Post-harvest logistics and food processing by salil singhal, chairman & mananging director, pi industries ltd

Indian Food Industry – Emerging Opportunities PI Industries Ltd The Indian food industry poised for huge growth, increasing its contribution to world food trade every year. Food production is likely to double in the next 10 years. Food and grocery market world’s sixth largest, with retail contributing 70 per cent of the sales. It is projected to grow at the rate of 104 per cent, touching US$ 482 billion by 2020 (Source: www.ibef.org) Food sector, especially food processing sector emerging as high-growth and high-profit sector due to its immense potential for value addition. India largest producer of several agri commodities and consumer of food. All 15 major climates of the World are present in India. 52% of total land is cultivable as against world average of 11%. Proactive government policies with attractive fiscal incentives. Huge Investments needed in post harvest logistics and supply chain management. Demographic dividend with immense scope for skill development. 4/27/2017

PI Industries Ltd India second largest producer in Fruits and Vegetables in the world with a production of 256 million MT (Source: MOFPI). India world’s largest producer of bananas, papaya, mangoes & guavas second largest producer of potatoes, green peas, cabbage and cauliflower The unique advantage of connectivity to Europe, the Middle East, Japan, Singapore, Thailand, Malaysia and Korea Nearly 4.6-15.9 % wastage in fruits and vegetables annually Hence opportunities in post harvest/logistics/processing sectors including in food safety segment

Opportunities In Dairy Sector PI Industries Ltd World leader in milk production: 146 million tonnes/annum Expected to reach 180 million MT by 2020, while the demand projected (by NDDB) to reach 200 million MT Huge scope for value added dairy products like ghee, flavoured milk & yogurt, butter (& variants), cheese, etc. Scope for innovative packaging, cold chain and new technology for product processing.

Opportunities In Poultry Sector PI Industries Ltd Annual egg production: 75 billion eggs (Source: MOFPI). The current processing level in poultry : only 6 %. Poultry is a highly vertically integrated industry in India and matches the efficiency levels of many western countries. Farm automation, logistics, processing, point of sale cold storage infrastructure and new technology offer opportunity Need for egg powder plants. Scope for new feed formulations and manufacturing. Modern Hatcheries

Post Harvest Losses of Major Agricultural Produces PI Industries Ltd The annual value of harvest and post-harvest losses of major agricultural produces at national level of the order of US $ 13.60 b (data of 2012-13 at 2014 wholesale prices. Crops Cumulative wastage (%) Cereals 4.65 – 5.99 Pulses 6.36 – 8.41 Oil Seeds 3.08 – 9.96 Fruits & Vegetables 4.58 – 15.88 Milk 0.92 Fisheries (Inland) 5.23 Fisheries (Marine) 10.52 Meat 2.71 Poultry 6.74 Source: GoI Report on “Assessment of Quantitative Harvest and Post-Harvest Losses of Major Crops and Commodities in India” by ICAR - Central Institute of Post-Harvest Engineering and Technology (CIPHET), Ludhiana. 4/27/2017

Challenges In Post harvest Management PI Industries Ltd Lack of modern post-harvesting practices Poor infrastructure facilities for Storage, including cold storage Logistics & cold chain handling Transportation Processing Packaging Distribution Lack of Processing facilities at the farm gate Dearth of Innovative on-farm preservation systems Low level of Research and Development Shortage of Skilled Manpower 4/27/2017

Requirement: Investment in Post-Harvest Infrastructure 4/27/2017

Cold Chain: Status & Opportunities Production of more than 400 million MT of perishables every year. Cold storage capacity around 31.8 million MT (Source: NHB). Geographically clustered facilities 4 states provide around 70% of cold store capacity Overall average capacity utilization in cold storage is 75% - showing sustainability of the cold chain business in India. Industry is largely fragmented and unorganized. Dominated by one or two products 75% cold storage capacity used for potato 25 % multi-commodity cold storages Pre-coolers and refer trucks facilities are negligible at present. 92% of cold storages owned and operated by private sector. Large capacity in cold storage, CA storage, reefers, ripening chambers, IQF, milk chilling and processing, etc. Requirement for cold chain across all states. Need for energy efficient cold chain technologies in the entire agri & food value chain. PI Industries Ltd 4/27/2017

Opportunities In Food Processing Industry PI Industries Ltd The Indian food processing industry accounts for 32 per cent of the country’s total food market, 14 per cent of manufacturing Gross Domestic Product (GDP), 13 per cent of India’s exports and six per cent of total industrial investment. Indian food service industry is expected to reach US$ 78 billion by 2018 (www.ibef.org). The Industry witnessed 7.1 % growth during 2013-14, much higher than the growth in agricultural sector (Source: MOFPI). Low level of processing – 2% in the case of fruits and vegetables 35% in Dairy 23% in Marine Produce 21% in Meat and 6% in Poultry (Source: MOFPI) India’s share in world’s processed food production-1% Value addition 20% against 45% in Philippines Estimated wastage fruits & vegetables in India 4.6 – 15.9 % 4/27/2017

Indicative Opportunities in Food Processing New Technology in F&V processing, cold storage, reefers, IQF, pack houses and ripening chambers New Packaging technology for enhanced shelf life, retaining taste and texture, attractive, easy to handle and space efficient Modern storage facilities & logistics Energy efficient technologies Food testing labs R & D Infrastructure New products- Fortified products, health food, tradition Indian food, convenience food Processed organic food specially baby food, confectionery and bakery items have an increasing domestic and overseas demand New product development in beverages viz, flavoured teas, juice variants, health drinks, energy drinks, sports drinks Packaged local drinks like nimbu pani, jaljeera, coconut water, etc Infrastructure & Technology Infrastructure & Technology Processing 4/27/2017

Reasons for Sub Optimal Growth of Food Processing PI Industries Ltd Lack of access to world class technology Lack of infrastructure, especially cold chain infrastructure Inadequate investment Agricultural development programmes focused generally on production Post harvest handling including agri/food processing was not a priority agenda under agricultural extension Lack of processing varieties Absence of efficient supply chain management 4/27/2017

Key Fiscal Incentives PI Industries Ltd 100 % FDI permitted through automatic route in food processing sector. Concessional rate of Customs Duty applicable on imported equipment Capital expenditure income tax deduction allowed at the rate of 150 % for setting up and operating cold chains and agri warehouses. 100 % income tax exemption available to new food processing, preservation and packaging units for the first 5 years of operation, and at the rate of 25 % - 30% thereafter. Cold chain projects eligible for External Commercial Borrowings. Refrigeration machines and parts used for installation of cold storage, cold room or refrigerated vehicle, exempt from Excise Duty. Cold chain services of pre-conditioning, pre-cooling, ripening, waxing, retail packing, labelling of F & Vs exempted from service tax. A fund of US $ 300 million with (NABARD) for credit to designated Food Parks and units therein. 4/27/2017

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