Chicken and egg dilemma in NE food processing

The Northeast region, having high potential in food processing industries, is well documented. Yet, the Ministry of Food Processing Industries (FPI) not getting enough applications from the region seeking central government grants to set up FPIs is baffling. Ironically, the central government has incorporated preferential provisions for the region in various schemes to promote FPIs in Northeastern states. Closer scrutiny of the lack of enthusiastic participation by entrepreneurs in FPI schemes in the region points towards infrastructural gaps adding to challenges of commercial viability and marketing gaps posing sustainability challenges. Some of the preferential provisions made in the scheme guidelines of Pradhan Mantri Kisan Sampada Yojana (PMKSY) include a higher rate of grants at a rate of 50% of the eligible project cost for the region, while for other regions it is 35%; a concession in project completion time and allowing more time for projects in the region; and a low requirement of the promoter’s capital in projects in the region, which requires promoters to contribute only 10% compared to 20% required for other regions. As the food processing industry involves perishable commodities, it requires prolonging the shelf life of products through the development of an integrated cold chain comprising cold storage, cargo terminals, refrigerated vans, etc. However, these infrastructures are inadequate, due to which food entrepreneurs are wary of planning an expansion of their processing units or establishing new units for commercial production on a scale to tap domestic as well as export markets. The Parliamentary Standing Committee on Commerce observed that, in the entire region, only the airport in Guwahati has both domestic and international cargo facilities along with cold storage facilities, while the rest of the airports in the region are either handling cargo through domestic passenger terminals or have no air cargo facility. The committee stated in its latest report that the stakeholders of FPI during the deliberations suggested that more airports in the NER should have cold storage facilities and air cargo handling facilities to transport items like fruits, flowers, and other perishable goods. The committee recommended that an air cargo handling facility, along with a cold storage facility, be created at other airports in the region. The ministry, however, replied that the creation of an air cargo handling facility along with a cold storage facility is not feasible due to meagre perishable tonnage handled at the airports in the region. The creation of the infrastructure and development of FPI has become a chicken-and-egg dilemma in the region. The infrastructure investment decision on the establishment of more air cargo with cold storage facilities is awaiting an increase in the production of perishables, including processed food, while the decision on entrepreneurial investment is awaiting the development of the infrastructure first so that they do not have to suffer losses due to the wastage of perishables for want of an integrated cold chain. Another crucial infrastructure gap in the establishment of FPI in the region is the lack of adequate food quality testing laboratories. The parliamentary panel observed that despite its recommendation to incentivise the laboratories in the region to opt for certification by the National Accreditation Body under the National Programme for Organic Production (NPOP), no such steps have been taken by the department in this regard. It points out that of the total 33 agencies that have been granted accreditation under NPOP, only one agency—Sikkim State Organic Certification Agency—has been granted accreditation in the entire region. This explains why the expansion of organic farming in the region has not been reflected in the proportionate expansion of the food processing business. The issue of the establishment of more accredited laboratories and speeding up granting accreditation as recommended by the committee must not be allowed to be lost in the celebration of individual success stories from the region in the food processing sector. Giving wide publicity to success stories is important to encourage more such entrepreneurial initiatives, but addressing the critical infrastructural gap is crucial to assure new entrepreneurs about the sustainability of their business ventures and the commercial success of their production on a large commercial scale to tap domestic and global markets. If private investors are not willing to invest in the creation of this critical infrastructure, then the central government as well as state governments in the region will be required to revisit their schemes and incentives to make those more attractive for private investors and explore public-private partnerships to overcome the challenges of adequate investment. Lessons must be learnt from the lack of enthusiastic participation by stakeholders in FPI development in the region that mere formulation of the schemes with preferential provisions is not going to bring about the required transformation. The development of cold storage and air cargo terminals in various airports must take place simultaneously with the boosting of organic farming. Improvement in road, railway, and waterway connectivity in the region has triggered new marketing hopes for products from the region, which needs to be leveraged for FPI promotion in the Northeast.