Agro Based Industries – Types, Importance, Challenges and Government Schemes

Agro-based industries are those in which the raw materials are procured from the agricultural and allied sectors such as animal husbandry and dairy. The agro-based industries are primarily dependent on the agriculture sectors for it’s raw materials.

According to the economic survey of India, during the last five years (ending 2018-19), the food processing industry sector has grown at an average annual growth rate of around 9.9% as compared to around 3.12% in agriculture and 8.25% in manufacturing (at 2011-12 prices).

The Indian economy has huge potential to achieve the sustainable development goal by 2030, but the important thing that should be noted is that if we will be not able to link one sector’s growth to the other sector it will create a barrier to achieve the target.

Agro-based industry can link the primary sector to the manufacturing sector which will minimise the extra burden on agriculture sectors. It will also remove distinguished employment from the agriculture sector which will result in inclusive development.

Agro-based industries have several advantages in India because of the following reasons;

1. Robust demand, large population, and rising urban and rural income is driving the demand. 

2. Policy support: Government has set a significant agriculture export target of $60 billion dollars by 2022

3. Attractive opportunity as demand for agriculture input such as hybrid seeds and fertilizers and allied services like warehouse and cold storage is increasing.

4. Competitive advantage as India has a high proportion of agricultural land and diverse Agro climatic condition which encourages the cultivation of the different crops which can be used as a raw material for the agro-based industry. 

According to the department for the promotion of industry and internal trade – The Indian food processing industry has attracted 10.2 billion US dollars between April 2020 and September 2020.

It is also a sunrise sector which has huge potential to improve the socioeconomic status of Poors.

Agro-based industries accommodate 3% of the workforce only.


Types of the agro-based industry:

1.Textile industry: This industry has a market value of 108 US billion dollars in 2015-16 which is expected to achieve 225 US billion dollars by 2023. Its growth increasing approximately 9% per year

2. Sugar Industry: The production of sugar in India is 29 million metric tons which is almost 17 percent of the total world production. Recently India has become one of the largest producers of sugar in the world.

3. Vegetable Oil Industry: Vegetable oil production in India is almost 5% of the total vegetable oil production in the world. India is also the largest consumer of edible oil.

In spite of being the largest producer, we are unable to meet our domestic requirement of 23 million tonnes and hence the additional required oil is imported from the other countries. 

4. Tea Industry: India is the second-largest producer of tea in the world. We are also the largest consumer of tea. It is to be noted that 75% of our tea demand is fulfilled by the local production and the rest 25% is imported from other countries.

5. Leather Industry: India has a huge cattle population. 13% of the world’s leather is produced in India which creates about 20 lakh employment.


Importance of agro-based industries:

1. Employment opportunities: It has huge potential to accommodate the distinguished employees from the agriculture sector which can result in improved inclusive growth.

2. Regional development: The urban area is the engine of the economy, However, the agro-based industries can revive the rural economy and can provide regional balance and reduce the disparity

3. Export promotion: The exports can be promoted through The Agricultural and Processed Food Products Export Development Authority (APEDA) as India is an agriculture-based economy, It can provide various agro-based products which will result in more exports.

4. Industrial production: The agricultural products are converted into the manufactured products which lead to the production of the industry and improve participation in GDP.

5. Poverty alleviation: The agro-based industries link various sectors and provide employment in steady livelihoods which will lead to income improvement and reduce the poverty level.

6. Foreign exchange: When agriculture export increases it will improve the foreign exchange reserves also.

7. Nutrition and food security: When the crop diversifies for the agro-industry leads to improve nutrition through food fortification.

8. Link the difference sector: Agriculture sector production linked to the manufacturing sector and then to the service sector through marketing and advertisement.

9. Reduction in Post Harvest losses: Approximately 35% of food production is wasted due to post-harvest losses. If a storage facility will be available for the industry then losses can be minimised.

10. Improved shelf life: When the raw material becomes the product and hence can be preserved for a long time.

11. Diversification of food choices: When the agricultural products become raw material for the enterprises, it creates various types of products which leads to increasing diversity of food choices.

12. Establishment of MSME: The establishment of new MSMEs required to generate a variety of agro-based products and provide employment.

13. Increment in farmer’s income: As the government has planned to double the income of farmers by 2022, the agro-based industry can play a vital role as farmers can provide regular raw material to these industries.

14. Controlled food inflation: Because of the availability and accessibility of choices.

15. Reduce the migration: When the agro-based industries will be established in the rural areas, Job creation will be more and hence migration of labours to bigger cities will be reduced.

The agro-based economy is the process in which agricultural products are transformed into a variety of foods and other forms. It is under the priority sector of the government for development.


Challenges face by agro-based industries:

1. Seasonal in nature: As agriculture provides raw material to agro-based industries but agriculture is seasonal in nature hence this industry also becomes seasonal in nature.

2. Low landholding: Due to low land holding, the landowners could produce little food grains which may not be sufficient to supply to the industries and hence low productivity.

3. Perishable products: The products are perishable in nature and hence create wastage due to the poor availability of the cold chain.

4. Quality control and poor standard: The poor quality of products pose a big challenge to the exports.

5. Tax and duty: The higher taxes and duties lead to unfair competition with the giant companies.

6. Value addition is low compared to other countries.

7. Skill and training is traditional so need technology advancement, integration, and regular assessment.

8. Competition with the other neighboring countries is high which leads to diverting in the FDI.

9. Supply chain disruption: Due to poor connectivity and logistics problem also cold chain have poor availability

10. Poor marketing and advertising: Poor marketing lead to poor acknowledgment and increase the vulnerability of failure.


How to improve the Agro-based industries:

1. Bring consistent growth in the agriculture sector so that it can supply the raw material regularly.

2. Measures like providing timely credit to agro-based industries make it more competitive.

3. Market Reform should be there to remove the middle man from the supply chain.

4. Improve productivity through modern farming and the use of technology in the industry.

5. Improving the marketing of agricultural products and agro-based industry products through standardization of product and quality control.

6. Bring a large food management program that can manage the farm to the folk and reduces vulnerability.

7. Shift from agriculture as a rural livelihood sector to the modern business enterprise through the incentive of government policy.

8. Focus on nutrient crops and food fortification lead to improved health.

9. Village-level procurement system could be better as self-help groups better example is Sudha dairy.

10. Linkage between production and processing lead to the selling of product at a time and reduce wastage.

11. Development of rural markets can revive the rural economy where agro-based industry plays vital roles.

12. Option of selling outside side of the APMC Market can break the cartel of the middle man.

13. Warehouse up-gradation like cold stores could help to preserve perishable goods.

14. Strengthening of railway freight operation leads to fast movement in less time.

15. Provide farmers with basic education and training to transform from producer to entrepreneur.

16. Strengthen agriculture extension services which provide technical information to farmers about practice guidance of the use of these inputs and services lead to an increase in productivity outcome.

17. Duty-free import and export lead is need to incentives the industry.


Major steps taken by the government to improve the agro-based industries:

100% FDI allowed so that technology as well as finances available.

Food park establish where cluster-based approach included leading to the farm to folk

Contract farming through the land lease act provides cluster farming increases mechanization leads to reduce wastage.

Unified cold storage and value addition infrastructure created.

Created e platform to provide single window clearance.

Pradhan  Mantri  Kisan  Sampada  Yojana: It is a  Central  Sector  Scheme that aims to supplement agriculture,  modernize processing and decrease agriculture waste. 

The following  schemes will be implemented under it; 

It was previously known as a scheme for Agro-Marine Processing and the development of Agro-Processing  Clusters (SAMPADA). creation of modern infrastructure, growth of food processing sector, and providing better prices to the farmers. 

PM – Formalization of Micro Food Processing Enterprises: The scheme was launched as a  part of Atmanirbhar  Bharat  Abhiyan. It is to be implemented over a period of five years from 2020-21 to 2024-25. 

The Scheme adopts the One District One Product approach to reap the benefit of scale in terms of procurement of inputs, availing common services, and marketing of products. 

Operation Greens: It was launched on the lines of Operation Flood to double the income of farmers by end of 2022.

It aims to promote farmer producers organizations agri-logistics processing facilities and professional management. 

Pradhan Mantri MUDRA Yojana: The program was launched to give access to cheap credit to poor and small fledgling businesspersons with the objective to provide self-employment. 

Stand Up India Scheme: It is under the aegis of the Ministry of Finance. It is to promote entrepreneurship among Scheduled Caste/Schedule Tribe and Women. 

PM’s Employment Generation Programme: PMEGP is a major credit-linked subsidy program being implemented since 2008-09 and it is extended up to 2019-2020. 

It is aimed at generating self-employment opportunities through the establishment of micro-enterprises in the non-farm sector by helping traditional artisans and unemployed youth in rural as well as urban areas.  

Zero Defect and Zero Effect (ZED) Scheme for MSMEs: The objectives are, financial Support to  MSMEs in ZED Certification Scheme to develop an Ecosystem for Zero Defect Manufacturing in MSME. Promote adaptation of Quality systems and energy-efficient manufacturing. Enable MSMEs for manufacturing quality products.


This article is written by;

Mr. Pankaj Kumar Gupta

(Email ID: [email protected])