Monday, November 24, 2014

"FOODPOLIS" in South Korea-India is still at the "Food Park stage!

India is considered a super power when it comes to production of agricultural, horticultural, plantation crops, sugarcane, milk and livestock during the last one decade. But when it comes to processing of most of these materials originating from its backyard, the country does not acquit itself creditably well, with most of the raw materials undergoing only primary processing with very little value addition. While most developed nations process their raw materials to the extent of 60-80%, India does not even process 20% of its field crops into high value products. Probably conservative dietary habits, predominance of poverty and low purchasing power may be inhibiting the development of food processing sector to the desired extent. Added to this a disorganized farm front, poor infrastructure, shortage of power and water, scarcity of farm labor and semi literate farmers worsen the problem further.

Food industry in India always claim that it cannot realize its full potential in contributing much more to the economy because of difficulties in accessing good quality raw materials near their processing facilities. This is a fairly argued stand and the major reason is the tendency of the industry to concentrate in and around urban areas in stead of setting up their shop near the growing area. Besides a typical farmer holds only about 2 acres of land and this size may not be an economically viable one making the farmer surviving with hand to mouth existence. There is no place for quality parameters for the produce they grow and most of these crops raised are intended for table consumption. The existing land acquisition regulations do not permit the purchase of agricultural land by any one but another agriculturist with annual income less than Rs 2 lakh! What an anachronism in a country which aspires to become a global economic power challenging others like USA, China etc! With the new government in office during the last 6 months, nothing seems to have changed much from what has been in vogue as far as land acquisition is concerned. Unless big players with processing experience and deep purse are allowed to set up large mechanized farms or organize large agricultural cooperatives, nothing much can be expected in boosting food industry development in the country.

Major processors, most of them foreign players, have realized the need for backward integration with the farms and have made their own arrangements for ensuring adequate supply of raw materials of right quality through prior arrangements with farmers near their facilities. It is not that Indian policy makers are not aware of this reality but some how they never bothered so far to set right the situation when it comes to linking producer with the processor. One has to look at the thriving sugar industry in the country which is fortunate in getting enacted appropriate laws to compel growers of sugar cane to surrender their crops at a predetermined government decided price, euphorically called Minimum Support Price (MSP), supposed to be for protecting the interest of the growers. The result is there for all to see and to day India is the top producer of raw sugar in the world. This has happened in spite of bad facilities for transporting the sugar cane to the crushing plants, often involving long distances of transportation! 

Assuming that Governments at the center as well as at the state levels do nothing to improve the situation there are still millions of entrepreneurs who are willing to get into the food industry taking their own risk and it is already happening at the ground level. It appears more than 75% of the food market is controlled by players in the so called unorganized sector though every Tom, Dick and Harry who is some body in the international food manufacturing scenario has operations in India also, not able to obliterate these small scale players! The so called free economy favoring a capitalistic society ushered into the country during early nineteen nineties did reduce the predominance of agriculture over other sectors but it did not douse the entrepreneurial spirits among domestic population with the industry registering impressive growth rates during the last two decades. It is true that Government of India (GoI) wanted to encourage growth of food industry and even set up a dedicated ministry to "oversee" its development as best as it could see. Unfortunately its vision was not far sighted and probably it thought creating a "ministry" would automatically facilitate the development without any cohesive and realistic thinking and inputs. One such "brainer" was the "Food Parks" concept lifted from the examples in the UK, China and other countries which is being tom tommed as its star program for the last 15 years..

In stead of a holistic approach, GoI thought disbursing funds as subsidies through the "ministry"would help industry to prosper! Alas, see what has happened, or rather what has not happened. After earmarking huge funds to set up such "parks", only 2 out of the 40 and odd "parks" sanctioned since 2000 are able to show some thing as a positive outcome so far. In stead of providing facilities like water supply, uninterrupted power, world class roads, reliable communication net work, helpful policy support GoI thrust the responsibility on private players many of whom were interested only in the land which was becoming "hot cakes" as an investment attraction in the country. In contrast the whole world is looking with envy the initiative in a country like Korea which is setting up world's largest food cluster in Iksan on its south west coast with easy access to China and Japan. The incentives being doled out are mind boggling while making their offer of providing sites within this cluster, aptly called "Foodpolis" because of its mega size. 

Foodpolis will possess a number of clear advantages to investors, It appears some 60 cities with a population of 1 million or more are located within a two-hour flight from the site of this project. The complex itself is very close to Korea's major airports and seaports, and the country's highways and high-speed KTX trains capable of high speed mobility. Tariff rates have been lowered significantly following Korea's implementation of free trade agreements with 47 different countries, including two major accords with the European Union and the United States. Foodpolis is also being established with a comprehensive support network that will include three state-funded research centers, including the Food Functionality Evaluation Center, Food Quality and Safety Center and Food Packaging Center. R&D will also be closely aligned with food institutes nationwide. In addition, firms locating in the cluster are eligible to receive a variety of incentives and benefits, including lowered tax rates and property rental fees, cheap utility charges and even state subsidies. The government plans exemptions on corporate income tax for the first three years, and a 50 percent reduction in the following two. Companies can also avoid property taxes for 15 years and, in some cases, receive rent exemptions from 50 to 100 percent for 50 years, with the potential to extend for an additional 50 years.

When construction is complete in 2015, Foodpolis probably may be one of the best places in the world for food processing and packaging companies to set up their base with hopes of finding markets anywhere in the Asia Pacific region. The basic concept of this cluster is to create an optimum business and research environment for global food companies. It's a mini city tailored for the food industry and will be a combination of information technology, culture and food science. The entire system is expected to be friendly to all investors regardless of their nationalities. According to those promoting Foodpolis great care has been taken, while designing the complex, to foster the food industry into the next growth engine for not only South Korea, but also the entire Asian continent. The cluster is expected to create thousands of jobs and a huge amount of added value for the regional economy. a conservative estimate puts the probable number of participants at about 166 including 70 global players and 20 research centers, resulting an estimated out put valued at $ 60 billion. 

It is time GoI considers emulating Korea in its vision and promote at least 5 such "Foodpolis" in the eastern  (Kolkatta and Vizhag linked), southern (Chennai and Kochi linked)  and western (Mangalore, Goa and Mumbai linked) regions with appropriate road infrastructure linking the agricultural, horticultural, plantation products and livestock generating areas for fast transportation for raw materials as well as for export through the port facilities on the coast. If necessary the country must take Korea's expertise and experience into reckoning, for joint development within the next 5 years. Will this happen? Let us hope for the best for the sake of this country!  


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