On top of it, the market intervention by governments in a number of states through application of the essential supplies maintenance act (ESMA), anti-hoarding drives, fair price sales outlets and retail price control of highly essential items of mass consumption are threatening to further choke the supplies of basic inputs for the food processing industry. The states include Maharashtra, West Bengal, Madhya Pradesh and Rajasthan, the traditional hubs of the processed foods industry.

Traditionally, the small-scale sector has been the backbone of the industry, employing lakhs of people in manufacturing and marketing of a variety of items from puffed rice, chivda, chiki, cookies, condiments, cooking aides, flavours, potato chips, noodles, juices and sauces to bakery products and dehydrated and frozen vegetables. Many organized sector players like Britannia, ITC Limited, Pepsi Foods, Hindustan Unilever, Parle, Reliance Industries, Spencers, More, Keventers, Mother Dairy, etc. are involved in branding and marketing of hordes of small-scale sector products. In recent years, several new companies and new processed foods brands have entered the market. They include Unibec of Australia with a production facility near Bangalore and West Bengal-based Bisk Farm and Priya.

Thanks to the changing lifestyle and eating habits of a growing number of Indians, the processed foods industry has, of late, been growing at a phenomenal rate of 25-30 per cent a year. Unfortunately, there is very little reliable data available to indicate the real turnover of the industry. This is because of the presence of hundreds of thousands of units in the small-scale and cottage industry sectors. Which is why no one in the government or in the industry is capable of saying for certain to what extent the basic food articles meant for common consumption is being diverted to the foods processing industry. This also makes official claims that there is no food shortage in the country and the present food production is enough to ensure per capita food supply of 55 grams both unrealistic and unreliable.

The diversion of a good chunk of the agricultural produce from the traditional farm-to-mouth to farm-to-factory route has been steadily reducing the availability of food articles for direct consumption resulting in the rise in their prices in the retail market. Now, the drought conditions across the country is leading to heavy shortage of agri-products and price surge, affecting both the farm-to-mouth and farm-to-factory routes. Since the government is rightly concerned about the availability of food articles at affordable prices for the consumption of the poor and the common man, the industry has to bear the burnt of the commodity shortage and the rising prices. Thousands of small units are faced with the prospect of immediate shut-down for want of basic inputs.

The shortage and high prices of basic inputs have become a threat to the business of even the large and medium-scale companies for a variety of reasons. Since a good portion of their turnover comes from the brand-sale of products obtained from the small units, these companies are hit by the fall in supplies from the small manufacturers. Furthermore, the sales margins are also under pressure for the first time in recent years as the organised sector units are finding it difficult to pass on the latest rise in the input costs entirely to consumers. For large and medium-scale manufacturers, the pressure is more from external than internal sources.

Thanks to the liberal import regime, almost all popular foreign brands of processed foods - from potato chips, sauces and biscuits to dairy products - are available in the domestic market. Of late, the price gaps between high-end domestic brands and imported rival brands are shrinking and so are the sales of the top-end local brands. Even in popular segments of confectionary items, products such as biscuits from countries like Bangladesh, Malaysia, Indonesia and West Asian emirates are flooding the department stores in metro and mini-metro cities. Indications are that the import of processed foods will grow further in the coming months as the domestic industry grapples with the adverse impact of the nationwide drought and shortage of basic food items.

Ironically, the union and state governments do not seem to be quite alive to the serious shortage situation prevailing in the foods market despite alarmingly high price levels of almost all basic food articles in the last few weeks. The governments also appear to be much less concerned about the issues concerning the country's processed foods industry which has grown really big in the last 10 years. With effect from September 1, food retailers, including retail chains, in most parts of the country have cut down stocks of grains, cereals, sugar and edible oils to comply with state government-imposed stock limits. Correspondingly, the prices of these basic items have been raised by 15-40 per cent almost in a single stroke.

It is a paradox that the union government is still sitting pretty on the issue of the growing food shortage and the resultant increase in the prices of not only the basic items but also the processed foods. The unfortunate development is. Posing a threat to the security of millions of jobs both farmlands and factories across the country. The national government and the state administrations must sit together to devise without any more delay at least a short-term strategy and action plans to minimise the impact of the current food shortage on both farmers and food processors for the ultimate relief to the common man. (IPA Service)