Great scope for nutra industry with friendly initiatives


Nutraceutical products can play an unprecedented role in balancing the nutritional intake of an individual in India where the mortality rate is one of the highest in the world. Currently, the size of the nutraceutical industry in India is estimated to be about $2.20 billion and with the 100% FDI under the automatic route being announced in the food processing and in the pharmaceuticals sectors; the nutraceutical industry is only going to lure more Indian and foreign investors. Current FDI investment in food processing and pharmaceutical sectors stands at $6,215.46 million (April, 2000 – January, 2015) and $1,882.76 million (April, 2000 – March, 2011) respectively. These figures indicate the tremendous opportunities and potential of the investments in the nutraceutical industry possible with investment friendly initiatives by the government.

Various government initiatives in the food processing sector like rolling out ‘Vision 2015 Action Plan’ for raising India’s share in global food trade from 1.5% to 3%; investing $23 million for setting Mega Food Parks to attract FDI; and establishing 60 fully equipped agri-export zones (AEZs) to provide a boost to food processing exports, would undoubtedly, lead to increase in market size of the Indian nutraceutical industry. Like in the pharmaceutical sector, the government can take several steps to give a strong impetus to the nutraceutical sector. Some of the recommendations are:

  • providing world class infrastructure
  • internationally competitive scientific manpower for R&D
  • venture fund for research in the public and private domain
  • weighted tax deduction for the R&D expenditure incurred

The government needs to reinforce its logistics capabilities like strengthening the cold storage facilities for increasing farm-to-shelf life of the nutraceutical raw material. Currently, India has 6,300 cold storage facilities with a capacity of 30.11 million tonnes. However, 75-80% of these refrigerated warehouses are not suitable for storing any fruits or any agricultural products (except potato), which actually are key ingredients in manufacturing nutraceutical products. Only, 10-11% of the fruits and vegetables produced in India, use cold storage. India’s investment in cold chain is projected to be $15 billion over the next five years. 

To overcome the long and fragmented supply chain, contract farming can be of great significance: companies can create direct farm linkages to source appropriate quality, quantity and variety of inputs. There is also a high requirement to develop a single entity of all multi-modal transportation, instead of splitting into rail, surface and air as separate ministries and entities. The single aim of such ministries should be to remain customer and industry centric rather than a government control mechanism.

Today India lacks requisite infrastructure for food testing laboratories. There is acute shortage of manpower, chemicals and test equipment for effective and efficient functioning of the labs. Currently, there is an urgent requirement of at least $130 million for strengthening of Food Safety and Standards Authority of India (FSSAI) at headquarters, regional and field offices, e-governance and food safety surveillance, strengthening of central level laboratories. Besides, $14.2 million is required for boosting the food safety infrastructure, undertaking awareness programmes and for conducting training and educational programmes.

To ensure greater flow of credit to this sector, finance to nutra, food and agro-based processing units with investment in plant and machinery needs to be supported by the RBI for coverage under indirect finance to agriculture category in priority sector lending (PSL). In the long term, the government should also try to lend credit to the food processing industry and small pharmaceutical companies for leveraging the hidden potential in the nutraceutical market. The government should also bring all industry incentive policies under a single window clearance, so that potential inventors do not face trouble in getting the due clearances from different ministries. 

Human resource development is another sector where the government needs to focus. According to a study conducted by the National Skill Development Corporation on Human Resource and Skill Requirement in the food processing sector, the annual human resource requirement in the food processing industry is estimated at about 5.3 lakh people and in the next 10 years this number would reach a staggering figure of 53 lakh. Hence, to mitigate this risk of skilled resources unavailability, the government should attempt to attract eligible human resources through employee friendly schemes. 

The above mentioned measures would require high capital investment and we are likely to see an investment to the tune of $5 billion over the next three years and $15 billion over the next 10 years. It is also likely to generate employment to the tune of 75,000 jobs, at least 10% of which are likely to be knowledge intensive jobs requiring professional training and experience.

Implementing the above mentioned measures alone would not help in increasing the market size of the nutraceutical industry. The food processing and pharmaceutical industries, which are the main players in the nutraceutical industry in India, have a key role to play in ensuring the market expansion of the nutraceutical industry in India. 

1. Firstly, the companies should be highly conscious of their product quality.

2. Secondly, the companies should attempt innovative ways of doing business like adapting the method of contract farming. This way, they can control the raw material prices and can at least attempt in making nutraceutical products available in majority of the households of the country at affordable prices.

3. Thirdly, companies should also run awareness programmes for making people aware of the nutritional significance of the nutraceutical products.

4. Fourthly, companies should also make their nutraceutical products more flavoured in order to suit the taste of Indian customers. 

Promoting nutraceutical products: The nutraceutical products are marketed primarily through commercial media. On few occasions, doctors prescribe these as an addition to other pharmaceutical products. But a majority of the doctors are of the opinion that they would be far more inclined to prescribe a nutraceutical product if they had health benefits that were proven under laboratory testing rather than unsubstantiated claims. To truly reach the potential of the market, this is a key channel that nutraceuticals are missing today. What this also implies is the need for manufacturers to provide doctors with information on proven health benefits from their products.

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