Agro-based Industries in India are playing a very important role in economic development. Economic policies of developing nations have always advocated enhancing farmers’ income through product and productivity growth and by systemic value addition in agri-products through processing and manufacturing. India‘s 54.6% population is still engaged in agriculture and allied activities. Indian farmers are largely unorganized.
They rely on external agencies for the disposal of their marketable surplus. Lack of capital asset endowments in rural areas compels them to sell their produce at throwaway prices to the commission agents. Low income from the primary farm produce and lack of investment in the processing and agri-value chain has caused a rapid reduction in farm profits and the farm occupation has now come under severe pressure.
Scenario of Agro-based Industries in India (Rural and Urban)
The industrial statistics of organized manufacturing units as reported in the Annual Survey of Industries of Central Statistical Organization indicate that there is less number of factories in rural areas as compared to urban areas. However, their contributions toward total output and net value addition in the sector were somewhat identical. This shows that the establishment of more rural industrial units would go a long way in not only absorbing surplus labor but also contributing largely to the total industrial output and value addition
Indian planners and policymakers have always encouraged rural and agri-industrialization. The inherent advantages of agri-industries are optimal utilization of local agri-resources, mobilization of investment on a large scale, creation of job opportunities, prevention of distress rural-urban migration, and reduction of disparity across sectors and regions. These industries have the capability of offering a wide, reliable, and sustainable model for profitable occupation and activity diversification in villages.
Agro-based Industries in India
The Agro-based industries in India can be grouped under three categories:
- Agri-processing units covering fruit and vegetable processing units, dairy plants, rice mills, dal mills, etc.
- Agri-manufacturing units covering sugar, dairy, bakery, solvent extraction, textile units, etc.
- Agri-input manufacturing units cover mechanization of agriculture, agriculture implements, seed industries, irrigation equipment, fertilizer, pesticides, etc.
Rural and agro-based industries in India help create employment opportunities at the production, distribution, manufacturing, and marketing stages. The agri-based industrial scenario has not fully capitalized on the benefits of the locally available resources and the efforts of the government through various subsidy-oriented central schemes.
Food Processing & Beverages
The Ministry of Food Processing Industries implements various Central Sector Schemes to boost food processing industries and value-addition activities. The scheme components include setting up of
- Mega Food Parks
- Integrated Cold Chain and Value Addition Infrastructure
- Food Safety and Quality Assurance Infrastructure
- Human Resources Development and Institutions.
PMKSY encompasses three new schemes namely:
- Infrastructure for Agro-Processing Clusters
- Creation of forwarding and Backward Linkages
- Creation/Expansion of Food Processing & Preservation.
Capacities focusing on creating robust modern infrastructure for food processing/preservation units. The PMKSY is very crucial in reducing the harvest and post-harvest losses of agricultural produce and ensuring remunerative income and adequate employment in the rural non-farm sector.
Textiles Industry – Agro-based Industries in India
The textile industry is known for its employment intensity. It employs 4.5 crore people directly and another 6 crore people in allied sectors, including a large number of women and the rural population. Indian Cotton Textile Industry is largely unorganized and suffers from high production and labor costs. Other vital issues of the industry are aging machinery, the quality of raw materials, and the absence of a level playing field for value-added cotton products in domestic and international markets.
With a view to making the Textile Industry globally competitive, boosting exports, and facilitating modernization, the Government has rolled out a number of initiatives: A scheme for an Integrated
- Textile Park
- an Integrated Processing Development Scheme
- a Group Workshed Scheme
- a Common Facility Centre and Amended Technology Up-gradation Fund Scheme
- Scheme for the Development of the Powerloom Sector (Power Tex)
- SAMARTH – The Scheme for Capacity Building in Textile Sector (SCBTS)
- Comprehensive Handloom Cluster Development Scheme (CHCDS)
- Rebate of State and Centre Taxes and Levies (ROSCTL), etc.
Jute Industry – Agro-based Industries in India
Jute Industry in India has an installed capacity of 16.5 lakh MT out of which 11.5 lakh MTs of Jute goods are produced. The excess capacity is due to marketing and labor-related issues. The Govt. has attempted to modernize the Jute mills by increasing their productivity and bringing in modern technology and equipment. National Jute Board’s schematic interventions, inter alia, provide capital subsidies to jute mills to address their issues and challenges at hand.
Khadi & Village Industry
Ministry of MSME’s Khadi and Village Industries Commission (KVIC) promotes the setting up of various post-harvest agro and food-based micro industries like processing of pulses & cereals, fruits & vegetables, village oil industry, bread baking, etc. in the country. Through Prime Minister’s Employment Generation Programme (PMEGP), KVIC tries to generate self-employment opportunities through the establishment of micro-enterprises in the non-farm sector which, inter alia,
- Agro based and Food Processing Industry
- Forest Based Industry
- Handmade Paper
- Fibre/Textiles Industry.
Animal Husbandry, Dairying, and Fisheries
Considering the employment and income generation potential, the government implements a variety of schemes to promote agro-based industries in this sub-sector.
- Dairy Entrepreneurship Development Scheme,
- Dairy Processing and Infrastructure Development Fund,
- Supporting Dairy Cooperatives and Farmer Producer Organizations engaged in dairy activities,
- Integrated Development and Management of Fisheries
- Aquaculture Infrastructure Development Fund
Agro-Based Industries: Review of Issues and Problems
The agro-based industrial sector, in spite of its high potential to ensure equitable income and employment opportunities in rural areas, has remained underdeveloped. A review of available literature indicates that the agro-based units have to address impending issues viz. finance, industrial policy, research and development, infrastructure facilities, marketing, production, and human resource-related concerns. There are following major issues with the types of problems faced by Agro-Based Industries in India.
| Sr. No. | Issue | Types of Problems of Agro-based Industries in India |
| 1 | Financing agro-based units | – Underfinancing/Inadequate/non-availability of bank finance – Inappropriate project appraisal – Delay in getting bank finance – Cost overrun due to high-interest rates and project completion delay |
| 2 | Industrial Policy, Research & Development | – Lack of implementation of Industrial Policy – Stringent regulatory provisions, environmental, Tax, Labour policy/ act/rules – Lack of Industrial Research and Development – Non-availability of the right consultancy – Lack of accredited research laboratory for quality control Lack of warehouse, cold-chain facilities Expensive Logistic support |
| 3 | Infrastructure | – Lack of warehouse, cold chain facilities – Expensive Logistic Support – Location disadvantages – Wastage management – Distance from warehouse, cold chain facilities |
| 4 | Marketing | – Lack of national/international market access with inappropriate market research – Competition with Multi-National Companies – Dependence on government subsidy and other support – Inconsistent quality of processed products – Weak and non-existent market development |
| 5 | Production | – Backward forward linkage issues Inappropriate and obsolete processing and ancillary equipment – Underutilization of capacity – Shortage or inconsistent raw materials supply – Seasonality of crops |
| 6 | Human Re-Sources | – Labour shortages in rural areas – Unskilled labour – Low investment in skill-set upgradation |
Agri-based industries conform to the notion of competitive advantage both within and outside the country. They can play a role of a safety valve to absorb surplus rural labor and can address the problem of large-scale unemployment/disguised employment in rural areas. The real challenge here is how effectively the government implements its schemes and policy interventions so as to ensure all-around industrial growth in rural areas without undermining the identity of the village, its socio-economic structure, agri-production systems, and the basic agri-manufacturing characteristics.
Government Policy for Agro-Based Industries in India
The Ministry of Food Processing Industries has been implementing several schemes for the development of food processing in India, which areas follows:
- Scheme for Infrastructure Development
- Scheme for Technology Up-gradation/ Establishment/Modernization of Food Processing Industries
- Scheme for Quality Assurance, Codex Standards and Research & Development
- Scheme for Human Resource Development
- Scheme for Strengthening of Nodal Agencies
- Scheme for Backward and Forward Integration and other Promotional Activities.
During the Eleventh Five-Year Plan, programmes started earlier were restructured with appropriate management/implementation arrangements in Public Private Partnership mode, with strong Project Implementation capabilities. Also the Scheme for Technology Up-gradation has been decentralized and now it operates through Nodal Banks in place of State Nodal Agencies to provide back-ended credit linked subsidy.
The new integrated approach not only addresses issue of financial assistance but also Skill Development Entrepreneurship Investment, institutional development and providing a policy environment which stimulates growth. Core elements of the strategy are:
- Better project selection, development and implementation;
- decentralized cluster-based development, particularly for creation of infrastructure and fostering linkages to retail outlets;
- Industry-led capacity building and up gradation of standards;
- An integrated food law and science-based food standards;
- Strategic intervention with redesigned schemes and strong implementation.
Potential of Agro-Based Industries in India
The fluctuating and decelerating agricultural growth, if not arrested, will have serious consequences for the livelihoods of the population that depends on agriculture, particularly the manufacturing sector that has strong backward and forward linkages with agriculture. The liberalized food manufacturing sectors, as well as other forms of agribusinesses, could play an important role in stimulating agricultural growth.
Amongst various Agro-based Industries in India, food manufacturing is more material-intensive, and thus possesses a greater potential to revitalize agricultural growth by strengthening forward and backward linkages with farmers, and speeding up the process of commercialization and diversification of agricultural production. Further, food processing industries, to reduce their own transaction costs, often tend to be located nearer to the source of raw material, and thus can create income opportunities for the rural people. Hence, accelerating agricultural growth through diversification and the development of agro-processing is a major policy challenge.