Balram Singh Yadav, Managing Director, Godrej Agrovet, analyses the industry in an exclusive interview to B&E
Godrej Agrovet has been associated with agribusiness and food processing for quite some time now. Here, Balram Singh Yadav, MD, Godrej Agrovet, gives rare insights into the dynamics of the industry...
B&E: Distribution and intermediation due to a fragmented supply chain increase costs in India by 15-30%. What should the government do to overcome such barriers?
BSY: Two things need to be addressed for this. Firstly, investment should be made in education of farmers on post-harvest technology. This is of particular importance to fruits and vegetables. Secondly, government should invest in storage and transportation in cold chain by subsidizing entrepreneurs and forming private-public partnerships.
B&E: Do you believe contract farming as a model will become successful to allow growth of large food processing units in the country?
BSY: Contract farming is difficult because of fluctuations in market prices at the time of harvest. Farmers are against fixed price procurement regime as they believe that they will not get the benefit of higher prices if they exist at the time of harvest. However, in case of price contract, farmers have always insisted on a price above Minimum Support Price even market prices are below that. Legal framework for enforcement of contract in contract farms is very poor.
B&E: How should the incentives for R&D in India’s food processing sector be enhanced so that rapid technological innovation can take place?
BSY: R&D expenses are already eligible for tax deduction at 150% level. Since R&D takes a long time, the government could give more deduction for R&D expenditure. The biggest support government can give the food sector is to put all Processed Foods in Zero VAT category.
B&E: How will the concept of Food Technology Parks as mooted in the Vision 2015 for the sector be effective in revamping and unlocking the sector?
BSY: The concept of Food Technology Park is wonderful, but it must be noted that raw material is spread over different geographies. Having Food Parks at one place may or may not work in case raw material supply chains are long.
B&E: What do you feel as a company are the major policy changes required by the government so that potential of the sector can be further opened up?
BSY: The subsidies should be increased for establishment of production units. Currently, subsidies being given are very low. The reason for increasing subsidy is to lower the breakeven for these units as value added food has long gestation period and very thin margins.
B&E: Processed food currently forms a very small percentage of India’s exports. How can this scenario be improved with India’s inherent cost advantages?
BSY: To compete in world market, we need to be competitive in cost and quality and both are also dependent on scale of operations which will come in case we can also make food processing successful for the domestic market.
B&E: As a company, how do you see the future for the sector in a 3-5 year timeline and what are the biggest opportunity areas within the sector ?
BSY: We believe that the Food Processing has a very bright future in the long run as cost of food is going up. This will require very efficient use of agricultural produce which is seasonal in nature and has very small windows of availability. The advent of modern retail and increased per capita income will make availability and affordability better.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2009
Godrej Agrovet has been associated with agribusiness and food processing for quite some time now. Here, Balram Singh Yadav, MD, Godrej Agrovet, gives rare insights into the dynamics of the industry...
B&E: Distribution and intermediation due to a fragmented supply chain increase costs in India by 15-30%. What should the government do to overcome such barriers?
BSY: Two things need to be addressed for this. Firstly, investment should be made in education of farmers on post-harvest technology. This is of particular importance to fruits and vegetables. Secondly, government should invest in storage and transportation in cold chain by subsidizing entrepreneurs and forming private-public partnerships.
B&E: Do you believe contract farming as a model will become successful to allow growth of large food processing units in the country?
BSY: Contract farming is difficult because of fluctuations in market prices at the time of harvest. Farmers are against fixed price procurement regime as they believe that they will not get the benefit of higher prices if they exist at the time of harvest. However, in case of price contract, farmers have always insisted on a price above Minimum Support Price even market prices are below that. Legal framework for enforcement of contract in contract farms is very poor.
B&E: How should the incentives for R&D in India’s food processing sector be enhanced so that rapid technological innovation can take place?
BSY: R&D expenses are already eligible for tax deduction at 150% level. Since R&D takes a long time, the government could give more deduction for R&D expenditure. The biggest support government can give the food sector is to put all Processed Foods in Zero VAT category.
B&E: How will the concept of Food Technology Parks as mooted in the Vision 2015 for the sector be effective in revamping and unlocking the sector?
BSY: The concept of Food Technology Park is wonderful, but it must be noted that raw material is spread over different geographies. Having Food Parks at one place may or may not work in case raw material supply chains are long.
B&E: What do you feel as a company are the major policy changes required by the government so that potential of the sector can be further opened up?
BSY: The subsidies should be increased for establishment of production units. Currently, subsidies being given are very low. The reason for increasing subsidy is to lower the breakeven for these units as value added food has long gestation period and very thin margins.
B&E: Processed food currently forms a very small percentage of India’s exports. How can this scenario be improved with India’s inherent cost advantages?
BSY: To compete in world market, we need to be competitive in cost and quality and both are also dependent on scale of operations which will come in case we can also make food processing successful for the domestic market.
B&E: As a company, how do you see the future for the sector in a 3-5 year timeline and what are the biggest opportunity areas within the sector ?
BSY: We believe that the Food Processing has a very bright future in the long run as cost of food is going up. This will require very efficient use of agricultural produce which is seasonal in nature and has very small windows of availability. The advent of modern retail and increased per capita income will make availability and affordability better.
For Complete IIPM Article, Click on IIPM Article
Source : IIPM Editorial, 2009
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