grown in the states of

jammu & kashmir, Himachal pradesh, hilly regions of north Uttar Pradesh, TamilNadu,

Maharashtra, karnataka, Gujarat, Andhra Pradesh, Assam, Madhya Pradesh, Rajasthan, Punjab,

Tripura, West Bengal and Orissa .

2.1.5 Industry volatility

Industry revenue volatility is medium

Changes in the price and supply of fresh fruits and vegetables are the primary sources of

volatility in this industry.

Competition from substitute foods, in particular fresh fruit and vegetables.

Fluctuating average real wages, which impacts on affordability.

Climatic conditions affect the quality and quantity of raw material supplied, although this

is lessened by growth in horticulture.

2.2 Key Factors

2.2.1 Key Sensitivities:

The key sensitivities affecting the performance of the Global Fruit and Vegetables Processing

and preserving industry include:

Competition from Substitutes - Fresh Fruit and Vegetable Wholesaling

Consumers may go through phases of preferring fresh fruit to the canned alternative, but

processed fruits are more convenient for some.

Domestic Goods Prices - Agricultural - Horticulture - Fruit

The price of raw materials supplied has some impact on value added and profitability, but

most industry participants buy cheap fresh fruit and vegetables from developing

countries.

Domestic Goods Prices - Vegetables

The price of raw materials supplied domestically has some impact on value added and

profitability, but most industry participants buy cheap fresh fruit and vegetables from

developing countries.

Downstream Demand-Other Grocery and Related Product WholesalersThis industry is a key source of demand for processors' products, and so manufacturers

are sensitive to its level of activity.

Nutrition - Vegetable Consumption

Nutritional information made available to consumers may either assist or hinder industry

growth, depending on its content.


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For example, medical research might show that some processed vegetables are just as

healthy as their fresh counterparts.

Nutrition - Fruit Consumption

Nutritional information made available to consumers may either assist or hinder industry

growth, depending on its content.

For example, medical research might show that some processed fruits are just as healthy

as their fresh counterparts.

Population Growth - World

Population growth affects the fruit and vegetable processing industry. Strong growth will

increase the retail demand for processed fruit and vegetables, impacting upon the demand

at the manufacturing level.

2.2.2 Key Success Factors

The key success factors in the Global Fruit and Vegetables Processing and Preserving industryare:

Marketing of differentiated products

A diversified range of products enables high capacity utilization, rather than seasonal

operation only. It also assists with brand recognition.

Ability to quickly adopt new technology

Adoption of new technology will raise productivity and improve product quality.

Upstream vertical integration (ownership links)

Linkages to suppliers, either via ownership or through contracts, will ensure raw

materials are available at an inexpensive rate. Access to high quality inputs

This holds some importance for processors since firms compete strongly with respect to

product taste.

Attractive product presentation

This is an important way of generating brand recognition, and hence, maximizing sales.

2.3 Exports

Indian exports primarily comprise of vegetables in the raw form and primary processed products,with low price realizations. Processed vegetables have shown a low CAGR of 7 percent. Key

barriers to exports include:

Price competitiveness Wide fluctuations in prices of Indian F&V products as compared to

South

America, which offers more stable prices.


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Distance Freight cost and shelf life are key constraints to success in export

markets for many F&V

Phytosanitary

requirements

In the post WTO period, especially since 1996-97, the complexity of

SPS regime has significantly constrained market access in developed

countries for Indian F&V products.

Climate and seasonality Subject to seasonal fluctuations and short season of availability

Small size of industry

and participants

There is a need to have a certain turnover to be viable as an export

operation.

Indian exporters lack scale and hence competitiveness. This leads to

low investments in upgrading skill and quality, product innovation

and brand building.

Fragmented nature of the

industry

The industry is fragmented. Hence, exporters are unable to establish

themselves as long-term players.

Raw material supply and

quality inconsistencies

Quality raw material for processing value added F&V meeting

international standards is not available. Even when available, thecost of raw material is very high.

Certification Increased compliance costs and lack of established quality

parameters.

Lack of market

intelligence and statistical

data

Lack of information about international requirements to a large

number of

Producers.

Packaging Poor packaging due to high costs and low innovation in packaging.

2.3.1 Indian Exports to some developed markets in the year 2009-10 are as

follows:

2.3.1.1 United States:

Exports from India Quantity(Mt) Value (lacs)

Dried and preserved

vegetables

26447 9061

Other fresh vegetables 4504 1815

Fresh onions 58.17 9.26

Imports from the world: 5th

largest imported vegetable is fresh/chilled tomatoes for US.


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2.3.1.2 United Kingdom:


Dried and preserved

vegetables

3973 2573

Other fresh vegetables 19795 8098Fresh onions 2108 290

2.3.1.3 Australia:

Exports from India Quantity(Mt) Value(lacs)

Dried and Preserved

Vegetables

4632.81 18411

Other fresh vegetables 2381.57 740

Fresh Onions 11.0 1.85

2.3.1.4 Canada:

Exports from India Quantity(Mt) Value(lacs)

Dried and Preserved

Vegetables

3490.24 2028.64

Other fresh vegetables 3190.07 1198.67


2.3.1.5 France:


Dried and Preserved

vegetables

18098.34 6124.53


Fresh onions 190.54 20.97

2.3.1.6 Japan:


Dried and preserved

vegetables

580.49 223.84




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2.4 Imports

1) India mainly imports:

a. Preparations of vegetables

b. Prepared/preserved tomatoes

c. Prepared/preserved frozen potatoes

2) Exports had a negative annual growth of 22.27 per cent during 2007-08, even though imports

continued to grow at 9.91 per cent over the previous year

3) Import of fresh fruits has grown by 217 per cent from 2004-05 to 2007-08(Apples top the list)

4) India is a net importer of fruits and vegetables with imports exceeding exports by over 1.7

million tons

5)Indian processing industry is acquiring strengths so trend is towards a scenario where India

imports raw materials and exports value added products.


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2.5.3 Low productivity levels: Indian yields are lower when compared to other key producers of

F&V like Brazil and China (Fig 3&4). Exceptions can be seen in the case of Grapes and

Banana, where the yields are amongst best as a result of introduction of new high yieldvarieties and their adoption by farmers. However in fruits like mango, farmers continue to

grow low yielding varieties.

2.5.4 Short Production Season for Vegetables and Fruits: Short production season for Fruitsand Vegetables restricts availability of raw material for F&V processing industry. Due to this

seasonal nature, assets remain idle over long periods of time. Stretching the production

season of many fruit and vegetable crops will have the potential to dramatically affectavailability of raw material for F&V processing industry. Increased use of technologies to

stagger flowering, varietal changes etc. will become necessary to achieve these.

2.5.5 Packaging: Another area of concern for R&D is the packaging sector. Cost of packagingcurrently forms 35-40% of the end product cost. High quality packaging calls for expensive

raw material and machinery. Research on packaging therefore needs to focus on arriving at

low cost solutions besides permitting import of packaging material, machinery at low rates ofduty.

2.5.6 InfrastructureInadequate infrastructure has been identified as a major constraint in the growth of fruit and

vegetable processing industries. Without a strong and dependable cold chain, a vital sectorlike F&V processing industry, which is based mostly on perishable products, cannot survive

and grow. Even at currents level of production, wastage in F&V is estimated at 35%, major

reasons being inadequate storage, transportation, cold chain facilities and other infrastructuresupport facilities.

Foster public-private partnerships for infrastructure creation and technology upgradation Involve Project Management Agencies to assist the Ministry in implementation of theProjects

Cluster approach to be adopted to deal with the fragmented holdings and SMEs which

dominate the sector Facilitate development of integrated cold chain (from farm to market) by providing

incentives to private investment.

Government of India has been implementing several schemes for facilitating creation of

infrastructure for food processing including the following components relevant for F&V

processing sector:

Food Parks

Packaging Centers

Integrated Cold Chain Facility Value Added Centers and Irradiation Facilities.


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2.5.7 Taxation On Food processing equipment, plant and machinery manufactured locally Central

Excise Tax may be reduced from 16% to 8%.

To encourage investment in cold chain infrastructure, investments in it may be given a

tax holiday for 5 years. Cold chain equipment may be exempt from CET. Customs dutyon cold chain may also be reduced from 12.5% to 5%.

It is suggested to reduce excise duty on OTS cans for food products from 16-8%.

A single flat tax rate under VAT may imposed on all food items across states. This needs

to be taken up with the Empowered Committee of Finance Ministry.

Current income tax exemption of 100% in the first 5 years and 25% in the next 5 years

may be continued for newly set-up food processing plants in general and F&V plants in

particular.

2.6 Government Initiative Ministry created for food processing as well as various department like,apeda(agriculture

and processed food export development authority) has been set up for the promotion of

export activities.

Most of the processed food items have been exempted from the purview of licensingunder the Industries (Development & Regulation) Act,1951,except items reserved for

small-scale sector and alcoholic beverages; Food processing industries are included in the

list of priority sector for bank lending in order to ensure easy availability of credit to

them.

Most of the items can be freely imported and exported except for items in the negativelists for imports & exports).

Free trade zones (FTZ) and export processing zones (EPZ) have been set up with allnecessary infrastructure. Also, setting up of 100% Export oriented units (EOU) is

encouraged in other areas. They may import free of duty all types of goods, includingcapital foods. Units in EPZ / FTZ and 100% Export oriented units can retain 50% of

foreign exchange receipts in foreign currency accounts.50% of the production of EPZ /

FTZ and 100% EOU units are saleable in domestic tariff area.

All profits from export sales are completely free from corporate taxes. The governmenthas established of mega food parks in different parts of the country, which will be run by

a Special Purpose Vehicle created by all the stakeholders to create an integrated value

chain from the farm gate to the consumer

Another strategic initiative taken in India is to establish cold chain facilities includingrefrigerated vans all over the country, to provide relief to the farmers, to enhance the


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shelf life of their product and retain its quality second hand ones in the food processing

sector

100% FDI permitted on automatic route Customs duty on food processingmachinery andtheir parts is being reduced from 7.5% to 5% a, Custom duty on Packaging Machine to be

reduced from 15% to 5%.

2.6.1 Schemes of The Government

2.6.1.1 Schemes for Market Development

Financial assistance in Packaging(Activity for development of packaging standards and design,

Upgradation of already developed packing standards)Assistance for conducting feasibility

studies etc.50% of the total cost subject to a ceiling of Rs 5.00 lakh per beneficiary in accordance

with MDA/MAI guidelines, Brand publicity (Product specific Indian Brands) throughadvertisement etc. Brand promotion for those brands which are of Indian origin , advertisement

in international print/electronic media, website development etc.(25% of the total cost subject to

a ceiling of Rs 50.00 lakh in a year on reimbursement basis subject to auditing of the accounts.

Not to be extended to an exporter beyond 3 consecutive years. Norms for providing assistance

would be framed by APEDA)

2.6.1.2 Schemes for Infrastructure Development

Establishment of common infrastructure facilities by APEDA or any other Government

or Public Sector agency like Airport Authority of India or Port Trust etc.(100% grant in

aid)

Promotion of Quality and Quality Control Assistance etc. for setting up/strengthening

laboratories 25% of the cost subject to a ceiling of Rs 20 lakh per beneficiary. Quality

standards should be adhered to for availing the subsidy Up gradation and recognition of

labs for export testing (50% of the cost for private labs;100% for the Central Government

labs)

Assistance for up gradation of technical and managerial skills through on spot training in

India/abroad 100% of cost of the programme organized by APEDA subject to a ceiling of

Rs 1.5 lakh per representative (not more than three from single organization)

2.6.1.3 Schemes for Research and Development

Assistance for technology development through R & D efforts with research institution

under Government/Public Sector (100% in case of APEDA).


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Assistance to recognized exporters associations of APEDA to support relevant research

and development for export enhancement through R & D organizations in co -

operative/private sector (Upto 50% of the total cost of the project subject to a ceiling of

Rs 20 lakh).

2.7 EXIM Policy

EXIM Policy is the export import policy of the government that is announced every five years. It

is also known as the Foreign Trade Policy. This policy consists of general provisions regarding

exports and imports, promotional measures, duty exemption schemes, export promotion

schemes, special economic zone programs and other details for different sectors. Every year the

government announces a supplement to this policy.

The EXIM Policy of 2002-2007 emphasized the importance of agricultural exports and

announced measures like the setting up of agri export zones, removal of procedural restrictions

and marketing cost assistance. Agri Export Zones are considered the most important creation of

this policy.

2.8 Agri Export Zones

Agri Export Zones were formed as a result of this policy. These zones are meant to promote

agricultural exports from the country and provide remunerative returns to the farming

community regularly. They are to be identified by the State Government, which would evolve a

comprehensive package of services to be provided by all State Government agencies, State

Agriculture Universities and all institutions and agencies of the Union Government for intensive

delivery in these zones. Corporate sector companies with proven credentials would be

encouraged to sponsor new agri export zones or take over already notified agri export zones.

Services that would be managed and coordinated through this scheme include the provision of

pre/post harvest operations, plant protection, processing, packaging, storage and related research

and development. APEDA will supplement, within its schemes and provisions, the efforts of

State Governments for facilitating exports. Click here for a list of the Agri Export Zones.

After, a change of government at the centre, a new EXIM Policy of 2004 2009 was

announced. This policy came up with export promotional measures such as Towns of Export

Excellence, Target Plus, Free Trade and Warehousing Zones and the Vishesh Krishi Upaj

Yojana.


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2.9 Indian Policies

Though no industrial license is required for setting up Fruits & Vegetable processing industries,

setting-up 100%EOUs require specific Govt. approvals. This sector is regulated by the Fruit

Products Order, 1955(FPO), issued under the Essential Commodities Act. The Department of

Food Processing Industries administers this order. The order lays down product specifications

and quality control requirements on production-hygiene, relabeling and marketing of processed

fruits and vegetables.

All processing units are required to obtain a license under this order. Periodic inspection of units

is also carried out. In addition, consignments of fruit & vegetable products intended for export

are subject to pre-shipment inspection under the FPO. Recognized Export Houses and Star

Trading Houses are however exempted from this inspection. Some items like: pickles &

chutneys, tapioca sago and tapioca flour are reserved for exclusive manufacture in the small

scale sector.

Export of fruit & vegetable products is freely allowed. Many fruit and vegetable processing

industries are eligible for automatic approval of foreign technology agreement and upto 51%

foreign equity participation. These include: tomatoes, mushrooms and other frozen vegetables,

fruit, nuts, fruit-peel, fruit jellies, marmalades, fruit juices and vegetable juices etc.

2.10 APEDAExport promotion organization

The Agricultural and Processed Food products Export Development Authority (APEDA) is an

export promotion organization under Ministry of Commerce & Industries, Government of India.It is mandated with the responsibility of promotion and development of the export of its

scheduled products.

The Agricultural and Processed Food Products Export Development Authority (APEDA) was

established by the Government of India under the Agricultural and Processed Food Products

Export Development Authority Act passed by the Parliament in December, 1985.The Authority

replaced the Processed Food Export Promotion Council (PFEPC).

In accordance with the Agricultural and Processed Food Products Export Development Authority

Act, 1985, (2 of 1986) the following functions have been assigned to the Authority.

Development of industries relating to the scheduled products for export by way of

providing financial assistance or otherwise for undertaking surveys and feasibility

studies, participation in enquiry capital through joint ventures and other reliefs and

subsidy schemes.


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Registration of persons as exporters of the scheduled products on payment of such fees as

may be prescribed.

Fixing of standards and specifications for the scheduled products for the purpose of

exports.

Carrying out inspection of meat and meat products in slaughter houses, processing plants,

storage premises, conveyances or other places where such products are kept or handled

for the purpose of ensuring the quality of such products.

Improving of packaging of the Scheduled products.

Improving of marketing of the Scheduled products outside India.

Promotion of export oriented production and development of the Scheduled products.

Collection of statistics from the owners of factories or establishments engaged in the

production, processing, packaging, marketing or export of the scheduled products or

from such other persons as may be prescribed on any matter relating to the scheduled

products and publication of the statistics so collected or of any portions thereof or

extracts therefrom. Training in various aspects of the industries connected with the scheduled products.

Such other matters as may be prescribed.

2.11 Competitor Approach

Large acreage - The competitors use harvest combines for harvesting the produce hence

making the produce lower in cost and fresh as well.

High Subsidies - Lots of subsidies are given by competing countrys governments which

make their products cost competitive. Low Inland transportation cost - Competing countries do not face the high Inland

transportation cost as compared to the Indianexporters. For e.g. in case of exporting peas,

since most of the peas are grown in Punjab and Uttar Pradesh it costs approximately Rs

5-6per kg to bring the produce to Mumbai port. This makes the export option

unprofitable and unviable.

Image of the competing country is better as compared to India - Image of India is

quite poor as a food processor. Hence,Indian produce has few takers and it is looked upon

as that of low quality.

Good varietiesThe competing countries grow varieties which ripen very fast.

Good packaging techniques - Competitors have advanced packing techniques makingthe product attractive.

Huge investment in infrastructure - The competitors have good infrastructure to

support the seamless export.

World class processing plant - The processing plants in competing countries have much

more capacity as compared to the Indian plants.


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2.12 SWOT Analysis

2.12.1 STRENGTHS

1) The vegetable industry is large.

2) It gives employment to a large number of people, especially in the rural India.

3) The sector experiences a constant demand.

a. Internal demand has always been high as the Indian prefer the fresh vegetables to

processed foods

b. External demand as India is a leading producer of fruits and vegetables. To an extentthat it is also known as the fruit and vegetable basket of the world. (a leading exporter of

onions)

4) Advances in technology and government initiatives support the development of the sector

5) Onion is the fourth most important commercial vegetable crop

6) The export of Onion products has increased from Rs 1035.78 Crores in 2007-08 to Rs 1827.52

Crores in 2008-09.

7) Major Export Destinations (2008-09):Bangladesh, Malaysia, UAE, Sri Lanka, Pakistan

8) Indias export of other Fresh vegetable has increased from Rs. 489.49 Crores in 2007-08 to Rs

680.2 Crores in 2008-09.

9) India also exports dried vegetables for example: cucumber, onion, potatoes, mushrooms,

garlic asparagus etc.

2.12.2 WEAKNESSES

1) Lack of government support.

2) Shift of labour force from agriculture to non-agriculture in India is peculiarly slow: rigid

labour laws in both the agricultural and industrial sectors.

3) Reforms in agriculture, in particular: trade liberalization, export promotion strategies.

4) Level of spending on agriculture does not translate into a significantly higher sectoral

performance


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5) Inadequate road linkages remain a major constrain for the development of well-functioning

agricultural markets.

6) A continuing fragmentation of: Land-holdings, Poor maintenance of existing irrigation

systems, declining soil fertility in some areas are other factors.

7) Seasonality and the fact that agricultural sector output heavily depends on the annual monsoon

2.12.3 OPPORTUNITIES

1) Grow white & yellow onions to export to European markets increase share in Malaysia,

Singapore & Gulf Improve packaging

2) Export processed Asparagus, Celery and baby corn to other countries.

3) Special package can be given to farmers for growing high value vegetables.

4) Reduction in air freight and adequate cargo space.

5) Better cold storage facilities, hygienic and vacuum packs

6) Canned, bottled and dehydrated vegetable export.

2.12.4 THREATS

1) Value addition to food fortification: 7% India, 23% China, 45% Philippines, 188% UK.

2) External liberalization poses threats of stiffer competition under a new world trade order.

3) Advances in bio-technology have enabled production of Genetically Modified (GM) foods.

4) Poor global marketing- Indian brands have yet to acquire an image in the international

markets.

5) No suitable insurance schemes for such exports of perishables. Hence, The banks face

considerable credit risks.

6) Poor marketing, transport and communication infrastructure.

7) Some issues like different MRL by member countries for pesticide, drugs and other

contaminants.

8) Highest Taxes on processed food in India.

9) Excise duty, Sales tax, octroi, mandi samiti, entry tax and customs duty, levied by the

Central/State/Local bodies.

10)Preservatives which are added for processed food is not good for health. It causes many

diseases.


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2.13 Problems faced by Indian exporters

The main problem area of Indian exporters is that there is lack of information flow in the value

chain regarding product specifications,packaging, labelling, and qualitystandards as per the

International demand.

Infrastructure there is lack of infrastructure it is estimated that half of the food is wasted in

transportation besides this there are lack of cold storage facilities etc

Certification to export to other countries especially in developed countries an exporter need to

obtain certificate from importing country agency as developed countries dont accept

certification of quality issued by Indian agencies.

Subsidy - developed countries provide large amount of subsidy to there farmers (which reduce

the cost for food processing) also to the agro industry in USA the average subsidy per egg isaround 50cents while same in India is around 40paise.

Bureaucratic Hurdles food processing industry is cover in more than 4 ministries and for

setting food processing unit you have to take approval of 20 different ministries and follow age

old labour laws.

Lack of food testing lab in India there are very limited food testing lab in india and moreover

lack of sprite to get there food tested by exporters

2.14 Statistical data:

Statistical data for exports from India to top 20 countries all over the world. This report covers

past three years data in which it is clearly shown that USA is the top most country that imports

dried and preserved vegetables from India.

Statistical data is been collected from APEDA-Agricultural and Processed Food Products Export

Development Authority, which is established by the government of India to promote the products

which are related to agriculture sector.


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2.14.1 Exports from India (2009-2010):

Value in Lacs

Quantity in MTSr No. Country Qty Value

1 U S A 4,49,945.00 1,54,050.00

2 France 3,07,672.00 1,04,117.00

3 Russia 2,23,986.00 92,913.00

4 Germany 85,048.00 73,979.00

5 Spain 2,21,185.00 68,545.00

6 Belgium 1,03,223.00 44,149.00

7 U K 67,555.00 43,755.00

8 Canada 59,334.00 34,487.00

9 Australia 78,758.00 31,350.00

10 Netherland 64,158.00 30,213.00

11 Italy 47,285.00 19,817.00

12 South Africa 25,760.00 19,086.00

13 Brazil 19,748.00 16,426.00


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14 Switzerland 2,236.00 11,862.00

15 Poland 15,873.00 11,065.00

16 Israel 18,052.00 9,583.00

17 Nepal 25,620.00 8,811.00

18 Philippines 17,739.00 8,184.00

19 Estonia 26,182.00 7,096.00

20 New Zealand 12,688.00 6,938.00

2.14.2 Exports from India (2008-2009):

Value in Lacs

Quantity in MTSr

No.Country Qty Value

1 U S A 4,61,184.00 1,51,111.00

2 France 4,12,109.00 1,41,801.00

3 Spain 2,47,884.00 67,452.00

4 Belgium 1,98,085.00 62,639.00


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Sr

No.Country Qty Value

1 Germany 2,95,797.00 96,274.00

2 U.S.A. 2,45,474.00 89,265.00

3 Bangladesh 4,06,050.00 78,998.00

4 France 2,15,080.00 76,919.00

5 Spain 1,79,041.00 50,120.00

6 Russia 1,41,875.00 47,056.00

7 U.K. 57,989.00 38,291.00

8 Belgium 1,12,074.00 36,041.00

9 South Africa 20,832.00 20,686.00

10 Netherland 42,851.00 17,117.00

11 Canada 52,508.00 17,076.00

12 Australia 63,456.00 16,646.00

13 Switzerland 1,414.00 14,325.00

14 Brazil 17,407.00 11,344.00

15 Israel 16,305.00 8,681.00

16 Sri Lanka Dsr 46,051.00 8,138.00

17 Finland 8,273.00 6,943.00

18 Poland 10,204.00 6,609.00

19 Italy 16,164.00 5,744.00

20 Philippines 14,830.00 5,583.00


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Chapter 3

Statistical Data Analysis and Discussion of Results

Data analysis is done for export quantity (million tons) and value (lakhs) from 20002010

years. These values are taken from APEDA- Agricultural and Processed Food Products Export

Development Authority.

Year

Export

quantity in

million tons

Value in

lakhs

2000-2001 10,22,766.00 4,12,996.00

2001-2002 10,39,317.00 3,44,807.00

2002-2003 14,32,242.00 4,35,921.00

2003-2004 11,96,253.00 3,79,803.00

2004-2005 12,37,849.00 3,86,527.00

2005-2006 22,74,377.00 6,74,887.00

2006-2007 20,27,601.00 7,26,823.00

2007-2008 21,37,346.00 7,30,898.00

2008-2009 25,13,638.00 8,43,905.00

2009-2010 21,18,428.00 9,04,525.00

3.1 Correlation analysis

3.1.1 Description:

The Pearson's correlation is used to find a correlation between at least two continuous variables.

The value for a Pearson's can fall between 0.00 (no correlation) and 1.00 (perfect correlation).

Other factors such as group size will determine if the correlation is significant. Generally,

correlations above 0.80 are considered pretty high.

Correlation coefficients significant at the 0.05 level are identified with a single asterisk, and

those significant at the 0.01 level are identified with two asterisks.

The correlations table displays Pearson correlation coefficients, significance values, and

the number of cases with non-missing values (N). The values of the correlation


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coefficient range from -1 to 1. The sign of the correlation coefficient indicates the

direction of the relationship (positive or negative).

The absolute value of the correlation coefficient indicates the strength, with larger

absolute values indicating stronger relationships. The correlation coefficients on the main

diagonal are always 1, because each variable has a perfect positive linear relationship

with itself.

Descriptive Statistics

Mean Std. Deviation N

Export quantity 1699981.70 567624.535 10

Value in lakhs 584109.20 213333.254 10

Correlations

Export quantity Value in lakhs

Export

quantity

Pearson

Correlation

1 .933**

Sig. (2-tailed) .000

N 10 10

Value in

lakhs

Pearson

Correlation

.933** 1

Sig. (2-tailed) .000

N 10 10

**. Correlation is significant at the 0.01 level (2-tailed).

3.1.2 INFERENCE

The correlation analysis between export quantity and value is 0.933,which is highly positive

correlation. This is the main matrix of the Pearson's output. Variables have been arranged in a

matrix such that where their columns/rows intersect there are numbers that tell about the

statistical interaction between the variables. Three pieces of information are provided in eachcell -- the Pearson correlation, the significance, and number of cases. When a variable interacts

with itself, the correlation will obviously be 1.00. No significance is given in these cases


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3.2 Regression analysis

3.2.1 Description:

Linear regression analysis estimates the coefficients of a linear equation, involving one or more

independent variables that best predict the value of the dependent variable.

3.2.2 Assumptions: For each value of the independent variable, the distribution of the dependentvariable must be normal. The variance of the distribution of the dependent variable should be constant for

all values of the independent variable. The relationship between the dependent variable and each

independent variable should be linear, and all observations should be independent.

Variables Entered/Removedb

Model Variables

Entered

Variables

Removed Method

1 Exportquantitya

. Enter

a. All requested variables entered.b. Dependent Variable: Value in lakhs

Model Summary

Model

R R Square

Adjusted R

Square

Std. Error of

the Estimate

1 .933a .870 .854 81635.414

a. Predictors: (Constant), Export quantity


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ANOVAb

Model Sum of

Squares df Mean Square F Sig.

1 Regression 3.563E11 1 3.563E11 53.461 .000a

Residual 5.331E10 8 6.664E9

Total 4.096E11 9

a. Predictors: (Constant), Export quantity

b. Dependent Variable: Value in lakhs

Coefficientsa

Model

Unstandardized Coefficients

Standardized

Coefficients

T Sig.B Std. Error Beta

1 (Constant) -11773.232 85487.770 -.138 .894

Export quantity .351 .048 .933 7.312 .000

a. Dependent Variable: Value in lakhs

3.2.3 INFERENCE:

The required regression line is

Value (in lakhs) dried and processed vegetables = -11773.232 + 0.351(Export Quantity)


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Chapter 4

Conclusion and Suggestions

4.1 Conclusion:

India can become one of the largest vegetable exporters in the world and can equally be a large

importer given its demographic diversity. This strong footing in agriculture provides a large and

varied raw material base for food processing.

Indias exports of Processed Food was Rs. 10065.58 Crores in 2008-09, which including the

share of Dried and Preserved Vegetable (Rs. 496.42 Crores), Other Processed Fruit and

Vegetable (Rs. 1371.79 Crores).

The Indian food processing industry is primarily export oriented. Indias geographical situationgives it the unique advantage of connectivity to Europe, the Middle East, Japan, Singapore,

Thailand, Malaysia and Korea. One such example indicating Indias location advantage is the

value of trade in agriculture and processed food between India and Gulf region.

There should be technology up gradation, quality management, firm adherence to export

commitments and acquisition of appropriate negotiation skills. Many non-traditional vegetables

mainly processed & gherkins and others like asparagus, celery, bell pepper, sweet corn, green

and lime beans and organically grown vegetables are also being increasingly exported.

Government and other private institutions can help Indian exporters and also farmers based onPre-Investment and Pre-Feasibility Studies, Market Surveys and Studies, Preparation of Techno-

Economic Feasibility Reports, Identification and Selection of Plant and Machinery,

Manufacturing Process and Equipment required, General Guidance, Technical and Commercial

Counseling for setting up new industrial projects and also for growing quality based vegetables

according to the exporters criteria.

4.2 Suggestions

4.2.1 TO GOVERNMENT

Infrastructure improvement in the areas of cold storage etc.

Integration of various schemes no. of ministries have the same Schemes Running hence

there is duplication of effort.

Promote setting up of food testing laboratory.

Real time update to exporter regarding changes in rules of importing countries.


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Increase in allocation of money allotted MOFPI (ministry of food processing).

Development of infrastructure like road, port etc.

Improving Image of Indias food through strict quality check.

Better representation in WTO for reduction in subsidy and SPS Removals.

4.2.2 TO EXPORTER

Integrating supply chain according to importing countries requirement.

Adoption of international standards for production and processing of Food.

Increasing production through application of advanced technologies in the processing of

dairy products.

Better and improved packaging.

Improving cold storage and transportation capacity.

Developing an efficient export marketing network to optimize the production and

exports. Integrating supply chain according to importing countries.

Setting up of more quality control laboratories for testing the quality of dairy products.

Self Regulation should also be there on the part of exporter so that dont send food of bad

quality.

Brand Building effort should also be undertaken by exporters as there are no many

Indians brand.


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References

Singh Chhotan and Vasisht A K (1995). Performance and prospects of export of agro-processed products. Agric. Econ. Res. Rev.,8 (2): 18.

Govt. of India, Annual Reports, Department of Food Processing Industry, Ministry ofAgriculture, New Delhi, India

Kejriwal N M (1992). Development of fruit and vegetable processing industries and theirexport potential. Ind. Fd. Packe,.46 (5): 13.

Processed Foods exports from IndiaRajesh Mehta and J George, RIS

Indian Food Processing Industry - Dun & Bradstreet

Annual Report of Food Processing 2006-07 Ministry of Food Processing Industries,Government of India

Policy environment of five food processing sectors in IndiaHarsh Vivek


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Webliography

1. The Agricultural and Processed Food Products Export Development Authority (APEDA)

http://www.apeda.gov.in/apedawebsite/index.asp

http://www.apeda.gov.in/apedawebsite/six_head_product/PFV_OPF.htm

http://www.apeda.gov.in/apedawebsite/SubHead_Products/Dried_and_Preserved_Vegetables.htm

2. Agriexchange

http://agriexchange.apeda.gov.in/indexp/Product_description_32head.aspx?gcode=0301

http://agriexchange.apeda.gov.in/product_profile/prd_profile.aspx?categorycode=0301

http://agriexchange.apeda.gov.in/product_profile/exp_f_india.aspx?categorycode=0301

3. Protein Foods & Nutrition Development Association of India (PFNDAI)

http://www.pfndai.com/

4. The Ministry of Food Processing Industries

http://mofpi.nic.in/ContentPage.aspx?CategoryId=110

http://mofpi.nic.in/ContentPage.aspx?CategoryId=88

5. Gujarat Agro Industries Corporation Ltd.(GAIC)

http://www.gujagro.org/
http://www.apeda.gov.in/apedawebsite/index.asphttp://www.apeda.gov.in/apedawebsite/index.asphttp://www.apeda.gov.in/apedawebsite/six_head_product/PFV_OPF.htmhttp://www.apeda.gov.in/apedawebsite/six_head_product/PFV_OPF.htmhttp://www.apeda.gov.in/apedawebsite/SubHead_Products/Dried_and_Preserved_Vegetables.htmhttp://www.apeda.gov.in/apedawebsite/SubHead_Products/Dried_and_Preserved_Vegetables.htmhttp://www.apeda.gov.in/apedawebsite/SubHead_Products/Dried_and_Preserved_Vegetables.htmhttp://agriexchange.apeda.gov.in/indexp/Product_description_32head.aspx?gcode=0301http://agriexchange.apeda.gov.in/indexp/Product_description_32head.aspx?gcode=0301http://agriexchange.apeda.gov.in/product_profile/prd_profile.aspx?categorycode=0301http://agriexchange.apeda.gov.in/product_profile/prd_profile.aspx?categorycode=0301http://agriexchange.apeda.gov.in/product_profile/exp_f_india.aspx?categorycode=0301http://agriexchange.apeda.gov.in/product_profile/exp_f_india.aspx?categorycode=0301http://www.pfndai.com/http://www.pfndai.com/http://mofpi.nic.in/ContentPage.aspx?CategoryId=110http://mofpi.nic.in/ContentPage.aspx?CategoryId=110http://mofpi.nic.in/ContentPage.aspx?CategoryId=88http://mofpi.nic.in/ContentPage.aspx?CategoryId=88http://www.gujagro.org/http://www.gujagro.org/http://www.gujagro.org/http://mofpi.nic.in/ContentPage.aspx?CategoryId=88http://mofpi.nic.in/ContentPage.aspx?CategoryId=110http://www.pfndai.com/http://agriexchange.apeda.gov.in/product_profile/exp_f_india.aspx?categorycode=0301http://agriexchange.apeda.gov.in/product_profile/prd_profile.aspx?categorycode=0301http://agriexchange.apeda.gov.in/indexp/Product_description_32head.aspx?gcode=0301http://www.apeda.gov.in/apedawebsite/SubHead_Products/Dried_and_Preserved_Vegetables.htmhttp://www.apeda.gov.in/apedawebsite/SubHead_Products/Dried_and_Preserved_Vegetables.htmhttp://www.apeda.gov.in/apedawebsite/six_head_product/PFV_OPF.htmhttp://www.apeda.gov.in/apedawebsite/index.asp

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