FDI in food retail will give an impetus to India’s food sector, Food Processing Minister Harsimrat Kaur Badal told CNBC-TV18 in an exclusive interview. India’s food processing is the sunrise sector, it is growing faster than agriculture sector and there is a positivity about it globally, Badal added.
The food ministry has restarted 17 food parks across the country in past two years and will set up another four soon, Badal said. Besides, there is also an impetus on setting up cold food chains.
The ministry, she said, is engaging in discussions with state governments to push stalled food parks. She added that foreign investors too are being approached for food parks.
Badal, however, said that global retailers have to understand that the business models for food industry are different in India. International players want to come through tried and tested models in India, she added.
Below is the verbatim transcript of Harsimrat Kaur Badal’s interview to Ronojoy Banerjee on CNBC-TV18.
Q: Let us start and address the big elephant in the room. The government had announced 100 percent foreign direct investment (FDI) in food retail and that had created a lot of excitement. It has been six months or so since then. How do you assess the effectiveness of that policy?
A: To start off with I would not call it an elephant at all. It is something which is actually going to kick-start the sunrise sector as the food processing sector is perceived to be. To give it an extra impetus to ensure that we start processing much more than the nascent 10 percent that we are doing. Yes, this policy was announced earlier on in the year when the Budget was announced. But the actual framework of the policy just came about by end July which was just four months ago and four months is a very short time for the entire world to find out that FDI has been allowed in India and what are the guidelines and what is the fine print which is why I went abroad to various countries and it was surprising that they had heard about it but they didn't not know what else. They thought there would be some riders, were they, weren't there. And I got a very positive feedback. There is no doubt that the entire world is interested in the Indian market. The whole world is looking at India, the fact that the highest amount of FDI in the history of India has come in the last one year goes to show that yes, India is definitely the one point that every market is looking at for the future.
Q: That companies cannot ignore?
A: Absolutely, food processing being a sun rise sector which has been growing faster than agriculture or manufacturing despite all the challenges that has and now with the kind of incentives and the impetus being given by this government in the last two years people in our own country see it as a very positive future for this. So, the people overseas are also perceiving it in the same way.
Q: You said 10 percent of food processing is done in India. The last time you and I spoke you said that you had a target of about 20 percent or thereabouts. Is that plan still on track to meet that?
A: Absolutely. I set myself a very ambitious target of 20 percent in the next five years. But when you are trying to target 60 years of work with five years of work of course you can always aim higher and that is what this government always aims high and then tries to achieve high as well.
Right from the time we gave in, right from the beginning, he time we took over the focus of food processing first of all separating the ministry from agriculture, making it into a different entity altogether so that the entire focus can be given and an importance to this sector then one by one creating an environment whether it was setting up Rs 2,000 crore in NABARD to give cheaper credit for food processing units, whether it was 42 new mega food parks or 130 new cold chains which is now 150, more new ones which are being announced whether it was the inauguration of 7-8 new mega food parks.
Q: There were 42 food parks and you have identified 8 as of now they are operational.
A: Yes, there were 42 which had been sanctioned by the earlier government, the scheme which came in the year 2008, but from 2008 right up to 2014 out of the 42 only 2 became operational. When I took over first of all something which was supposed to become operational in 24 months and had not become so in 6 years, I went around shutting them all down and cancelling them and re-advertising for them, so that people who were interested in getting into the business could get into it, so we restarted 17 new food parks which were cancelled and the others which were lingering on and not moving we pushed those — so we ensure that in two years we got another 6 of them going and by this year-end, I hope either by the end of December or latest by February-March we will have another 4 which will become operational.
The ones which were lagging behind we are pushing whether it talking to the state governments giving them all the support, the ones which have started with getting them tie-ups overseas, within India so that they start functioning in a profitable manner and of course I am going abroad and trying to sell my food parks wherever I can and there is a lot of interest on the concept.
Q: But tell me going back to the 100 percent foreign direct investment (FDI) in food retail, you are in touch with retailers, we have been speaking with retailers and they say that this pure food play as a business model has no precedent and therefore if he want to come and invest in India, we want to come and sort of use our tried and tested business model, we do not want to stay from that and that is why they have been wanting at least a small percentage of investment should be allowed in non-food products and you have been taking this matter up. Can you give us an update on that?
A: Well, yes when we talked about the international players, most of them want to come and do their tried and tested model for India, but I think now when I go out and I am meeting a lot of them on their own home turf. See Indian food market is really different to the western food market; number one there is a lot of frozen food, they go to this big store and stock up their freezer for the whole month and they keep it.
In our country there is no concept of stocking it up in our freezer, we don’t have freezer of that size - - so there is the concept of fresh food and cooking every day, we are just very different to the western world, so people have to understand that first of all, that your model which is working everywhere else may not work here, because we are not in the concept of eating and yes of course rapid urbanisation is leading to the cities and the metros.
For full interview, watch accompanying videos...