How to Start a Food Processing Unit in India?

Last Updated at: Jan 07, 2021
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Food processing unit

This article will discuss how to start your own food processing unit in India. But before we discuss the procedures, it is imperative to understand a little bit about the Indian food market. You also need to know what food processing actually means.

Introduction

India is an agrarian economy with 41.49 per cent of its population (as in 2020) employed in agriculture. Agriculture has been the backbone of the Indian economy since ages. India is the second-largest food producer in the world after China. India has an impeccable heritage in farming. Besides, MSMEs producing organic foods have grown phenomenally in the last few decades. Currently, the Indian food market ranks sixth in terms of production, consumption and exports. Additionally, it is one of the largest markets of the Indian Economy. Therefore, food processing units have tremendous growth potential in India.

Now let us delve into some tips on how to start your own food processing unit in India. Moreover, we will also examine some things to consider before penetrating the food processing market.

But first, let us understand what food processing units basically do.

What is a Food Processing Unit?

Food processing refers to the process of transformation of raw materials into edible food products. Further, food processing units convert raw materials into consumable food products. A food processing unit uses tools and techniques to manufacture food products for consumption and storage. Likewise, the food processing industry comprises myriad activities like agriculture, horticulture, animal husbandry, poultry, fisheries etc. Food processing units are indispensable as they take care of the seasonal and perishable nature of foods. 

Mass production of food generates economies of scale thereby enabling all market players to reap higher profits. Currently, this industry accounts for 32% of India’s food market. Likewise, this industry is expected to be valued at INR 53435.52 billion by 2024, indicating untapped growth potential.

So if you are considering an entrepreneurial venture in the food processing industry, then you are on the right track.

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Benefits of starting a food processing unit in India

  • Abundant raw materials.
  • Current consumption patterns skewed towards processed foods.
  • Increasing demand for processed foods across different social classes especially urban middle class.
  • Low production costs.
  • Fiscal policies favouring the development of food processing units.
  • Easy entry and exit barriers.
  • Easy availability of subsidized loans for entrepreneurship.

How to start a food processing unit in India?

  1. Do Business Research

This step involves:- 

  1. Understanding the current state of the food processing industry.
  2. Collecting information on current market players, entry-exit barriers, total market turnover, current total demand and current production costs.
  3. Identifying viable options i.e what kinds of foods you want to and can process.
  4. Determining the type of company – Public Limited, Private Limited, LLP, Partnership etc.
  • Do Market analysis.

This step encompasses:-

  1. Identifying target markets.
  2. Understanding current demand and supply patterns in target markets.
  3. Understanding current pricing structures.
  4. Calculating the production costs you are likely to incur.
  5. Calculating expected revenues to break-even.
  • Location of the food processing unit

This step comprises:-

  1. Identifying if you have easy access to raw materials and manpower.
  2. Ensuring you have a robust supply chain and logistics system at the chosen location.
  3. Moreover, ensuring the location has good electricity supply and transportation facilities to prevent production bottlenecks.
  4. Additionally, understanding tax reliefs and subsidies provided by the government in your chosen location.
  5. Further, calculating costs of running the site like lease or rent costs, maintenance costs etc.

Chalk out a Business Plan

This step involves:

  1. Devising a business plan and strategies to achieve your monthly and yearly targets.
  2. Similarly, drawing a business process flow chart.

Obtain funding for your business

This step comprises :

  1. Determining whether you want more debt-based or equity-based funding. You can raise equity only if your firm is listed on a stock exchange.
  2. Additionally, calculating leverage (Debt/Equity ratio)
  3. Determining how you are going to service your interest payments.
  4. Allocating some funds for contingencies.

Complete legal formalities

  1. Obtaining FSSAI (Food Safety and Standards Authority of India) license for your food products.
  2. Further, as per Companies Act 2013, register your food processing unit with the Registrar of Companies.
  3. Registering your firm for all taxes like sales tax, service tax, VAT etc.
  4. Moreover, obtaining ISO 22000 certification. It enables firms to ensure food is safe by controlling safety hazards.
  5. You can also apply for a 9001 – 2015 quality management certificate. It aids in brand-building

Prepare a project report

A Project report envisages the following:

  1. Project introduction with all product details
  2. Market Survey
  3. Plant and Machinery
  4. Land and Building
  5. Raw Materials
  6. Manufacturing Techniques
  7. Financial Aspects
  8. Staff and Personnel requirements.

Implementation

Once you have completed all the above-mentioned procedures, you arrive at the crucial step of implementation. Moreover, ensure you execute everything as per your business plans. Further, your food processing unit is now up and ready to function smoothly and meet delivery timelines.