Challenges faced in Food Processing Industry with a focus on Rice Mills

Much hullabaloo has been raised both by intellectuals and the media over the recent approval of Food Security Bill (September 12, 2013). Many have claimed that such a law would aggravate the food price inflation, add subsidy burden to the already weak economy exacerbating macro level inflationary pressure. Another view that came out in the debate was the shift in farm produce towards cereal production and away from other farm produce such as proteins. This behavior is attributed to the fact that our current food processing industry primarily the rice mills are not optimized and such a shift is inevitable in order to sustain the large population. Thus an attempt has been made to understand the major challenges faced by the Food Processing Industry with a focus on the Rice Mills.

Overview

Rice is the major staple food and is considered more than just food as it has a strong cultural connotation, not just in India but the whole of South Asia. India is the second largest producer of rice in the world with a production of around 104.2 million tonnes in 2012-13 and exports amounting to 10.3 million tonnes.
Food processing industry is said to be the connection between the agriculturists/producer to the consumers. It is a value-add to the food commodity and provides convenience to the consumers. It also provides the producers with a ready business market and helps them by fetching a good price for their produce. The rice processing is fairly simple and is as old as rice consumption itself, obviously! The rice milling has evolved from mortar and pestle to the current day highly advanced machinery available to do the job. But have the Indian rice millers actually adopted them?

Issues in modernizing Rice Mills in India

Let’s discuss the challenges faced by the Indian Food Processing Industry in modernizing the rice mill industry in India.There are more than 1 lakh rice mills in India. Since the yield rate of full rice grain needs to be maximized the rice mills need to be modernized  But Huller mills, rubber shellers and their combination- the types of rice mills which yield high broken rice component are still very prevalent. To encourage modernization  Government of India has repealed the Rice Milling Industry Act facilitating setting up of modern rice mills without government permission. And also, subsidies are being provided by the government for setting up of rice mills and also the grants are disbursed in a much decentralized way by roping in many scheduled banks to ease up the process.The Ministry of Food Processing Industries states-

“The Ministry of Food Processing Industry has re-opened the Flour Milling, Pulse Milling and Rice sector w.e.f. 01/04/07 which was closed since 31/3/04. Under the Plan Scheme of the Ministry grant will be provided up to 25% in general areas and 33.33% in difficult areas up to a maximum of Rs. 50 lakhs and Rs.75 lakhs respectively on Plant & Machinery and Technical Civil Work for setting up/modernization /expansion of Food Processing Industries.”

The modernization of rice mills accelerated because of the high demand of the polished rice which led to the natural death of the traditional rice mills.

However the cost of setting up a rice mill is very high. NABARD quotes a very conservative figure of about 52,76,600 INR for setting up the rice mill. But the actual costs can run up to 5 crores. With the profit margin of a rice mill running as low as 5 – 6%, it doesn't makes a  lucrative business to be taken up.

Also the power requirements are about 100 HP and requires a reliable water supply for producing parboiled rice or operating sortex polishers. Although the number of labors employed in a modern rice mill is substantially low, owing to greater degree of automation, but the stricter labor laws have increased the labor costs.

Besides, the most important point that affects the rice mill industry is the monsoon. The supply of paddy can be affected by a low monsoon or crop destruction by floods bringing in a high level of uncertainty. Also the location of paddy cultivation and rice milling tend to be concentrated.

The greatest culprit has been the fragmented land holdings which leads to the inconsistency in the rice quality. The changes in quality creep in even when similar resources are utilized in cultivation like fertilizers, seeds, etc. Cooperative Joint farming societies should help keep this to a minimum.

Conclusion

The food processing capability in rice sector has a lot of potential for improvement. However it is necessary that the above challenges are addressed so that India utilizes its rice production capacity to its optimum.

About the Author

Varsha Kalyankar K. is a PGDM student of 2013-2015 batch. She loves visiting new places and is a big time foodie. She can be reached at varshak2015@email.iimcal.ac.in

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