Prospects in the Food Processing Industry

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Prospects in the Food Processing Industry


Nepal's import of agricultural products has witnessed an 18 percent annual average growth over the past 12 years.  During the same period, the average annual growth of Nepal's overall import was just 15 percent.  

In FY2019/20, the share of oilseeds in total agricultural imports was 15 percent, followed by rice (14 percent) and edible oils (12 percent). But the list of agro products that Nepal imports is very long. For example, pulses, fruits, vegetable, maize, spices, oilcake, wheat, processed edible items and nuts too are imported in big quantities. Similarly, tobacco items, alcoholic products, sugar, malt extract, dairy products, fish, bran, chocolate and flours of cereals are also being imported in considerable amounts.

The agricultural sector in general and the food processing industry in particular has emerged as the single largest industrial sector across the world. Due to such growing importance of the food processing industry, Nepal's immediate neighbour, India, has set up a separate Ministry (Ministry of Food Processing Industry) to promote, regularise and enhance the sector. Urbanisation, migration, hectic lifestyles and disintegration of the family institution are some of the major factors that are shaping the pattern of the modern agricultural and food processing industry.

Nepali society too is transforming and adapting to the culture of developed societies. This structural change in Nepali society will ultimately transform the Nepali kitchen, its culinary system and the food habits of the people. In the long run, traditional agriculture practice and food habits will be replaced by commercial farming and takeaway culture. The food processing industry is at the centre of the agricultural sector and there should be vertical and horizontal integration with other activities for this industry to be strong.

That means, the food processing industry should get sufficient attention to strengthen it. Its backward linkage with farm activities and agricultural marketing has to be strong. At the same time, the linkages among the primary processing industries with the final product manufacturing industry has to be strong also. This requires a robust transport and exchange mechanism, as well as a clear legal infrastructure.  There are lots of areas to improve in those fields in Nepal.

Annual import trade of around Rs 243 billion indicates huge investment potential in this sector. Strengthening the existing food processing industry with subsidies, tax waivers and incentives, supporting necessary research and development activities and clear and strict regulatory systems are some of the moves that the Nepal government should make in order to lay a strong foundation for the Nepali food processing industry to prosper and to encourage investment.

(Bajgain is a Senior Officer at TEPC)

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