As part of its grand plan to link rural and urban economy, the UPA government is contemplating a package for the food processing sector,including incentivising FDI and private investment in infrastructure and duty sops for the industry.

There is a realisation in the government that unless concerted action is taken, the existing mismatch between farm production and the processing capacity would aggravate further. This would result not only in substantially higher levels of wastage of agri-produce, but also in unremunarative prices to the farmers, low level of processing, higher levels of wastage of agri-produce, poor value addition and low share of processed food in the global food market. In short, there is need for an integrated strategy for the food processing sector.

The government is considering granting investment in food processing industry the status of infrastructure, strengthening institutional framework for developing world class technologies, an integrated food law, undertaking capacity building of small and unorgansied sector, launching a major promotional campaign for this sector and incentivising retailing.

Informed sources say the package could form part of the Budget 2007-08 or may see its reflection and manifestation in it.

With the farm sector weighing heavily on its agenda, the government is all set to give a boost to the sector.

Refrigerated trucks, refrigeration equipment and capital goods needed for the food processing sector could witness a reduction in custom duty. Besides, sources say, interest subsidy could be extended to setting up such facilities in rural areas.

The lack of cold chains lead to wastage of about 40 per cent of farm produce, resulting in an annual loss of Rs 50,000 crore (Rs 500 billion).

A clutch of Indian firms are investing in agri-business.

Reliance is setting up rural business hubs across the country to source and process farm produce. ITC has developed its e-Choupal and 'Choupal Sagar' model for agri-sourcing.

Official sources say that in spite of all efforts, adequate response from the private sector was not forthcoming and the Achilles heel is the lack of critical infrastructure in the food processing sector. The government, therefore, feels that it is important to create a conducive environment to encourage Public- Private partnership.

The government is also considering creation of infrastructure like Mega Food Parks to provide common facilities to the Small and Medium Enterprises processing units and also those functioning as sourcing hubs for retail and industry. The thinking of the government is to avoid the route of acquisition of land keeping the interest of the farmers. The Special Economic Zone controversy has been like a storm in a tea cup and the philosophy now is 'once burnt twice shy.' The government is clear that without adequate supply and cold chain infrastructure the food processing industry will not be able to realise its full potential.

The government's thinking is to provide assistance and infrastructural support to the farmers and processors involved in highly perishable horticulural produce like grapes, which have a huge market potential in India and abroad. The government proposes to promote the wine and beer industry, by way of treating it differently from hard liquor, on account of ability for value addition.