Must Take Care Of Environment When Expanding Food Processing Sector: Piyush Goyal, Minister Of Railways And Coal At World Food India 2017

The need for credit in the food processing sector is bound to increase alongside a burgeoning middle class, the rise in income levels, social transformation and global lifestyle influencers revolutionizing food chains. At a session in World Food India 2017 (day three), called “Innovative Financing to Unleash Growth”, various avenues for financing sub-segments of the food processing sector were discussed

The moderator of the session, Rajesh Srivastava, Chairman & Managing Director, Rabo Equity Advisors Pvt Ltd. ( a subsidiary of Rabobank), began with a presentation saying, “The food processing sector is split up into primary processing and secondary, as the drivers of the sector are completely different. The Demand Drivers for creating compelling investment opportunities in all sub-sectors are rising population and urbanization. Farm fragmentation, low applications of inputs and technology are some challenges in the supply side. There is a big need to break down food processing into primary and secondary processing as the sizes are different, different sizes of credit limit. There is a makeover of agriculture food value chains underway, a rejigged credit and risk approach is required. The financial sector can play a catalytic role in the progressive development and integration of agri-food value chain.”

He also went on to add, “The food processing sector in India consists of a diverse range of players, with 38, 600 registered units and 223,000 MSMES. The current level of credit deployed s only around 59-55% of the approved credit. We need innovative financing and structured solutions in this sector. The Funding gap needs to be addressed to cater to the robust growth potential of the sector. We will require 60 billion USD of fixed investment in the next 5 years at an affordable with ease.  Various asset classes have reaped benefits from investments in the Food Processing Sector.” Srivastava also added, “Innovative financing needs to cater to sector growth needs, like venture debt, venture funds, risk participating, credit insurance, structured debt, credit enhancement, ECB & ECA funding. We need propositions which are bankable. Financing and credit insurance go hand in hand.”

This was followed by a passionate speech by Piyush Goyal, Minister of Railways and Coal, Government of India who said, “We need to do much more to add value to our farmer’s produce, to help them get better incomes, more sustainable and good quality of life for the family of farmers, good quality food for our people, processed and unprocessed and a holistic vision of how we are going to make this sector an engine of growth of our country. We have to take care of the environment when expanding the food processing sector. We shouldn’t add projects which add to environmental degradation, like refrigeration. Financing has to be made more attractive and encouraging for investors and funders in the food processing sector.”

Goyal also elaborated, “We must bring to the table a realistic picture of what the industry can give in terms of return, and it has to be benchmarked with international standards. The rupee has never depreciated between 3.5 and 3.25%, just one period it came to 4%, in any long haul, thus this expectation on returns we hear from venture capitalists, investors and bankers tend to be somehow reasonable. And that becomes a factor which holds back the industry and investment. We must see how the categorization of food processing sector can be more appropriate because it can be a big boost to agricultural income which is our goal by 2022. I am not talking about subsidies, as I have focused on removal of subsidies to drive aggressive growth, as prices tend to get phenomenally high, and subsidies act as a limiting factor. There should be no budget for research and innovation. Innovative financing does not mean adding a subsidy to the program.”

Goyal also went on to add about the role of the government in innovative financing, saying, “The government should be a facilitator and not be an impediment, and not regulate you and bottleneck you beyond a point. We need to understand what can be done to scale up this industry, with innovative ideas, economies of scale, financing and technology.” He also added, “We have to think intelligently of what are the products India is most suitable to work on, with more value-addition and scope. We should not be satisfied with the laurel of numbers, we have to look at a quantum jump, which will make this industry with good returns and good profits. We should see whether the futures market damages the farmer’s interest through price fluctuation and derivative pricing.”

The minister concluded his speech saying, “The time has come that food processing engages with the farmers, becomes a teacher to the farmer, and brings in technology to the farm level. We need indigenous solutions, which have quality standards, are safe and sustainable, with better, environmentally-friendly, biodegradable packaging. Formalization of the agricultural sector will bring it into the national mainstream. We should look at an industry where we can come up with different profit-making modes to scale up the food processing sector in India.”

Anurit Kanti

BW Reporters The author is correspondent at BW Businessworld, he has a keen interest in sustainability and environmental economics