Overview of India’s National Food Processing Policy

India is one of the world’s largest producers of food, yet a significant portion of its agricultural output is wasted due to inadequate processing, poor storage, and weak supply chains. To tackle these challenges head-on, the Indian government formulated the National Food Processing Policy – a comprehensive framework designed to accelerate the growth of the food processing sector, create better returns for farmers, and position India as a global leader in processed food exports. This policy isn’t just a government document; it’s a blueprint for transforming how India handles its food – from farm to fork.

Why India needed a dedicated food processing policy 🔗

India ranks among the top producers of milk, fruits, vegetables, grains, and spices globally. Yet, the level of food processing in the country has historically been low – less than 10% of total agricultural output undergoes processing. For perspective, approximately 2% of fruits and vegetables, 8% of marine products, 35% of milk, and only 6% of poultry are processed. This is a massive gap when compared to developed nations where processing rates often exceed 60-70%.

The consequences of this gap are severe. According to the Indian Council of Agricultural Research (ICAR), post-harvest losses of major agricultural produce amount to tens of thousands of crores annually. Food that could feed millions or generate economic value is instead lost due to poor handling, inadequate cold storage, and broken supply chains. The Ministry of Food Processing Industries (MoFPI) recognised these issues early on and identified the food processing industry as a thrust area for national development.

Core objectives of the National Food Processing Policy 🔗

The National Food Processing Policy was formulated with a clear set of goals aimed at building a strong, competitive, and sustainable food processing ecosystem across India. Here are the key objectives the policy aims to achieve:

Ensuring remunerative prices for farmers 🔗

At its heart, the policy is farmer-centric. One of the primary objectives is to ensure that farmers receive fair and profitable prices for their produce. When raw agricultural products are processed into value-added goods – packaged foods, frozen items, canned products, dried goods – the overall value chain expands. This expansion allows farmers to earn more than they would by simply selling raw produce in local markets. The policy specifically seeks to create stronger linkages between farmers, processors, and consumers so that the benefits of value addition flow back to the primary producers.

Reducing post-harvest wastage 🔗

Post-harvest losses remain one of India’s biggest food security challenges. The policy targets a significant reduction in wastage at every stage of the supply chain – from harvesting and handling to transportation, storage, and retail. This is to be achieved through infrastructure development, including cold chains, warehouses, and modern food processing units that can absorb surplus produce and convert it into shelf-stable products.

Addressing malnutrition through processed foods 🔗

India faces a dual burden of malnutrition and lifestyle-related health issues. The policy recognises that processed foods, when fortified with essential vitamins and minerals, can help address nutritional deficiencies at scale. By encouraging the production of nutritionally balanced and fortified food products, the policy aims to close the nutrition gap, particularly in rural and underserved areas.

Boosting competitiveness and attracting investment 🔗

The policy sets out to make India the most preferred investment destination for agribusiness and food processing. It targets a six-fold increase in sectoral investment by 2035. To attract both domestic and foreign investors, the government has created a liberalised investment environment, including allowing 100% FDI through the automatic route for food product manufacturing.

Key principles guiding the policy 🔗

The National Food Processing Policy is built on several foundational principles that guide its implementation across states and union territories.

Creating a conducive environment for entrepreneurs 🔗

A major principle of the policy is to make it easier for entrepreneurs to set up food processing businesses. This includes rationalising the tax structure on both fresh and processed foods, as well as on machinery used in food processing. Before the introduction of GST, the food processing sector dealt with a complex web of central and state taxes that increased costs and created compliance hurdles. The policy advocates for a simplified, transparent tax regime that encourages new entrants – especially small and medium enterprises – to invest in food processing.

Simplifying food laws and regulations 🔗

Historically, food businesses in India had to navigate multiple regulatory frameworks – the Prevention of Food Adulteration Act, Fruit Products Order, Meat Food Products Order, and several others. The Food Safety and Standards Act of 2006 consolidated these into a single law enforced by the Food Safety and Standards Authority of India (FSSAI). The policy builds on this by pushing for further simplification, including a shift from product-by-product approval to an ingredient-and-additive-based approval process. A Parliamentary Standing Committee report on food processing also recommended integrating all approval authorities onto a National Single Window System to reduce regulatory burden further.

Improving infrastructure from farm to retail 🔗

Without adequate physical infrastructure, no food processing policy can succeed. The policy places heavy emphasis on developing cold chain networks, warehouses, food parks, and agro-processing clusters across the country. These infrastructure assets are intended to connect production centres with processing hubs and retail markets, ensuring minimal loss and maximum value addition at every step.

Government schemes supporting the policy 🔗

The National Food Processing Policy does not work in isolation. It is supported by a suite of government schemes that provide financial assistance, infrastructure, and technical support to the sector.

Pradhan Mantri Kisan SAMPADA Yojana (PMKSY) 🔗

The Pradhan Mantri Kisan SAMPADA Yojana is the government’s flagship umbrella scheme for the food processing sector. Originally launched in 2016 with an allocation of ₹6,000 crore, it was designed as a comprehensive package to create modern infrastructure and efficient supply chain management from farm gate to retail outlet. The scheme has since been extended with continued funding under the 15th Finance Commission cycle.

PMKSY covers several sub-schemes including integrated cold chain and value addition infrastructure, creation and expansion of food processing capacities, infrastructure for agro-processing clusters, food safety and quality assurance infrastructure, and Operation Greens (which focuses on stabilising prices of perishable commodities like tomatoes, onions, and potatoes). As of mid-2025, over 1,600 projects had been approved under PMKSY, with more than 1,100 completed, benefiting over 34 lakh farmers and generating employment for more than 4.3 lakh individuals.

PM Formalisation of Micro Food Processing Enterprises (PM FME) 🔗

A large part of India’s food processing happens in the unorganised sector – small-scale units making pickles, papads, snacks, and other traditional products. The PM FME Scheme, launched in partnership with state governments, provides financial, technical, and business support to upgrade these micro enterprises. The goal is to help them comply with food safety standards, improve packaging, adopt better technology, and access formal credit. Common Incubation Centres have been set up across the country so that small entrepreneurs and farmers can use shared processing facilities to reduce their post-harvest losses.

Mega Food Parks 🔗

The Mega Food Parks scheme created large-scale industrial food processing parks with shared infrastructure – including cold storage, testing labs, packaging units, and warehousing. These parks operate on a cluster-based approach, bringing processors, suppliers, and service providers together in one location to achieve economies of scale. While the scheme for setting up new Mega Food Parks was discontinued in 2021, existing parks continue to operate and serve as critical processing hubs.

Technology and innovation in food processing 🔗

The policy strongly encourages the adoption of modern technologies to improve productivity, quality, and competitiveness in the food processing sector. This includes technologies for processing, preservation, packaging, storage, and waste management.

The Ministry of Food Processing Industries actively promotes research and development for product and process innovation. Institutions like the National Institute of Food Technology Entrepreneurship and Management (NIFTEM) play an important role here, offering specialised education, research, and entrepreneurship development in food technology.

The policy also emphasises sustainability – encouraging the efficient use of water and energy, adoption of eco-friendly processing technologies, and productive use of waste generated by food processing industries. Long-term growth in the sector, the policy recognises, must be built on environmentally responsible practices.

FDI and trade policy for food processing 🔗

India’s foreign direct investment policy for the food processing sector is among the most liberal. The government allows 100% FDI under the automatic route for manufacturing of food products, meaning foreign companies can invest without needing prior government approval. For retail trading of food products manufactured in India – including through e-commerce – 100% FDI is allowed under the government approval route.

This liberalised FDI regime has brought in billions of dollars into the sector. Between 2016 and 2022, FDI equity inflows into food processing grew steadily, though recent parliamentary assessments have noted a moderation in FDI due to geopolitical uncertainties. The government has been advised to speed up the approval process further to keep India competitive as an investment destination.

On the trade front, the policy supports the promotion of Indian processed food products in international markets. MoFPI organises trade events like Indusfood to connect Indian food processors with global buyers. The government is also working on aligning Indian food safety standards with international benchmarks such as Codex Alimentarius and ISO standards, which is essential for expanding export access.

Role of FSSAI in food safety and quality 🔗

No food processing policy can function without a robust food safety framework. The Food Safety and Standards Authority of India (FSSAI) is the apex regulatory body responsible for setting food safety standards, granting licences to food businesses, and ensuring compliance across the supply chain.

Under the FSS Act of 2006, FSSAI consolidated seven older food safety laws into a single framework. It sets science-based standards for food products, additives, contaminants, packaging, and labelling. FSSAI also runs initiatives like the Eat Right India movement and the State Food Safety Index, which ranks states on their food safety performance.

However, challenges remain. FSSAI has faced criticism for understaffing, limited testing laboratory capacity, and inconsistent enforcement across states. The Standing Committee on Agriculture has recommended completing all pending food testing labs under PMKSY and ensuring adequate personnel and training for food safety officers. Strengthening FSSAI’s capacity is essential if the policy’s goals around food safety and quality are to be fully realised.

Encouraging women entrepreneurs in food processing 🔗

The policy explicitly recognises the role of women in the food processing sector. Women have traditionally been involved in food processing activities in the unorganised sector – making papads, pickles, spices, and other products. The policy proposes additional incentives from state governments to promote women-led food processing enterprises in the organised sector. This is not just about economic empowerment – it is about formalising and scaling up the valuable skills and knowledge that women already bring to the food value chain.

Challenges ahead 🔗

Despite strong policy intent, several challenges continue to slow the growth of India’s food processing sector. Supply chain infrastructure – particularly cold storage and refrigerated transport – remains inadequate in many parts of the country. Credit availability is a persistent issue, especially for small and micro enterprises in rural areas. The level of processing remains low compared to global benchmarks, and there are significant gaps in technology adoption, especially among unorganised processors.

Additionally, the preference for fresh, locally cooked food over processed products in many parts of India, combined with the high cost of packaging, means that consumer demand for processed foods – while growing – is not yet at the levels seen in other countries. Regional diversity in food habits also makes it difficult to build nationally scalable processed food brands.

The policy acknowledges these issues and provides a framework for addressing them. But effective implementation at the state level, timely release of funds, and stronger coordination between central and state agencies will be critical for turning policy ambitions into ground-level results.

What do you think? Can India’s food processing sector realistically reach global processing levels in the next decade, or do structural challenges in agriculture and infrastructure make that timeline too ambitious? And how can small-scale farmers – who form the backbone of Indian agriculture – be better integrated into the processed food value chain?

References

1. https://www.pib.gov.in/PressReleasePage.aspx?PRID=1780034
2. https://www.mofpi.gov.in/en/Schemes/about-pmksy-scheme
3. https://www.gktoday.in/national-food-processing-policy/
4. https://en.wikipedia.org/wiki/Food_Safety_and_Standards_Authority_of_India
5. https://prsindia.org/policy/report-summaries/food-processing-sector-under-make-in-india-program
6. https://www.ibef.org/news/over-1-100-projects-completed-under-pradhan-mantri-kisan-sampada-yojana-pmksy-benefiting-34-lakh-farmers-across-india
7. https://www.impriindia.com/insights/ministry-food-processing-industries/
8. https://fssai.gov.in/
9. https://www.drishtiias.com/to-the-points/paper3/food-processing-in-india