Chanakya National Law University, Patna: Mega Food Parks: A New Initiative
Chanakya National Law University, Patna: Mega Food Parks: A New Initiative
Chanakya National Law University, Patna: Mega Food Parks: A New Initiative
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ECONOMICS- II
FINAL DRAFT
Project Topic:
MEGA FOOD PARKS: A NEW INITIATIVE
Submitted to
DR. SHIVANI MOHAN
Faculty of Economics
Submitted by
PARTH SHARMA
Roll No. - 1543
4th Semester, 2nd Year, B.A.LL.B. (Hons.)
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MEGA FOOD PARKS: A NEW INITIATIVE 2018
ACKNOWLEDGEMENT
Writing a project is one of the most significant academic challenges, I have ever faced. Though
this project has been presented by me but there are many people who remained in veil, who gave
their all support and helped me to complete this project.
First of all I am very grateful to my subject teacher DR. SHIVANI MOHAN without the kind
support of whom and help the completion of the project was a herculean task for me. She donated
her valuable time from her busy schedule to help me complete this project and suggested me from
where and how to collect data.
I am very thankful to the librarian who provided me several books on this topic which proved
beneficial in completing this project.
I acknowledge my friends who gave their valuable and meticulous advice which was very useful
and could not be ignored in writing the project.
Last but not the least, I am very much thankful to my parents and family, who always stand aside
me and helped me a lot in accessing all sorts of resources.
B.A.LL.B. (Hons.)
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MEGA FOOD PARKS: A NEW INITIATIVE 2018
TABLE OF CONTENTS
ACKNOWLEDGEMENT................................................................................................................................................ 2
TABLE OF CONTENTS................................................................................................................................................ 3
BIBLIOGRAPHY ....................................................................................................................................................... 17
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MEGA FOOD PARKS: A NEW INITIATIVE 2018
CHAPTER-I
INTRODUCTION
The Scheme of Mega Food Park aims at providing a mechanism to link agricultural production to
the market by bringing together farmers processors and retailers so as to ensure maximizing value
addition, minimizing wastage, increasing farmers income and creating employment opportunities
particularly in rural sector. The Mega Food Park Scheme is based on “Cluster” approach and
envisages creation of state of art support infrastructure in a well-defined agri / horticultural zone
for setting up of modern food processing units along with well-established supply chain. Mega
food park typically consist of supply chain infrastructure including collection centers, primary
processing centers, central processing centers, cold chain and around 30-35 fully developed plots
for entrepreneurs to set up food processing units.1 Government has sanctioned 42 Mega Food
Parks (MFPs) to be set up in the country under Mega Food Park Scheme. Out of these, 36 projects
have been accorded Final Approval and another 2 projects have been accorded In-Principle
Approval. Nine Mega Food Parks have become functional. Ministry of Food Processing
Industries is implementing the Central Sector Scheme of Integrated Cold Chain and Value
Addition Infrastructure with the objective of arresting post-harvest losses of horticulture & non-
horticulture produce and providing remunerative price to farmers for their produce. Under the
scheme, Ministry provides financial assistance in the form of grant-in-aid @ 35% for general
areas and @ 50% for North East States, Himalayan States, ITDP areas and Islands for storage and
transport infrastructure and @ 50% and 75% respectively for value addition and processing
infrastructure subject to a maximum grant-in-aid of Rs. 10 crore for setting up integrated cold
chain projects including irradiation facility without any break from the farm gate to the consumer.
The integrated cold chain and preservation infrastructure can be set up by individuals, groups of
entrepreneurs, cooperative societies, Self Help Groups (SHGs), Farmer Producer Organizations
(FPOs), NGOs, Central/State PSUs, etc. The scheme is primarily private sector driven and
proposals under this scheme are invited through Expression of Interest (EOI). The scheme is
available in rural & urban areas in all States/UTs. State wise funds are not allotted under the
1
Retrieved from, http://mofpi.nic.in/Schemes/mega-food-parks, as on 12/04/2018.
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MEGA FOOD PARKS: A NEW INITIATIVE 2018
scheme for Integrated Cold Chain and Value Addition Infrastructure. The Ministry is presently
assisting 228 Integrated Cold Chain projects under the scheme.2
The Mega Food Parks Scheme aims to provide a mechanism to bring together farmers,
processors and retailers and link agriculture production to the market so as to ensure
maximization of value addition, minimization of wastages and improving farmers’
income. The primary objective of the Scheme is to provide modern infrastructure
facilities for the food processing along the value chain from the farm to the market with a
2
Retrieved from http://pib.nic.in/newsite/PrintRelease.aspx?relid=174346, on 13/04/2018.
3
Retrieved from http://mofpi.nic.in/sites/default/files/MegaFoodParksinIndia.pdf as on 13/04/2018.
4
Press Information Bureau, Government of India, Ministry of Food Processing Industries. Retrieved from
http://pib.nic.in/newsite/PrintRelease.aspx?relid=118634 as on 12/04/2018.
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MEGA FOOD PARKS: A NEW INITIATIVE 2018
cluster based approach based on a hub and spokes model. It includes creation of
infrastructure for primary processing and storage near the farm in the form of Primary
Processing Centres (PPCs) and Collection Centres (CCs) and common facilities and
enabling infrastructure like roads, electricity, water, ETP facilities etc. at Central
Processing Centre (CPC). These PPCs and CCs act as aggregation and storage points to
feed raw material to the food processing units located in the CPC.
Food Processing being capital incentive activity, common facilities are created at CPC to
be used by the processing units on hire basis. This helps in reducing the cost of individual
units significantly and makes them more viable. The minimum land required for a Central
Processing Centre in Mega Food Park is 50 acre and implementation period is 30 months.
The scheme is demand-driven and would facilitate food processing units to meet
environmental, safety and social standards.
Functioning of Mega Food Parks is closely monitored by the Ministry through a well-
established mechanism as per the scheme guidelines. This includes detailed scrutiny of
the periodical progress reports of the project by the Programme Management Agency
(PMA) and the Ministry, verification of the bills by the Project Management Consultant
(PMC) before release of the funds from the bank account maintained for the purpose, site
visits of the projects by the PMA and Ministry officers, periodic review meetings of the
progress of the projects at the level of the senior officers and Minister in the Ministry etc.
Ministry monitors each project very closely and regularly.
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MEGA FOOD PARKS: A NEW INITIATIVE 2018
The researcher is going to research the above topic with some of the objectives which are sited
below:
HYPOTHESES
The Researcher has certain hypothesis regarding the research topic. The researcher has presumed
that:
1. That the Mega Food Parks Scheme aims to provide a mechanism to bring together
farmers, processors and retailers.
2. That the mega food parks promote employment creation, especially in rural areas.
RESEARCH METHODOLOGY
Sources of Data-
Primary Source: Legal Provisions and Treaties and Conventions.
Secondary Source: Books, Websites, journals and Articles.
Method of writing
The method of writing followed in the course of this research project is primarily
analytical.
Mode of Citation
The researcher has followed a uniform mode of citation throughout the course of this
project.
Due to the broad area and extensiveness of the doctrinal research, the researcher has to be
dependent only upon the limited area of his doctrinal research.
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MEGA FOOD PARKS: A NEW INITIATIVE 2018
CHAPTER-II
SUPERMARKET REVOLUTION IN ASIA
“Supermarket revolution” in the developing countries started in the early 1990s revolution" and
has continued to the present.5 This revolution involves the rapid increase of modern retail shares
in food retailing at the expense of traditional shops and wet markets. The supermarket revolution
in Asia has been driven by the same factors as in other regions: on the demand side by income
growth and urbanization, and on the supply side by foreign direct investment (FDI), format
diversification to meet consumer segment needs, competitive domestic investments, and
procurement system modernization to drive down costs. However, several things were different
in Asia. Especially for third-wave countries - China, India, and Vietnam - the trends have been
more intense and more rapid. The third-wave countries in Asia also have active state
involvement in economic development. In China and Vietnam, and to lesser extent India, state
investment in modern retail provided a major initial fillip to the revolution. Although
supermarkets in other regions eventually moved from the initial urban base to rural markets and
from the initial offering of mainly processed foods and staples into fresh produce, in Asia,
especially in the third-wave countries, these transitions have been accelerated. Modern retail,
either in modern private or state variants, has adapted to formats to penetrate rural areas,
sometimes (as in India) combining with services for farmers. Relative to the United States and
Latin America, Asian supermarkets have already started to penetrate fresh produce markets,
perhaps because of the special importance this has for Asian consumers. The combination of
rapid retail transformation and supply-side constraints requires combining modernization of
procurement systems in ways done in other regions (distribution centers and networks, preferred
supplier systems, use of dedicated wholesalers, and private standards) and adaptation to
traditional supply chains, involving development of relations with wholesale markets. Beyond
this dual approach is the gradual introduction of innovative procurement system and supply
chain modernization solutions by agribusiness companies, sometimes in company with
government and donors, such as with rural business plat forms and hubs. The first are the basic
5
Reardon T, Timmer CP, Barrett CB, Berdegue JA (2003) The rise of supermarkets in Africa, Asia, and Latin
America. Am J Agrie Econ 85:1 140-1 146.
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MEGA FOOD PARKS: A NEW INITIATIVE 2018
enabling demand-side conditions fueling modern retail diffusion, which typically is a function of
urbanization, rising incomes, and women increasingly working outside the home. The very rapid
income growth rates and the emergence of large middle classes in Asia are well known. The
urbanization rates are no less striking: for example, 40% of the US population was in cities in
1900 and 75% 9 decades later, by 1990. That same shift occurred in South Korea in the 2
decades up to 1990.6 The rapid development of Tier II, III, and IV cities, for example in India,
has also been propitious for the spread of modern retail beyond the megalopoli.7 However, even
this shared characteristic of the importance of FDI seems to be more striking in Asia. Saturation
and intense competition of the Western Europe and US markets, and nearing saturation in the
earlier retail growth markets of the first wave, has focused global retailer attention on Asia as
“the last frontier” and other gold-rush terms.8
The implications for small food processing/manufacturing enterprises and farmers in the longer
run are also significant. It focuses on impacts that modern retail has on farmers and processors.
The modern retail diffusion, whether fast and/or along unique pathways, would not necessarily
imply impacts on farmers different from traditional retail if modern retailers use the same
procurement systems traditional retailers do, the wholesale markets. However, the evidence
points to modern retailers increasingly using modernized procurement systems, at different
speeds and pathways over the two product categories9:
processed/staples, such as grains, edible oils, and packaged foods, and semiprocessed
products, such as meat and dairy; and
fresh products.
6
Henderson V (2002) Urbanization in developing countries. World Bank Res Obs 17: 89-112.
7
Reardon T, Gulati A(2008) The Rise of Supermarkets and Their Development Implications: International
Experience Relevant for India. IFPRI Discussion Paper 00752. (International Food Policy Research Institute, New
Delhi, India).
8
Kearney AT (2010) Expanding Opportunities for Global Retailers: The 2010 A.T. Kearney Global Retail
Development Index, Report (A.T. Kearney, Vienna, VA).
9
Ali J, Singh SP, Ekanem E (2009) Efficiency and productivity changes in the Indian food processing industry:
Determinants and policy implications. International Food and Agribusiness Management Review 12:43-66.
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MEGA FOOD PARKS: A NEW INITIATIVE 2018
Sourcing efficiencies (such as buying direct from factories) and scale allow modern retailers to
charge consumers prices below those of traditional retailers in processed/staple products. A
recent study in Delhi showed that supermarkets charge lower prices for the key staples rice,
wheat flour, and edible oil than small shops.10 This is a common finding in other developing
regions.11
10
Minten B, Reardon T, Sutradhar R (2010) Food prices and modern retail: The case of Delhi. World Dev 38:1775-
1787.
11
Minten B, Reardon T (2008) Food prices, quality and quality's pricing in supermarkets versus traditional markets
in developing countries. Review of Agricultural Economics 30:480-490.
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MEGA FOOD PARKS: A NEW INITIATIVE 2018
CHAPTER-III
INNOVATION IN DEVELOPMENT STRATEGIES: MEGA FOOD PARKS
As supermarkets spread in Asia and their sales expand much faster than GDP growth, they can
draw on a rapidly growing, consolidating, and modernizing processing and milling sector in
cereals, dairy, meats, and condiments/sauces. However, fresh produce retailing, still in its
incipience, puts strains on traditional produce supply chains because of its speed. That is a big
challenge facing the chains tying to scale up procurement. There are two prongs to the attack on
this problem:
Governments need to invest in wholesale market systems and other market infrastructure.
More specific strategies need to be developed to link farmers to dynamic supermarket
channels.
Still, small farmers in Asia (and elsewhere in developing regions) are constrained by
“idiosyncratic market failures.” There are dual challenges facing all farmers in scaling up supply
to modern markets; they are more difficult for small-holder farmers12:
Credit, input, information, and insurance markets exist, but small farmers often cannot
access them on favorable terms.
Small farmers are also constrained by their general poverty of assets, such as education
and infrastructure, but also by specific assets, such as irrigation or specialized
horticultural knowledge, needed to supply to modernizing domestic and export markets.
To meet this double challenge, unique development strategies are emerging in Asia. Some are
shared with other parts of the developing world, but a number are unique to Asia and serve as
interesting lessons for elsewhere. The most unique to Asia, is a family of development strategies
being developed that involve assembling into a “hub” or “platform” or “park” the various
companies and services that link farmers to modern markets. These seem to be mainly emerging
in India.
This hub approach is “bringing the markets to the farmers” and provides the missing services,
such as output procurement, processing/packing/cooling, technical assistance, credit, and
12
Farhoomand A (2008) ITC E-Choupal: Corporate Social Responsibility. Case HKU 765 (University of Hong
Kong, Asia Case Research Centre, Hong Kong).
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MEGA FOOD PARKS: A NEW INITIATIVE 2018
insurance and products (inputs and equipment of requisite quality) required for small farmers to
compete. This cluster of services is localized, benefitting from economies of agglomeration.
Sometimes, fanning out from it is a set of collection centers or depots to which farmers deliver.
This approach is designed to meet the input and service needs of farmers and reduce transaction
costs by putting retailers and processors into rural areas, but provide the missing infrastructure
and service base for the companies, who in turn make concomitant investment in packing plants
and logistics facilities.
There are two variants of these hubs/platforms/parks13:
Rural business hubs
It is mainly private and medium-scale hub, such as the chains of "rural business hubs" of
companies in India started in the mid/late 2000s.14 The retailer sets up a rural hub, in
which it puts a small supermarket, an input retail shop, and sometimes procurement
facilities for grain or milk or vegetables, and invites partners in the banking, insurance,
and health sectors to set up store-in-store units. This becomes a one-stop shop for farmers
and a procurement hub for other operations (such as business-to-business to other
retailers or to processors or exporters).
Public-private partnership
These may have a private sector “anchor” that invites other investors, such as a processor
or retailer who then invites logistics companies and other service providers to co-invest in
the (large) platform area. This agglomeration of services, at close range to the farmers, is
meant to solve the missing service constraints facing both the retailer or the processor and
the farmers. The public sector can also be an anchor investor, or an infrastructure
facilitator, providing the "park" or "hub" water and electricity and so on, as well as
technical assistance services to the farmers linking to the hub. This second variant is the
“public-private partnership” version of the above, such as the mega-food parks and
integrated agro food parks in India, started in 2009.15
13
Bell DE, Sanghavi N, Fuller V, Shelman M (2008) Hariyali Kisaan Bazaar: A rural business initiative. Case 9-
508-012, April 15. Harvard Business Review, 10.1225/508012.
14
Chakravarty K, Sridhar V, Bhardwaj P, Bhattacharjee N (2007) Rural Retailing - The Next Phase in Retailing
(Confederation of Indian Industry-YES BANK, New Delhi).
15
Natawidjaja R, Reardon T, Shetty S (2007) Horticultural Producers and Supermarket Development in Indonesia.
Report 38543 (World Bank/Jakarta, Indonesia).
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MEGA FOOD PARKS: A NEW INITIATIVE 2018
16
Supra Note 9.
17
Pacific Economic Cooperation Council (2005) Pacific Food System Outlook 2005/2006: A Revolution in Food
Retail.
18
Mergenthaler M, Weinberger K, Qaim M (2009) The food system transformation in developing countries: A
disaggregate demand analysis for fruits and vegetables in Vietnam. Food Policy 34):426-436. 17.
19
Supra Note 8.
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MEGA FOOD PARKS: A NEW INITIATIVE 2018
unexplored topic is how scalable and sustainable these cooperatives are20 and what assistance is
needed to make them competitive in a rapidly changing market environment. This latter
challenge seems present for the multitude of unique strategic approaches now being tested in
Asia that are designed to keep small-holder farmers profitably engaged in modern supply chains,
while continuing to bring the benefits of modern supermarkets to a rapidly increasing proportion
of the region's consumers.21
Government Initiative
The government has allowed 100% foreign direct investment in food processing and in trading,
including through ecommerce, of food products manufactured or produced in India.22 The central
government is aiming to establish 42 mega food parks with a cluster-based approach in a phased
manner to prevent wastage and damage of perishable items. Some of these have already come
up. The main objective of this scheme is to provide modern infrastructure facilities for food
processing along the value chain from the farm to the market. This includes the creation of
processing infrastructure near the farm, transportation, logistics and centralized include the
creation of processing infrastructure near the farm, transportation, logistics and centralized
processing centers.
Smaller food parks, which will have cold-storage facilities, will also be set up. In the past two
years, ministry has created infrastructure worth Rs 9,000 crore to process 32 lakh tonnes of
perishable fruits and vegetables, and reduce wastage by 10 per cent a year. There is huge scope
for processing of fruits and vegetables, and reduce wastage by 10 per cent a year. There is huge
scope for processing of fruits and vegetables as only 2 per cent of perishable horticultural
produce is being processed currently, despite the fact that the food processing industry accounts
for about 32 per cent of the India’s total food market. On an average, each mega food project
would have around 30-35 medium food processing units with a collective investment of around
20
Chen K, Shepherd AW, da Silva C (2004) Changes in Food Retailing in Asia. Agricultural Management,
Marketing and Finance Occasional Paper 8 (Food and Agricultural Organization of the United Nations, Rome).
21
Singh S (2009) Spencer's Retail. Inclusive Value Chains in India - Linking the Smallest Producers to Modern
Markets, ed Harper M (World Scientific, Singapore), pp 76-88.
22
Retrieved from, https://economictimes.indiatimes.com/news/economy/infrastructure/government-to-aid-mega-
food-parks-for-two-years/articleshow/60088378.cms, as on 10/04/2018.
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MEGA FOOD PARKS: A NEW INITIATIVE 2018
Rs 250 crore that would eventually lead to an annual turnover of about Rs 450-500 crore. Each
project is expected to create direct employment to 2,500 people and indirect employment to
about 30,000. The food parks would enhance the earnings for farmers, reduce wastage, build
capacity for processors and create significant direct and indirect employment opportunities.23
23
Retrieved from https://economictimes.indiatimes.com/news/economy/infrastructure/mega-food-park-project-
progressing/ as on 13/04/2018.
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MEGA FOOD PARKS: A NEW INITIATIVE 2018
CHAPTER- IV
CONCLUSION
Although foreign direct investment has been important, the roles of domestic conglomerates and
even state investment have been significant and unique. Second, Asia's super market revolution
has exhibited unique pathways of retail diffusion and procurement system change. There has been
"precocious" penetration of rural towns by rural supermarkets and rural business hubs, emergence
of penetration of fresh produce retail that took much longer to initiate in other regions, and
emergence of Asian retail developing-country multinational chains. In procurement, a symbiosis
between modern retail and the emerging and consolidating modern food processing and logistics
sectors has arisen. Several approaches are being tried to link small farmers to supermarkets. Some
are unique to Asia, for example assembling into a hub or platform or park the various companies
and services that link farmers to modern markets. It was found that The Scheme of Mega Food
Park aims at providing a mechanism to link agricultural production to the market by bringing
together farmers processors and retailers so as to ensure maximizing value addition, minimizing
wastage, increasing farmers income and creating employment opportunities particularly in rural
sector. The Mega Food Park Scheme is based on “Cluster” approach and envisages creation of
state of art support infrastructure. Other approaches relatively new to Asia are found elsewhere,
especially in Latin America, including bringing modern markets to farmers by establishing
collection centers and multipronged collection cum service provision arrangements, and forming
market cooperatives and farmer companies to help small farmers access supermarkets.
From the above points it is clear that the researcher fulfilled all the objectives and both the
hypotheses were duly proved at the end of this research work.
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MEGA FOOD PARKS: A NEW INITIATIVE 2018
BIBLIOGRAPHY
Reports
Websites Referred
http://mofpi.nic.in/Schemes/mega-food-parks
http://pib.nic.in/newsite/PrintRelease.aspx?relid=174346
https://economictimes.indiatimes.com/news/economy/infrastructure/government-to-aid-
mega-food-parks-for-two-years/articleshow/60088378.cms
https://economictimes.indiatimes.com/news/economy/infrastructure/mega-food-park-
project-progressing/
http://mofpi.nic.in/sites/default/files/MegaFoodParksinIndia.pdf
http://pib.nic.in/newsite/PrintRelease.aspx?relid=118634
17
MEGA FOOD PARKS: A NEW INITIATIVE 2018
Reardon T, Timmer CP, Barrett CB, Berdegue JA (2003) The rise of supermarkets in
Africa, Asia, and Latin America. Am J Agrie Econ 85:1 140-1 146.
Ali J, Singh SP, Ekanem E (2009) Efficiency and productivity changes in the Indian food
processing industry: Determinants and policy implications. International Food and
Agribusiness Management Review 12:43-66.
Minten B, Reardon T, Sutradhar R (2010) Food prices and modern retail: The case of
Delhi.
Chen K, Shepherd AW, da Silva C (2004) Changes in Food Retailing in Asia.
Agricultural Management, Marketing and Finance Occasional Paper 8 (Food and
Agricultural Organization of the United Nations, Rome).
Pacific Economic Cooperation Council (2005) Pacific Food System Outlook 2005/2006:
A Revolution in Food Retail.
Mergenthaler M, Weinberger K, Qaim M (2009) The food system transformation in
developing countries: A disaggregate demand analysis for fruits and vegetables in
Vietnam. Food Policy 34).
Minten B, Reardon T (2008) Food prices, quality and quality's pricing in supermarkets
versus traditional markets in developing countries. Review of Agricultural Economics.
Chakravarty K, Sridhar V, Bhardwaj P, Bhattacharjee N (2007) Rural Retailing - The
Next Phase in Retailing (Confederation of Indian Industry-YES BANK, New Delhi).
Books Referred
Singh S (2009) Spencer's Retail. Inclusive Value Chains in India - Linking the Smallest
Producers to Modern Markets, ed Harper M (World Scientific, Singapore), pp 76-88.
Henderson V (2002) Urbanization in developing countries.
18