Developed countries contribute more to Global Food Wastage

It seems to be fashionable to discuss the criticality of food wastage and then giving stock solution like setting up the cold chain and infrastructure. Rajat K Baisya attempts to provide a counter view point on the subject and discusses the real issues with respect to the wastage of primary foods to suggest some solutions.

world-Food-Wastage

IN India, it seems to be fashionable to discuss the criticality of food wastage and then giving stock solution like setting up the cold chain and infrastructure. This discussion we are hearing since sixties. Indian food industry was relentless in pursuing three-point agenda for last four decades or so. These include wastage of fresh produce, complexity of regulatory and licensing regime and high taxation. Over the years and particularly during last decade regulatory scenario has drastically changed by bringing them together under one umbrella organization called FSSAI (Food Safety and Regulatory Authority of India). Although formation of unified regulatory system under FSSAI has not made anyone happy as things now have become more complicated than before and on top of it nothing moves in FSSAI. But this was our own creation and we cannot blame anyone for that. The taxation structure although remained same till we will move to GST regime, as proposed. However, the quantum of tax on processed food has gone down drastically and possibly we cannot expect any further concessions. That left us with single point agenda and that is huge wastage of fresh produce, low value addition (9%) and very low level of processing (2.75%) compared to both developed and other developing countries.

India seems to have a distinction as world ranking primary producer of many items including fruits, vegetables, milk, fish, livestock and poultry but we process hardly 2 percent of that and consume more as fresh without any value addition and rest we waste. In our system farmers get the low price, consumer pays the highest. The consumer price is almost 3.5 times of farm gate price for fresh fruits and vegetables. Our farm level price of primary foods is lowest and labour cost is 54 percent of world average but we still are not globally competitive and hence global trade in processed food is also low at around 1.4% which has increased from 1.1 % to 1.4 % during last two decades only. These statistics are being repeated in each seminar and conference and so-called experts make the same suggestion that we need to make investment in cold chain infrastructure to save that wastage without realizing what the real issues are. This article attempts to provide a counter view point on the subject and discusses the real issues with respect to the wastage of primary foods to suggest some solutions.

Cold Storage Capacity and Utlization

Saumitra Chaudhuri Committee constituted by Planning commission in 2012 estimated country’s cold storage requirement as 61.33 million tonnes as against 29 million tonnes at present. Paradoxically, existing cold storage has a capacity utilization of about 60 percent. Also the controlled atmosphere storage facility set up at Sonepat by Fresh & Healthy Enterprises Ltd – a wholly owned subsidiary of Container Corporation of India Ltd – a Govt of India Undertaking under Ministry of Railways also has an average capacity utilization of about 50%. Most of our cold storage capacity is utilized for apple, onion and potato. For meat, fish and poultry there is separate dedicated facility available. And we don’t normally waste these animal proteins. Reason is that demand outstrips supply. The trouble seems to be with respect to other perishable produce such as fresh fruits and vegetables and not even milk. It is generally believed that when price is high wastage is low and when price is low wastage is also high which means that when value is high more care is taken to reduce wastage taking place due to negligence in handling and transportation within the same infrastructure. The Adani Group in Gujarat has set up cold chain and integrated supply chain network which they find it difficult to run to make optimal use of the capacity. This observation relating to low capacity utilization of existing cold storage and even new cold and controlled atmosphere storage obviously, raise the question regarding why capacity remains idle if there is really a wastage taking place of fresh produce which we everyone talks about ? Why surplus is not stored in cold storage to be sold in lean season. Answer is again simple, storing will add to cost and there is no market for that. Besides, farmers cannot pay for storing surplus which will eventually waste and they want to sell everything they produce. They will rather reduce the price to sell whatever they have produced and get back to cultivation again. Who will then store for what?

The latest wastage figure that has been reported is Rs 40000 crores including Rs 13300 crores for fruits and vegetables. Our grain production is about 250 million MT and total consumption is around 225 million MT making a surplus of 25 million MT. Food Corporation of India (FCI) has agreed that between 2005 to 2013 they have wasted 1.96 lakh MT of food grain which translates into about 24500 MT of grain every year. Is it not better to give away this surplus free to those who have no food to eat if we are not able to store and market the surplus?

The Bigger Challenge

Over 350 million population have not been the beneficiary of our much talked about economic growth. For them nothing has changed and they even don’t know what is happening. 250 million people go to bed hungry everyday and 48% of children below age 5 are under nourished (malnutrition). All inclusive growth is therefore, a challenge before the nation. If poor people are not integrated with the mainstream development process, the growth will not be sustainable. Food industry in India will never grow if processed food is not affordable to this section of the society.

The export price of processed food products from India is significantly lower than the domestic price which means our own people are paying more for the processed food here than the price at which we sell the processed food in international market. We are not globally competitive not because we waste lot of fresh farm produce but because of inefficiency and more importantly complexity in the whole system in spite of the fact that our farm level price is one of the lowest.

Food Wastage a Global Phenomenon

Roughly one third of the food produced in the world every year or approx 1.3 billion tonnes of food is lost or wasted. About 56 % of Food Wastage is contributed by Developed Countries and 44% by Developing Countries (World Bank Report). Every year rich countries waste almost 222 million tonnes equal to entire net food production of Sub-Saharan Africa (230 million tonnes) – source UNEP. In USA 30-40% of the food supply is wasted equaling more than 20 lbs of food per person per month. About 30% of 430 billion lbs of product in US is wasted worth USD161 billion (source: USDA)

Americans throw away 40% food each year that adds upto 31 million tons of food put in landfills, which adds 17% to total carbon emission, uses 2% of the nation’s total energy and wastes a whopping USD 165 billion annually (2012 study by National Resources Defense Council)

Americans are sending 133 billion lbs (60 billion kgs) of food to the garbage dump each year – meat, poultry and fish (30%), vegetables (19%), dairy products (17%), source: USDA

One third of the world’s food is thrown away each year valued at USD 750 billion- that means 28% of the world’s agricultural land is used to produce food that is eventually wasted- this leads to 3.3 billion tonnes of excess greenhouse gases emitted to the planet’s atmosphere (U.N.Report). In US about 49 million people lived in food insecure household over 305 million people.

Retail Wastage

In US retail food wastage in grocery stores, restaurants account for 43 billion lbs while consumer losses amounted to 21% (90 billion lbs) of the available food supply (USDA). Retailers like Wal-Mart, K-Mart etc throw away around 45 billion tonnes each year that is about 10% of what is on the shelves. In India at retailers end we waste about 10 percent of fresh fruits and vegetables. In a recent trip to UK I have read a big report published with photographs in The Daily Mail showing poor children picks up food discarded by Tesco in the night in dump yard as unsold stock of the day. Is not saving this wastage is more important than worrying about what has not been processed at all?

Where Wastage Takes Place

In developing countries like India, due to poor logistics and infrastructure supply chain losses are more. Food wastage during processing is 2%, expiry stock 5 to 10% – this happens even in India. In developed countries highest wastage takes palce at post production stage at consumers end. If we process more than what we can consume or market, wastage will still happen and that wastage is of much higher value as we are losing value added product. In India, because of supply chain infrastructure constraints we lose more as fresh during handling and transportation. In western world, the loss takes place at post production .The obvious question that can arise is that is it not better to lose fresh rather than value added processed food?

Why food wastage takes place anyway

It is now clear that we are not the only culprit wasting huge quantity of food annually. Even developed countries including USA are contributors to major global food wastage and they waste much more than us. When fresh wastage is low processed wastage is very high. Over consuming society like Americans waste more at the consumption level as can be seen by the figures given above. And is it not better to waste fresh rather than waste after adding value and processing those? Fresh wastage takes place because there is no market for those and therefore if market is not developed we will still waste those as preserved and processed and magnitude of that wastage will be much higher than what it is today. Even whatever we process we cannot sell and end up with expiry and near expiry stock which varies from 5 to 10 % of what has been processed. This will raise the question where will the additional stock go if we save losses and process more. Answer is simple, we will still waste those as Americans do. So what is the big issue about wastage?  Has anyone heard any processors lost sales for want of raw material except in situation like cyclical crop failure like mango.

It makes very good sense to save wastage if we view from the point that a large section of the world population and more particularly in India are not having enough to eat but they don’t have any purchasing power also. In India about 60 % of the population has no purchasing power and therefore if we save wastage and if we cannot market that or sell that surplus we end up only adding to the losses unless we decide that surplus will be given free to poor which possibly will never be. Couple of years ago there was a bumper crop and FCI warehouse was not having capacity to store the surplus and Government sought the advice of Delhi School of Economics and they suggested to give surplus free to poor through public distribution system but Govt did not do that. If that is not done why should we save wastage? That remains a question.

The Solution for food wastage

Setting up cold chain obviously is not the answer. Those who still believe that cold chain is the only solution are either consultants with vested interests in getting the consulting assignments or those who are in the business of cold chain infrastructure. There are people who think existing cold storages are not efficient but who can dismantle those and set up new? Only the existing owners. And they will get motivated to invest only if they know that investment will give them return and if existing capacity utilization is only around 50% even for new cold storages what will be their motivation to sink more money. Those who talks in favour of setting up chain should answer. You can see those popular faces who talks same thing in every opportunity. Ministry of Food Processing have a scheme for investment in cold chain by giving grant up to 50% of the plant and equipment and up to 75% in difficult areas like north eastern regions with a ceiling of Rs 10 crores. Has any study been done what happens to those who have set up cold storages taking advantage of that fund.

Technology intervention alone will therefore not be the solution to the problem. Only market development can help saving the wastage. Alternative to that is distributing free to poor is only solution. Money can buy technology but not market.

Social media organizations can play big role such as Food Cowboy, Food star, Plan Zeroes etc. Zero Percent- channelizing 1500 lbs of everyday in Chicago city. Food Banking Network which collects food of near expiry stock and distributes free to those who are poor and hungry or during disaster and natural calamity. Social organizations like Food Banking deal with only surplus and near warranty stock which businesses cannot sell and that is distributed free. These organizations are only trying to salvage wastage of processed food and not fresh food.

Policy Changes

The policy reforms can bring about a lot of improvement in the existing system in terms of efficiency and cost competitiveness. I would like to make the following recommendations.

Scrap APMC (Agricultural Produce Marketing Committee) which works like wholesaler cartel in mandis. That will make free trade between traders and farmers possible. Large retailers can play a vital role. Discard minimum support price system as that takes away entrepreneurial dynamism of the farming community. Introduce GM crop selectively. Withdraw conditions attached for FDI in retail. Introduce GST (Goods and Service Tax) regime to replace ST, CST, Excise, Service Tax, Entry Tax etc.

India ranks 134th in World Bank’s ‘Doing Business Report’. Labour law reforms therefore are required to attract more investment. Improve corporate governance. Abolish all subsidies and transfer cash through mobile banking to female head of household.
These are a few reforms that will make all the difference in our industry.

Conclusions

India’s food wastage (USD 6.6 billion) is only 3.9 % of what USA’s wastage (USD 166 billion) and 0.88% of the global wastage (USD 750 billion). And USA has no constraints on cold chain and supply chain infrastructure. In fact most of the processing units are also located in the close vicinity of agricultural farms in US. We therefore, need demand linked supply chain infrastructure.

When Reliance first came to invest in fresh they talked about lifting stock of farm produce by air and selling those through their retail network. Very soon that enthusiasm evaporated and reality dawned on them and they realized that it is not possible after paying a huge price and incurring losses. Bharti group had set up a joint venture with UK’s largest fresh fruits and vegetables distributor also ended up in failure and ultimate separation. All these just point towards only one issue and that is market is the key and that can only drive the rest of the chain. The supply chain has to be synchronized with demand chain. Working only in supply chain in isolation can only bring disaster and failures as has been witnessed time and again.

 

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