THE "BUDGET" TIME-WHAT IS IN STORE FOR THE FOOD INDUSTRY?

It is the budget time now in India and as usual the Finance Minister goes through the motion of consultation with various stakeholders as far as the national economy is concerned. If one goes by the past experience it is rare that any suggestions made by those fortunate to be consulted, are incorporated in the Budget. With its eyes focused heavily on spreading the net far and wide, GOI obviously is averse to any pleas from the industry to forgo any revenue that is already assured through existing policies. One of the unique features of the financial policies of GOI is that those who pay taxes are repeatedly being asked to pay more taxes and most of the revenue generated through economic levies is spent on programs which are supposed to help poor people. In spite of massive subsidies distributed year after year neither the poverty level nor the hunger seems to be affected with more people being pushed under the "Below Poverty Line" though the statistics based on which these are estimated cannot be taken as reliable.

Recent debate regarding Food Security Bill throws up stark realities of Indian scenario where GOI wants to give food grains at throw away prices to more than 75% of rural population and 65% of urban population incurring a national financial commitment estimated at Rupees one hundred thousand crore, an enormous amount measured on any scale. Obviously the money has to come from honest tax paying citizens and business sector and the newest Budget, scheduled to be presented in the first week of March has to dig deep into the pockets of those already paying hefty taxes to "augment" the subsidy "frenzy" that has seized the government. There is no quarrel with the social justice philosophy inherent in such a mindset but when country's precious resources are squandered, pilfered or stolen, every citizen is bound to feel the pinch of the sacrifice made each one and the country's policies are questioned. On one hand the every day food is becoming increasingly expensive, casting a heavy burden on the family budget of an average citizen, protective foods like fruits and vegetables are non-affordable to most middle class consumers raising alarms all around regarding the adverse impact of such a run way price escalation on the health of the people in general.

According to some observers familiar with the government thinking, the Finance Minister may attempt to come out with policies that can nudge entrepreneurs to invest more on productive activities and this is sought to be achieved without worsening the already alarming fiscal deficit. Economy is sought to be revived through measures that include incentives for new infrastructure projects, labor-intensive industries, others manufacturing urea and a few agricultural input materials, setting up of cold chains and supply chains that help maintain the quality of food produce. It is recognized that a combination of unbearably high interest rates and tortoise paced decision-making at the government level have caused a policy paralysis which are responsible for stalling investments. Gross fixed capital formation, a measure of investments, contracted 0.7% in the second quarter of the current fiscal from a year ago. 

As in 2008, the government presently does not seem to have the leeway to step up spending to generate demand and probably dreaming to encourage private spending through policy impetus, least realizing that scope for major fiscal concessions is very limited. With the national debt mounting to unacceptable level, bordering on panic,GOI seems to have very limited options to keep the growth rate beyond 7%. GOI may not concede that it is unlikely to succeed in restricting fiscal deficit target of 4.6% of GDP in the current fiscal and naturally this will increase pressure to rein in spending. Commitments already made on food security bill, the pet project of the UPA government will suck more from the kitty and only future will tell whether this is a wise policy at all viewed from fiscal angle. If one has to hazard a guess, the forthcoming budget may make an attempt to ease norms governing foreign investment in infrastructure and set up a dedicated infrastructure debt fund to provide support to public-private projects. There is also a possibility of subsidizing imported natural gas to achieve higher urea production. 

Though nothing much is talked about food industry which has been knocking on the doors of the Finance Ministry every year at this time seeking tax abatement for its products, except for juggling with the excise duty with some items removed and others brought in there is hardly any relief to this sector. Of course the budget for the SPV for food industry, the MoFPI is increasing every year for various incentive schemes for the different areas of food processing like Food Parks, R & D, infrastructure, cold stores and chains, new food projects in backward regions, etc but the impact of these measures so far during the last few years has been not very significant. Still food industry is benefited by progressive lowering of packaging materials during the past which has enabled many small scale processors to break into the highly competitive market with low cost pouched products affordable to masses. If there is a single wish the industry is allowed to express, it will be to free all the products manufactured by it from all taxes at the federal and state levels, at least for a 10 years. 

The debate about taxing high end products will go on with no consensus about it in sight but there may be a case of taxing nationally branded products while leaving out local products from any levy. This move can give some relief to the small and medium scale industries which currently find it difficult to compete with large brands and wide scale sickness in this segment of food industry can be attributed to their insufficient marketing muscle. A fiscal incentive scheme for large players for bringing smaller ones under their tutelage for marketing purpose may give a fillip to the development food industry as a whole and must be considered by the government. GOI can definitely afford these steps because tax collection from the food industry is so minimal that there may not be any net benefit if the expenses for recovering the tax are computed. One can only hope that GOI can still listen amid the din generated by UP election and the slew of financial scams in which it is embroiled!  

V.H.POTTY
http://vhpotty.blogspot.com/
http://foodtechupdates.blogspot.com

"CHEAP" EATERIES FOR LOW COST FOODS-THE CHENNAI INITIATIVE

The most difficult process of selecting an eatery, when a family goes for an outing for food, is the quality of food served though cleanliness and safety also are factors that do weigh in the minds of customers. Recent trend in India is for the catering joints to raise the prices of items served, indiscriminately for no rhyme or reason, though the food inflation has dipped into the negative zone. Even a small restaurant is charging its customers exorbitantly making it difficult for low income families to eat outside their home more frequently. Pressure of work, inadequate leisure time and other compulsions make outside eating inevitable whether one likes it or not. Under such a difficult situation there is an urgent need for making the cateing sector realize the folly of continuing with such a suicidal course of "killing the Goose that lays golden egg". To some extent the street vendors are providing relief to such harassed citizens by serving foods at reasonable price though their preparation and serving environment cannot be called satisfactory.

In spite of lot of talk and after hundreds of conferences on street foods, nothing precious has happened to modernize the street vending sector and most vendors in almost all cities and towns across the country continue in despicable state. Surprisingly their clientele is only growing by leaps and bounds and they include even well heeled people who just cannot resist the hot steaming food and many tasty preparations doled out by them. In countries like Malaysia, Pakistan etc there are food plazas in strategic places where the erstwhile street vendors are aggregated into a single place, easy and convenient for the customers. These plazas are adequately equipped with the necessary wherewithal to maintain good hygiene and sanitation besides other facilities so necessary to prevent food related episodes of serious nature occuring. This trend is yet to appear in India and the haphazard  street vending food industry continues to languish with potential danger to the health of millions of regular customers.

The Food Truck movement in the US is an offshoot of the "arrogance" and "insensitivity" of the established catering industry which never bothered to provide customized service expected from them besides increasing the price of their offerings to unreasonable levels unacceptable to many customers. To day the Food Truck business is posing a direct challenge to the established players in many cities across the US. It is time Indian catering sector sees the writing on the wall and address the concerns of its patrons who provide "bread and butter" for its survival! It is entirely possible that in India also a Food Truck movement may start eventually to give a better and more affordable alternative to the much harassed Indian customers. 

Maximum exploitation of citizens and their vulnerability takes place in religious and pilgrim centers where the customers are "fleeced" till they bleed with no succour coming from the local civic authorities and food being an essential item for survival the visitors are literally "extorted" to pay whatever is demanded for keeping their body and soul together! Same is true in bus stations and Railway platforms across the country where it is "free for all" situation with the monopoly caterer selling cheap imitations of popular brands and sub-standard foods at exorbitant prices. It is time that the state governments and civic authorities across the country wake up and take effective measures to prevent such out right "thuggery" in front of their eyes allowing the perpetrators  to go Scot-free. Such negligence can only make the lives of the citizens more and more miserable, especially when they step out of their home.

Recent announcement by the civic authorities in Chennai that they would provide relief to thousands of visitors to the city through a program of setting up low cost food out lets that would serve good foods at reasonable price is indeed welcome. According to the Municipal Authorities there, the concept of 'Kai yendhi bhavan' or roadside eateries would be translated into reality by setting up around 1,000 eateries across the city which would hopefully provide quality, hygienic food to the city's floating population of 10 lakh every day. The targeted beneficiaries include daily wage laborers, auto rickshaw drivers, unorganized workers, and school and college children who can expect to get breakfast and lunch items every day. To start with the Corporation expects to set up 200 such eateries on a trial basis immediately. Those already running roadside eateries can be expected to get preference though they would be wage earners without proprietorship of the out lets.  If the proposal materializes many self-help group members with reputation can be expected to be roped in to prepare food and transport it to the eateries. According to the proposal mooted, the food is to be prepared at the four existing community kitchens of the Corporation from where it is supplied to relief centers during the monsoons. The commodities would be procured from the government owned Tamil Nadu Civil Supplies Corporation at right prices. Of course there could be a slip between the "cup and the lips", if the state government does not accord permission to the Corporation's initiative. 

A natural question that arises in this context is whether any government agency is really equipped with the wherewithal of running a business successfully and if the past experience is any indication the success of the new program may be somewhat tenuous. But skepticism is not justified when people fired with enthusiasm, even in the government, are driven by such noble intentions and the program must be given a decent trial before expanding the same further. If the bureaucratic mind set and usual red tapism associated with government endeavors yield to dynamism, hard work, dedication and mission mentality, there is no way this experiment can fail. If successful, such efforts must be replicated in all states with continuous improvements being incorporated into the Chennai model based on the experience gained.  

Update 19/6/2012
Here is a comment from Chennai on the above publication:

Dear Sir:

I recently came across your blog and in it the article about the 1000 cheap eateries that the Chennai Corporation has planned to set up.

In this context I wanted to introduce to you our own project in Chennai that has successfully set up a back end facility for producing 30000 meals and at the front end, over 50 road side eateries that sell our food. There is no onsite cooking. The women who operate these kiosks earn between Rs 200 and Rs 300 per day, depending on their business volume. We are non profit aiming to empower women and at the same time offer some food security to the community through affordable, hygienic food.

Please find more information about our work at www.ecokitchen.org. If you happen to be in Chennai we would be glad to show you our project.

Sincerely, Ganesh



V.H.POTTY
http://vhpotty.blogspot.com/
http://foodtechupdates.blogspot.com

WHERE DID INDIA FALTER IN ACHIEVING REAL FOOD SECURITY?

Comparing India with China is a favorite past time to many national and international analysts and this is understandable considering that these countries together account for almost one third of the global population besides becoming self governing entities around 1947-48. With a level playing field the routes chosen by them have taken since becoming responsible nations invariably provides an opportunity for drawing conclusions regarding their success and failure. Of course India has been a democratic Republic since 1950, China went under the influence of Marxism with relatively close society and very little personal freedom. Looking at to day's situation, from the macro economic angle, China has overtaken India long ago to become a super economic power rubbing shoulders with the US and Europe. Where did India go wrong in not realizing its full potential to achieve much more than what it has done so far?

Take the food production front where China has done exceedingly well and its annual food production is estimated at around 380 million tones as compared to less than 200 mt by India. China's grain production is double that of India though the former has lesser arable land and same area of irrigated land. Probably one of the reasons for this laggard record may be because of the highly restrictive import policy India had till the advent of WTO where as China has a liberal agriculture import policy. Another critical factor is the the fragmented nature of the land holding, with average size being less than 2 acres. This in turn has come in the way of large scale mechanization of agricultural operations during the last 6 decades. Of course China has its own limitations because of the collective land-ownership system of land which is a severe constraint on farm borrowing and consequent poor economies of scale. Though China's ratio of investment in agriculture to agri-GDP is similar to India where it has outscored India is in investing significantly in agri-parks and dairy towns, which are fully integrated models right from cultivation to processing (financed by the agri-banks). 

It is interesting that though both countries have faced severe drought-like conditions or floods frequently, Chinese have been able to cope with these natural disasters much better with minimum hardship to citizens. Look at the fresh-water storage capacity where China scores very high marks as its 1,000 cu. m per capita figure is almost five times that of India. Similarly in water conservation measures also Chinese are much better placed as depletion of ground water table is significantly lower as compared to many parts of India where gross tube-well abuse is prevalent. It is scary for Indian agriculture when future is considered as it requires much more water by 2050 to sustain the agriculture because the water footprint is being depleted faster, especially in the Ganges and other major river basins. India also continues to grapple with the river-linking project in terms of environmental impact issues. On the other hand, China is already implementing many large-scale water projects (Three Gorges Dam, north-south aqueducts using Yangtze's water). Indian policy makers approach to the fresh-water storage and sustainability issue has been mired with slow decision-making and legal opposition by environmentalists. However, India scores better on micro-irrigation with its Government subsidy schemes.

India and China build significant grain reserves each year. India's grain reserve is around 50-60 million tonnes (20-22 per cent of annual production) whereas in China it is about 150-180 million tonnes (35 per cent of annual production). Due to this huge reserve, the food system is less dependent on flows from the global market and helps China contain food inflation in tough years. In terms of grain-storage infrastructure, China has the capacity to store up to 200 million tonnes of wheat and paddy, while India's capacity is 87 million tonnes. In India, there is an erosion of value of approximately 7-8 per cent (about 18 million tonnes) of total food production worth about $6 billion annually, due to unscientific and insufficient storage and supply-chain inefficiencies. Given China's large trade surplus and foreign currency reserves, any grain imports would not have material impact on their fiscal position. India may face a sharp currency depreciation and ballooning balance of payments if it were to resort to large-scale grain imports. Hence, India needs to enhance storage capacity and increase buffer stock to meet food needs of the population for at least five to six months. 

The stated objective of both countries' agricultural policy is to achieve self-sufficiency and food security. China has surged ahead on productivity through the use of high-yielding seed varieties, extensive use of fertilizers and pesticides (twice of India by per-hectare use). China has also focused significantly on cash crops, helped by stagnation of grain consumption and increasing consumption of fruits, vegetables, milk, milk products and meat. The Chinese Government has, since the 1970s, invested significantly into agricultural research and development (R&D), especially to create high-yield varieties of rice, wheat and maize. After the first green revolution , India's agriculture R&D has been academic and localized instead of supporting productivity at national levels.. China accounts for over 70 per cent of world's fresh-water aquaculture production and its livestock production has grown over 8 per cent annually for the last decade.

During the 1990s, China encouraged import of large amounts of new genetic material for hog, beef, poultry and dairy industries from the US, Japan, Canada and New Zealand, which has improved the quality of the genetic stock in China's livestock. While India and China have some congruency on policy front including a State-enforced minimum support price, there are notable differences in respect of wholesale agri-markets, agriculture subsidies and cooperative financing system for agriculture. Land ownership is individual in India but collective in China. While the Chinese Government provides direct subsidies to its farmers, subsidies in India are indirect. Compared to India, China has well-developed commodity exchanges and futures markets and tighter rules for converting or selling crop land for non-agricultural use. Unlike India, China has a price ceiling to minimize the effects of food inflation.

In India, less than 3 per cent of fruits and vegetables produced is processed while total processing in the agriculture sector is less than 8 per cent. By contrast, 40 per cent of food consumed in China is now processed (80 per cent in Western nations). Lack of economies of scale due to size restrictions on industry (under Small Scale Industries rules), supply-side constraints for agri-inputs because of rules governing large-scale corporate farming, and paucity of dry and cold storage infrastructure are the key shortcomings of the Indian food-processing industry.Since many sections of food processing were reserved for the small sector, there are hardly any large food-processing companies in India, except for a few transnational ones. On the other hand, over 70 of China's 500 largest companies are in the food-processing sector (in India this would be at the most 15), and this industry is growing rapidly.

India's agri-trade with the rest of the world is limited with agri-exports of $25 billion (10 per cent of total exports) in financial year 2011 and agri-imports of $8 billion (less than 3 per cent of total imports). Restrictive agri-import policies in India partly fueled by insecurity of domestic cultivators (political motivations) and some genuine and misguided concerns of disease import have led to inflationary pressure on key food articles. Bulk of India's agri-exports are rice, oil meal, cotton and spices (commodities with limited value addition) and bulk of the imports are pulses, edible oils and sugar. China, on the other hand, has a liberal agricultural import policy and is among the world's largest importers of commodities, including edible-oil seeds and even cattle. According to China's Custom statistics, agri-imports for 2010 were $65 billion and exports were over $30 billion, taking the agri-trade value to over three times that of India. China's agri-trade deficit has been growing but is balanced by exports of manufacturing and electronic goods. This has enabled it to maintain food inflation under 6 per cent as compared to the consistent 10-plus per cent for India till recently.

India and China are similar in terms of issues and policy challenges in agriculture. Both countries, due to their strong economic growth, are also experiencing inflationary pressures on food. However, India's total fertility rate of 2.6 (China's is 1.6) poses greater challenges as India's population will continue to grow faster and remain young longer, demanding high-nutrition food. Like China, India needs to focus on livestock, poultry and aquaculture (all key sources of protein), focus on R&D in agriculture by increasing budgetary allocations, promote farm mechanization through producer cooperatives, focus on replenishing aquifers through scientific water-harvesting in villages, avoid pitfalls of excess use of fertilizers and pesticides liberalize agri-trade policies to manage food prices and focus on economies of scale and integration in food processing.

V.H.POTTY
http://vhpotty.blogspot.com/
http://foodtechupdates.blogspot.com

BRINGING IN CHANGES FOR BETTER-HOW FORMIDABLE IS THE TASK!

Indians are familiar with the way the elected governments chosen once in five years become totally insensitive to the aspirations and expectations of the people who elected them. Most recent example was the massive outbursts from the masses against the phony efforts to set up an Omdusman for bringing corrupt people to books and the fact that in spite of 43 years of promise and evasive action, no such corruption fighting mechanism has been put in place tells its own story! Same is true in almost all areas of citizen welfare programs promised but never delivered. In stead the politicians are more enamored by legislation like the Food Security Bill, Farmer Subsidies, PDS Subsidies etc that they expect will bring them dividends in the form of votes. Compared to the situation in India, American democracy seems to be more vulnerable to "alms" from big league business players with massive resources to influence policies favoring them!

Look at the corruption fight in India. Being a parliamentary democracy people expect their representatives to engage themselves in making laws that can be considered to be beneficial to them. Unfortunately the elected representative has a free reign to do whatever he or she feels which need not be in the best interest of the citizen. This is what happened during the recent show down between masses and the parliament which politicians of all hues proclaim to be supreme with people having no power to even register their views in a peaceful manner. It was due to sheer desperation that masses had to converge on the streets compelling the government to introduce some sort of a Bill for creating an Omdusman and subsequently aborting it at midnight under one pretext or the other. This fight with politicians and bureaucrats will have to continue in the coming months to put further pressure on the parliament to give the country a law that will reduce if not eliminate corruption altogether.

According to dispassionate observers no democratic government is immune to succumbing to the powers of a few people with money power and in effect it is more akin to an oligarchy-"government of the lobbyists, for the lobbyists and by the lobbyists" The million dollar question is how to fight with such a fatal combination? Probably there can be one way to fight this oligarchy through mass movements that protest against the entrenched power. Of course it may be logical to argue that the voting power of the people must be channelized to punish the political class that refuses to see the needs of the citizen. Looking at history there are many instances where mass pressure had forced the governments to change the unpopular policies. The infamous Vietnam War was ended by my massive unrest and demonstrations by the people on the streets and for that matter the abandonment of segregation policy also driven by people's movement. There is no alternative to collective action by large numbers of citizens who can muster the power to reverse unfair policies and force governments to come nearer to people in whose name they rule the country.

Coming to the food system which has a profound influence on health of the citizen, governments must be freed from the clutches of corporate industry players who have nothing but the welfare of their companies in mind rather than that of the people. Why is that Genetically Modified (GM) foods, despite having doubtful safety credentials, have been forced through the throat giving no clue to the consumer that these foods contain GM ingredients. It is time that American citizens stand up and force the government at least to make the food industry declare the truth on the label. Recent march of thousands of people from New York to Washington DC to protest against GM foods containing packages not declaring about the same may be a beginning and once it assumes critical mass no government can escape from bring in compulsory labeling regulations eventually. An excellent example is the mass movement against the Keystone XL pipe line in the US when thousands of people sat in front of the White House to protest its approval which was considered a  "fuse to the biggest carbon bomb on the planet."! It appears that the pipeline proposal had several supporters among the law makers who shamelessly pocketed $42 million from the fossil fuel industry. Though these protests led to a delay in the approval process for the time being it is unlikely that the government will pursue with it in the near future.

In India Government after prevarication for two decades enacted the food safety act with an Authority consisting of crass bureaucrats to oversee the implementation of the law and see what is happening now. The country has become a "free for all" society with food adulterators and fraudsters holding the hapless consumers to ransom. If some of the reports are to be believed, though India is a top milk producing country on paper, more than 70% of the milk bought by the consumers is made from pond water, detergents, urea and other inedible ingredients and what is that this Authority has been able to do to combat this crime? Similarly China is reported to be flooding markets in India and in many other countries with low quality fake "Made in India" brands at reduced prices! Where is the "Authority" when it comes to stopping this heinous practice by the neighboring country.

V.H.POTTY
http://vhpotty.blogspot.com/
http://foodtechupdates.blogspot.com 

"HUMAN" GELATIN-SOUNDS WEIRD?

Gelatin is a relatively minor substance that is used by food, pharmaceutical, photography and cosmetic industries which find this by-product of meat industry a very attractive material with some unique physical properties. As the world use of gelatin is less than 0.3 million tons and many effective substitutes have been developed from plant sources during the last few years, its significance is progressively diminishing though its recovery during slaughter house operations improves the economy of meat industry significantly. Use of gelatin by food industry is not very high because of its association with meat industry, many manufacturers preferring to use plant derived viscosity modifiers which include agar agar, carrageenan, pectin, konjak, guar gum etc..

While 27% of gelatin manufactured comes from animal bones, Bovine hide and Pig skin contribute 28% and 44% respectively. Production is largely concentrated in Western Europe (39%), Northern America (20%) and Latin America (17%). Gelatin is a protein by nature derived by partial hydrolysis of Collagen found in bones, connective tissues, organs, intestines of cattle, chicken and pig but its nutritional value as a protein source is very low. It is predominantly made of two amino acids-glycine and proline, has no tryptophan and is deficient in threonine, isoleucine and methionine. Therefore its value to the industry lies in its functional properties. It melts into a liquid at high temperatures and solidifies on cooling. It forms a high viscous fluid with hot water and can form a gel on cooling. This is the property which makes gelatin an attractive ingredient in many food products.

Gelatin is found in many food products that include Marshmallows, gelatin desserts, low fat yogurts, jams, cream cheese, a number of low fat foods, margarine, jelly base etc. Its properties as a stabilizer, thickener, texturizer, viscosity modifier, fat sparing ingredient are unique and given a choice any processor will opt for gelatin. Recent news that using biotechnology scientists have been able to make gelatin from human cells, if true, may provide a cleaner route for getting a cleaner and more consistent product for industrial use. The quality of gelatin from slaughter house waste is not uniform though there are broad quality ranges and lot of standardization is required before a uniform quality product with assured performance can be offered. Human gelatin, so called because of the use of human stem cells for producing the product, can be of a high quality with assured performance. Biotechnology has been even able to create artificial meat from human stem cells.    

The new technique for making gelatin from human DNA is receiving world wide attention after the reported success of Chinese scientists who were able to insert human genes into a strain of yeast to "grow" large amounts of recombinant.human gelatin. Though the experiments are still at an early stage, some doubts are being raised whether such products derived from stem cells will be acceptable to the industry and the consumer. The reported fiasco of marketing human "breast milk" as a health product in the UK is still fresh in the memory of many people and whether same sentiments may rule when it comes to accepting meat derived from human gene remains to be seen. More important consideration would be whether such products are safe and whether clinical trials are required to be done to confirm their safety.

It is claimed that there is a very high degree of similarity between gelatin that comes from a cow, a pig, and a human and hence the pioneers do not see any health risk to it. The fact that people have been ingesting gelatin for many years does not guarantee that human derived counterpart would behave the same way. It is being pointed out that human-derived gelatin is already in use by the pharmaceutical industry in the manufacture of certain pills and vaccines. Probably the highly controlled production techniques under laboratory conditions may offer a more consistent product than "traditional" gelatin. Also cited is the current practice of using human genes by pharmaceutical firms in the production of human  insulin for diabetics, human growth hormone, and erythropoietin, which is used to treat anemia. Using stem cells for experiments however beneficial it may turn out to be, is a divisive issue with religious connotations and probably such products may never find universal acceptance in all parts of the world.

V.H.POTTY
http://vhpotty.blogspot.com/
http://foodtechupdates.blogspot.com