Why Start a Food Manufacturing Business?

India is a diverse country. Its food is as diverse as its people and geography. India and its connection to food are of utmost importance. The taste of Indian flavours and spices is making the Indian food manufacturing industry popular not only in the domestic market but in the global market as well. The food manufacturing industry is a fast flourishing industry. Starting a food manufacturing industry is a profitable option indeed.

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What Products You Can Offer?

Well, if you have finally decided to start a food manufacturing company, the next step would be finalizing the products. In the case of food, the list of products is inexhaustible. A few options that have high demand and good performance in the market are as follows:

• Ready to eat packaged foods
• Ready to cook foods
• Bakery products
• Frozen foods
• Snacks
• Chocolate production
• Bread production
• Cereal production
• Bottled water
• Spices and curry powders production

Industry and Market

The Indian food industry is a high-growth and high-profit industry. Its contribution to the world food trade is growing rapidly. The food and grocery market in India is the world’s sixth-largest. The Indian food processing industry makes up 32% of the total food market of the country and in terms of production, consumption, export, and expected growth, it is ranked fifth. It contributes approximately 8.80 and 8.39 % of GVA in Manufacturing and Agriculture respectively, 13% of India’s exports, and 6% of total industrial investment.

Benefits to Start

The government through MoFPI is encouraging investments in the industry. It has approved proposals for joint ventures (JV), foreign collaborations, industrial licenses, and 100% export-oriented units. As per the data given by the Department of Industrial Policies and Promotion (DIPP), the food processing sector has received approximately USD 393.41 million worth of FDI in 2020-21. During the period of April 2000 till November 2021, FDI WORTH USD 10.88 billion was received by the food processing sector. The CII has estimated that the food processing sectors have the potential to attract more than US$ 33 billion of investment over the next 10 years. 

Under the automatic route, 100% FDI is permitted in the food processing industries in India. As per 2020-21, data India is exporting Ready to Eat (RTE), Ready to Cook (RTC), and Ready to Serve (RTS) food products to U.S.A, U.A.E, Nepal, Canada, and Sri Lanka, which were more than $ 2 Billion in 2020-21.

The government has approved the Central Sector Scheme – Production Linked Incentive Scheme for Food Processing Industry (PLISFPI) to support food manufacturing and Indian food product brands in the international market with an outlay of Rs. 10900 crore. 

The Government is also implementing Pradhan Mantri Kisan Sampada Yojana (PMKSY) with an outlay of Rs. 6000 crore. 

Government Incentive Schemes 

Production Linked Incentive Scheme for Food Processing Industry (PLISFPI)

The implementation period of this scheme will be from 2021-22 to 2026-27.

This scheme has two components. 

The first component is associated with incentivizing manufacturing of four major food product segments viz. Ready to Eat/ Ready to Cook (RTE/ RTC) foods including Millets-based products, Processed Fruits & Vegetables, Marine Products, Mozzarella Cheese.

The second component is associated with supporting branding and marketing abroad to incentivize the emergence of strong Indian brands.   

PMKSY:

There are a number of schemes that will be implemented under PMKSY. These are as follows: 

• Mega Food Parks
• Integrated cold chain and value addition infrastructure
• Creation/Expansion of Food Processing/ Preservation capacities 
• Infrastructure for Agro-processing Clusters
• Creation of Backward and Forward linkages
• Food safety and quality assurance infrastructure
• Human resources and institutions
• Operations Green

Nivesh Bandhu:

Nivesh Bandhu is a one-stop platform for all the stakeholders of the industry, including farmers, processors, traders, and logistics operators. It brings together central and state government policies and incentives available for the food processing sector. A food map is also available on the portal that can be helpful for the investors to find various project locations.

How to start the food manufacturing business?

Land

It is the choice of the project proponent to decide the size and scale of his industry. As per the resources available the industry could be small, medium, or large-sized.  The land area required for the industry would depend upon the market size and share of the industry. The land area may range from 0.5 acres to 50 acres. The land area and location should be finalized considering the availability of raw materials, manpower, transportation facilities, ease of doing business, etc. In some states, the government provides tax exemption and subsidies on establishing businesses in specific locations. 

Building and Construction

The building should be designed considering the requirements of the business. The Architect should prepare the building plan taking into consideration the machinery required and the processes that are to be carried out in the plant. The safety measures as mandated by different rules and regulations should be in place. The average construction cost comes around Rs. 2000-4000 per square feet. 

Financial

Finances and financial compliances are some of the most important requirements for running a business smoothly. There are a few tax registrations that are mandatory. 

• Income Tax:- Each and every business is mandated to have a PAN (Permanent Account Number) and TAN (Tax Account Number), under the name of the business or the owner, in case of a sole-proprietorship, for filing income tax.
• GST Registration:- GST registration is mandatory for businesses having a financial turnover of more than Rs. 20 Lakhs (Rs. 10 Lakhs for special category states). In some cases GST Registration is mandatory irrespective of the turnover:

1. The business involving inter-state supply of goods and services
2. The situation where the tax is paid by the person receiving the goods/services instead of the supplier.
3. A business operating on an e-commerce platform.

• Professional Tax:- This is levied by the local municipality on the salary paid to every individual. The tax rate is different in different States. 

Legal and Statutory

Registration of the business entity: You are free to decide on whatever business structure you want to choose for your company. The business structure that you choose should be suitable for your conditions. The different structures to choose from are as follows-

• Private Limited Company

It’s the renowned legal structure for the business with multiple benefits such as limited liability, separate legal entity, ease in share transfer, etc. A private limited company can be registered with a minimum of 2 directors and 2 shareholders, where shareholders and directors can be the same person. At maximum, the directors can be 15 and the members can be 200. 

• One Person Company

The biggest advantage of OPC is – that there can be only one member as the sole owner who will be responsible for all the economic and organizational decisions. It is mostly preferred for micro-businesses.

• Limited Liabilities Partnership

It is an upgraded version of the general partnership and the partners are known as Designated Partners. The partners in LLP have limited liability, meaning that the personal assets of the partners can’t be used for paying the debts of the company. All partners are shielded from joint liability. For professional firms, micro and small businesses that are family-owned or closely-held LLPs are the most recommended.

• Proprietorship

A sole proprietorship is a kind of business entity that is solely owned, controlled, and managed by a single person. It is the easiest way of running a business, with the ease of registration process and with lease compliance responsibilities. The proprietor possesses the complete rights of the business to himself in terms of legal formalities, decision making, finance, etc.

• Partnership

A partnership comes into the picture when two or more people agree to go into business together and both might be from the same family or same association, whether or not they have a written contract. Validating the details in a partnership agreement that specifies each partner’s rights, responsibilities, and share of the profits is mandatory.

Licenses and Registration

1. Food License

Any FBO (Food Business Owner) who is planning to start a business that involves activities related to food (food processing, manufacturing, re-labelers, repackers, retailers, distributors, suppliers, caterers, etc.) need to register itself or get a license from FSSAI depending upon the annual turnover.

• FSSAI

FSSAI stands for Food Safety and Standards Authority of India which was established under the Food Safety and Standards Act, 2006. It comes under the Ministry of Health & Family Welfare. FSSAI regulates and checks for safe food manufacture, storage, and handling practices of FBOs. FSSAI is responsible to check for compliance and see if FBOs are following the regulations and standards mentioned under the Food Safety and Standards Act, 2006.

• What is FSSAI License?

Any FBO requires an FSSAI Registration or an FSSAI License depending upon annual turnover, installed capacity, area of operations, branches, etc. FSSAI License is a 14 digit license number issued to FBOs compliant with the rules and regulations laid down under Food Safety and Standards Act, 2006. The FSSAI License number should be printed on the food products with the FSSAI Logo. 

Three types of FSSAI License

• FSSAI Basic Registration

Small start-ups and businesses having an annual turnover under Rs. 12 Lakhs should seek FSSAI basic registration. Registration can be obtained from the state government by submitting the needed documents. Registration application should be applied through Form A.

• FSSAI State License

Mid-sized companies having an annual turnover of more than 12 Lakhs but less than 20 crores need to obtain FSSAI State License from the State Government. State License is to be applied through Form B.

• FSSAI Central License

Large businesses having an annual turnover of more than 20 Crores need to obtain FSSAI Central License from the Central Government. The Central License is to be applied through Form B.

Documents for FSSAI Basic Registration (Also required for State and Central)

• Duly-Filled Form A signed by all directors/partners/proprietor/ Executive members of the society [Form B for State and Central License]
• On the letterhead of the company, Food Safety Management System (FSMS) declaration should be done
• Annual Turnover of the Food Business Operator (FBO) determined by Proof of Income
• The person appointed by the firm/company nominated in Form IX
• Self-Declaration by Director
• Affidavit on Non-Judicial Stamp Paper

Additional Documents for State License

• Location’s Blueprint or layout 
• A list specifying the Equipment and Machinery installed or to be installed at the location
• Copy of the license and NOC from manufacturers
• Authority letter specifying the name and address of the responsible person

Documents for Central License

• An Analysis report of water from a certified and/or a government health laboratory
• IEC issued by the Directorate General of Foreign Trade
• For units involved in the manufacturing of mineral or carbonated water, a pesticide residue report of water
• Source of Milk
• Proof of Annual turnover, if required
• Meat provider/ Meat processing units
• Certificates issued by the Ministry of Tourism, if applicable
• Vehicles turnover proof, if applicable
• Articles of Association (AoA) and Memorandum of Association (MOA)

2. Pollution Clearance

Since the food manufacturing industry is considered a polluting industry as per CPCB as well as SPCBs, Pollution clearance (Consent to Establish/Consent to Operate) is required from the respective SPCB. Depending on the type and scale of the business operation a category-specific license is required. Most of the food processing industries fall in orange and green categories.

CTE should be obtained before establishing the business and CTO is required before the beginning of the operations. CTE is a one-time NOC whereas CTO requires renewal from time to time.

3. Shops and Establishment Registration

As per the Shops and Establishment act, 1953, an FBO is mandated to get a trade license by registering the business with the local authority. The FBO should send an application along with the required fee and details of the business to the concerned local municipality or health department. An inspector will visit the premises for inspection. After the complete inspection and verification of the documents, the license is issued to the FBO.

4. Fire Department NOC

A NOC from the concerned fire department is required as well before starting the business. The FBO should apply through an application accompanying necessary documents like- building plans, building model, and certificate from the architect. A questionnaire related to compliance with fire safety rules and regulations shall also be filled out by the FBO. An inspection of the premises will be carried out by the fire department officials after the verification of the documents. 

5. Trademark Registration

Trademark registration is not mandatory but it is an added advantage for any business for faster growth and building a brand image in the market. The FBO can get a trademark registration by registering over the Intellectual Property India Portal with necessary documents and fees.

6. Water testing and an Organic testing Certificate

Water is the most necessary ingredient for preparing any food item. The water being used by the FBO for manufacturing food items should be of the best quality. A water testing certificate should be obtained from a certified agency in order to comply with the underlying permissible limits.

7. Import and Export Code (IE Code)

Any business that is importing goods is required to obtain IE Code. IE Code application should be submitted to the Directorate General of Foreign Trade (DGFT) along with necessary documents and fees. The IE Code registration is a one-time requirement and it has no additional compliances or annual filings. 

Machinery 

The food processing industry involves the processing of raw materials into an attractive and marketable food product. For this processing which is diverse and complex, a variety of machinery and equipment is required. The various equipment involved in the production cycle are as follows:

Preparation Equipment

Cleaning Equipment:- The cleaning process involves the dry process and wet process. The raw material is to be cleaned thoroughly so that any contaminant can be removed from the surface of the material. The following types of equipment are used for cleaning: 

• Sterilizers
• Soak/Floatation Tanks
• Spray Washers
• Magnetic Separators

Grading Equipment:- this process is associated with sorting and determining the overall quality of the raw material. Equipment used:

• Tungsten lights
• Image Processors

Peeling/Skinning Equipment:- The undesirable and inedible parts are removed in this process. Equipment employed:

• Pressure vessels (Flash steam peeling)
• Stationary rotating blades (Knife peeling)
• Conveyors and Furnaces (Flame peeling)

Sorting Equipment:- This process is almost similar to the dry cleaning process. 

• Sieves/Screens
• Sorting Conveyors
• Disc Separators

Mechanical Equipment

Size Reduction:- Mechanical processes involving shear, impact, or compression force are used to reduce the average particle size of solid food matter. 

• Grinding/Crushing: Roll crushers, Pressure mills, Strainers/Pulpers
• Cutting/Chopping: Slicing machines, Meat grinders

Size Enlargement:- These processes are used to increase the average particle size of solid food matter.

• Extrusion: Refrigerated extruders, Non-thermal extruders
• Agglomeration: Pelletizing Equipment, Rotating Drums, Tableting equipment, High-speed agitators
• Forming: Confectionary molders, Bread molders, Pie, and Biscuit formers

Homogenization/Emulsification:- The liquid food matter is homogenized and average particle size is also reduced.

• Emulsifiers
• Homogenizers
• High shear mixers

Mixing/Blending Equipment:- This process is used to maintain a uniform mixture.

• Fluid mixers
• Dough/Paste mixers
• Solid mixers

Packaging and Labelling Equipment

Raw material

The raw material is procured from the producers to make finished goods. The raw material required depends upon the type of food being manufactured in the industry.  For e.g. Grains, nuts, and seeds; vegetables and fruits; seafood and meat; dairy products, poultry, etc. The raw materials being used in the manufacturing process should be of the best quality. 

The government developed the “Nivesh Bandhu” Investor Portal. The trade section of this portal allows the food processors to procure raw materials. 

The food producers can procure raw materials from FPOs (Farmer Producer Organization).

Staff

To handle the operations and functioning of the business, manpower is required. The staff of the industry constitutes of people having different job roles according to their experiences and capabilities. The basic teams required are- Management, Human Resources, Operations, Quality, Sales, and Labor. 

The people employed in any business are subjected to different labor law regulations and registrations:

• Employee State Insurance registration

The businesses having more than 10 employees earning less than Rs. 21,000 per month must do ESI registration. 

• Employees Provident Fund registration

The businesses having more than 20 employees must obtain EPF registration. The employees earning less than Rs. 15,000 per month are mandated to be covered under EPF.

Manufacturing/Service flow

The manufacturing flow constitutes all the processes involved in making a finished good beginning with raw material. 

In order to understand the manufacturing/service flow, let’s take an example of potato chips manufacturing.

Conclusion

The food manufacturing industry is a prospering industry. In recent times the food habits and consumption patterns of people are shifting from home-cooked towards processed and packaged food and the production cost is decreasing. In this changing scenario, this industry ensures very profitable and quick growth. The food processing sector in India is one of the largest in the world. Its output is expected to reach $535 billion by 2025-26. This is an outstanding time to start a food manufacturing business. 

Why Corpseed?

Corpseed is the one-stop solution for setting up a new industry in India. We facilitate end-to-end solutions starting from company registration to quality management certificates. Our team of Industry veterans catering the in-depth knowledge of this industrial sector provides the best in class consultation to overcome all the compliance burdens and provide hassle-free delivery. 

Our specialists have the technical knowledge and industry-specific experience to understand the challenges that this sector confronts, as well as extensive experience working with important government agencies. Our expertise in liaisoning with government officials helps us to represent our clients whenever required.