Policy on cards to boost investment in agro-processing

The Ministry of Industries has drafted the Agro-food Processing Industry Policy 2021 to attract investments in the agro-processing sector that remains largely ignored by entrepreneurs despite having huge prospects both in the domestic and international markets.

In many countries of the world, including neighbouring India, ripe mangoes are processed as canned and frozen slices and in various other ways, and are sold throughout the year.

According to online marketplace Alibaba, the top three markets for processed mangoes are Eastern Asia (40% of the market), Middle East (20%) and North America (10%), where dried mangoes, frozen dried mangoes, soft sweet dried mangoes and sliced mangoes are in high demand.

Even though over 20 lakh tonnes of mangoes are produced in Bangladesh every year, no agro processing industry here markets the fruit by processing it in these ways. Consumers can buy mangoes directly from the market for only about three months during the harvesting season. Producers also are deprived of fair prices of their produce as supply exceeds the demand during this period.

In spite of having huge potential both in the domestic and international markets, mango processing in the country is limited to juice production by a few companies.

The same is true of jackfruit.

About 19 metric tonnes of jackfruit have been produced in the country this year.

Notwithstanding that the national fruit is produced in a huge quantity each year, no initiative is visible to market jackfruit pulp by processing it or making any other product from it. On the contrary, it is sometimes seen that farmers are throwing jackfruits on the road due to low prices.

In order to attract investments in the agro-food processing sector, the government will provide various incentives including capital assistance at nominal interest rates, interest subsidies, tax exemption on imports of capital machinery, research incentives, laboratory grants, waiver of income tax, and skilled workers, as mentioned in the draft policy agro-processing industry policy.

The draft policy calls for ensuring $5 billion foreign investment over the next five years. It is expected to create new employment opportunities for 1 lakh people.

The industries ministry has already sent the draft policy to various ministries, agencies and business associations for their feedback. Once they give their opinion, the policy will be taken up in the cabinet meeting for final approval.

The policy focuses on the processing of fruits and vegetables, milk and dairy products, fish, poultry, eggs, meat and meat products, flowers and grains, including grading and packing.

The policy also covers confectionery processing including bread, oilseeds, breakfast foods, biscuits, snacks, cocoa, refined coconut oil, barley pulp, protein foods, high protein foods and breast milk substitutes.

It proposes special facilities for scientifically established tissue cell laboratories, and establishment of modern greenhouse and seed production units to meet the industrial standards.
At the same time, a strategy has been adopted for halal branding of products besides maintaining quality.
 
Capital assistance

The policy proposes to provide 50% of the total capital or highest Tk50cr in flexible loans at a nominal interest rate to those who will invest in agro-processing industries within the stipulated time.

To avail this loan facility, a SME industrial unit has to go into production within 12 months of getting the capital assistance. For large industrial units the time limit is 24 months.

The same facility will be available for setting up primary processing centres (PPCs), primary supply centres (PSCs) in the industry

However, if anyone wants to invest in the technological development and modernisation of their existing food processing industry units, they will get 25% of the project cost or a maximum of Tk50 crore as capital assistance.

The government will also provide this facility for setting up cold chains of agriculture, horticulture, dairy and meat products, the policy states.
 
Interest subsidy

The policy proposes that 5% or highest Tk20cr annual interest subsidy be given on loans taken on condition of fixed capital investment for industrial units and cold chain infrastructure.

This facility will be available for seven years from the date of commissioning of the factory.

In the case of PPCs and PSCs, the interest subsidy has been proposed at 5% or maximum Tk10cr per year.

The draft policy also proposes incentives and duty cuts on exports, transport purchases, capital machinery imports, cash assistance in research, allotment of stalls for participation in fairs abroad.
 
Duty waiver

According to the policy, tariffs will be reduced by up to 50% on the purchase price of air-conditioned vehicles for processing industrial units. Nonetheless, the maximum amount of this discount will be Tk10 lakh.

In addition, the government will provide cash incentives at the highest rate to industrial units for the export of perishable goods from the date of their commercial production. The maximum limit of this incentive for an industrial unit will be Tk50 lakh. At the same time, the government will waive corporate income tax for two years.

The policy has also attached importance to research to develop the market of this sector. Therefore, it proposes up to 50% of the cost or a maximum of Tk25 crore, if an industrial institute conducts research by a government-approved research institute.

Besides, a maximum of Tk5 crore or no more than 50% of the project cost will be provided for laboratory development, the draft policy says.
 
Infrastructure development

The government will set up agro-food technology parks or agricultural export zones near seaports, markets and airports within the next five years. It will also establish special economic zones for rapid industrialization.

Several steps have been taken to implement the initiatives.

The engineering colleges and universities of the country will introduce Food Engineering Management as a specialised subject.

Institutions of food processing industry technology will be set up in collaboration with the Institutions of Developed Countries, FAO of the United Nations Food and Agriculture

Organisation, where industry related subjects will be taught and technical manpower will be created.

The government has established the Agro Food ISC (AFISC) under the National Skills Development Authority (NSDA). The government will fund the AFISC to undertake vocational training activities. In addition, for the certification of halal products and evaluation of other products, importance will be given to the certification of various domestic and foreign companies.

Besides, the government wants to develop the sector through food packaging, testing quality improvement, supply chain development so that it is possible to increase the export by meeting the demand for quality products in the country.

The Bangladesh Standards and Testing Institute (BSTI), the Bangladesh Council of Scientific and Industrial Research (BCSIR), the Bangladesh Accreditation Board (BAB) and Islamic Foundation will work on product innovation and quality improvement.

The government will also soon set up an agricultural food processing board. The government will form the board with members from all sub-sector associations in Dhaka to help increase productivity in the sector and create greater market connections with farmers.

An agro-food processing industry development council will be formed to monitor and evaluate the implementation of the policy at the national level.

It is learnt that about 2.5 lakh people are directly working in the agro-processing industry.

In addition, a large number of people are working in various segments including backward linkages such as farmers involved in the production of agricultural products, employees of packaging material manufacturing factories and suppliers but the Bangladesh Agro-processors Association (Bapa) does not have specific data on this.

Ahsan Khan Chowdhury, chairman and CEO of Pran-RFL Group said that the market for agro-processing products in Bangladesh will not be less than Tk50,000 crore.

However, Bapa does not have accurate statistics on the issue.

According to Bapa, goods worth $400 million were exported in the 2019-20 fiscal year. The amount is expected to exceed Tk450 crore in FY21. At present, agro-processed products are being exported to 144 countries, according to Bapa.

The agricultural sector contributes 13.6% to the country's GDP while 40.62% of the total workforces of the country are employed in the sector. A large part of this sector is the agro-processing industry that is currently contributing 8% to the manufacturing sector of Bangladesh.

According to data released by Bapa in 2017, the contribution of the agro-processing industry to GDP is more than 1%.

Asked about the policy, Syed Mohammad Shoaib Hassan, vice president of Bapa, said, "If the incentives mentioned in the policy are given, it is possible to meet the investment and employment targets."

He, however, cast doubt over the implementation of the policy. "Many agencies will work focusing on this issue. In that case if the coordination is not done properly, it will not bring the desired results."

Professor Dr Md Abdul Alim of the Department of Food Technology and Rural Industries at Bangladesh Agricultural University, said 40% of fruits and vegetables produced in the country are wasted due to a lack of preservation facilities.

If these agricultural products can be processed, they can be supplied throughout the year, he said, adding there is also a huge opportunity to export these agricultural products to foreign markets by adding value to them through processing.

"Many organisations in Bangladesh are doing this. For example, Pran Group is exporting food processed products to 144 countries. Further expansion of this industry will require our investment, technology and skilled manpower."

He further added that the food processing industry, like the ready-made garment industry, has huge potential. It is important to establish a food engineering university to make use of this opportunity, he concluded.