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Government proposes 100% FDI in food processing

With a view to benefit farmers and reduce wastage of fruits and vegetables, the government today allowed 100 per cent foreign direct investment in marketing and processing of foods products.

Finance Minister in Budget for 2016-17 said the policy has to address the requirements of farmers and food processing industry as a lot of fruits and vegetables grown by farmers either do not fetch the right prices or fail to reach the market.

"Food processing industry and trade should be more efficient," he said.

"100 per cent FDI will be allowed through FIPB route in marketing of food products produced and manufactured in India. This will benefit farmers, give impetus to food processing industry and create vast employment opportunities," he said in his speech.

When asked to comment on his party's stand on FDI in multi-brand retail later during an interaction with Doordarshan, he said: "My party has reservations... Our intention (on FDI proposals in Budget) is to let foreign companies buy products from our farmers, process it and sell it domestic or international market, it will help farmers."

Reacting on the move, Food processing Minister Harsimrat Kaur Badal said the announcement will provide tremendous impetus to the sector.

"The farmers will also get better price for their produce and it will create strong linkages from farm to folk," she said.

Dhanraj Bhagat, Partner, Grant Thornton said that it is still not clear whether this will be permitted for retail marketing or only wholesale marketing.

"We will need to study the fine print before concluding on the same. In the event that this applies to retail marketing then it could be a prelude to opening of multi-brand retail marketing, beginning with the food sector. The opening up of this retail sector for food would be beneficial to the farmer, which is one of the key directions in the 2016 budget," Bhagat said.

This article appeared in Business Standard on 29th February, 2016.