Adapting to survive the coronavirus crisis and Food Processing Industries

The rampant spread of COVID-19 pandemic, across borders and geographies, has put global economy in recession with global economy projected to shrink by 3.2% (UN DESA). The disruptions caused by the outbreak and containment measures have left deep impacts on supply chains of manufacturing sector.  Companies across the globe have been scrambling to streamline their supply chains to secure immediate operations.  The economy of India is not an exception and the Indian industries including the food processing industries and MSME are severely affected. MSMEs are an important part of larger supply chains and their health has a bearing on the supply chains overall and indeed ability to supply major consumer product categories. Therefore, substantive support measures are required to see MSMEs through this crisis.

It is important to note that the food processing sector is recognised as a sunrise sector in India. The $600 billion industry currently employs close to 70 lakh workers, including around 15 lakh women. Furthermore, it has a massive potential to unlock the economic value of agricultural produce, thus facilitating the national agenda of doubling farmers’ income by 2022.

The ministry of food processing Industries recently announced the setting up of a task force to address some of the pressing concerns faced by the units. A closer look at some of these challenges highlights the need to understand the structural nature of the issues affecting the sector. It is evident that COVID-19 Crisis offers an urgent and much needed reset point for India’s Food Processing Industry.

The current Government is appeared to be committed to support the food processing industries and MSME in general for reviving their businesses and it is pertinent to highlight here the recently announced Financial and regulatory supports by Honourable Prime Minister and Finance Minister as part of the clarion call on ‘Atmanirbhar Bharat”. It is expected that industries will tide over the huge blow caused by the lockdown and able to provide more and creating more employment in coming years.

COVID-19 has revealed the weaknesses of a globalized manufacturing system and in order to respond, companies need to fundamentally rethink supply chains. In a post-lockdown world, supply chain stress tests will become a new norm.

It has moved from playing a “behind the scenes” organizational role to being a prime driver of the company business. Companies must have now appropriate ‘re-calibration’ strategies for modifying their supply chains as a key business driver and putting back the human asset as the most important factor for an agile business to succeed.

There are huge opportunities for Indian companies and would encourage them to attract international capitals and investment for creating a new manufacturing hub in India. This is possible, as many international manufacturers now looking into India considering its pro-business and FDI environment.   It is believed that our Industries need to strengthen on three fronts: cost (cheaper labour), quality (high skilled workforce), and supply chain (robust infrastructure), India can call itself the next global factory in future. We shall promote a ‘culture of manufacturing’ in India which is prevalent in a few countries such as Germany and South Korea, and closer home in South East Asia. We need to attract our best brains and encourage them to join the manufacturing sector. We need to establish manufacturing linkages. The lack of infrastructure pushes up the logistics cost, which at 14 per cent of GDP is one of the highest globally.  Our industries shall be able to present to the world the enormous opportunities that India offers as a base for manufacturing, innovation, design, research and development.

Keshav C Das

New Delhi, 31st May, 2020

Make In India needs to work

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India has followed a peculiar growth story over the years. India has seen high growth in the services sector. The government has been focusing on right from creating a single window facility for addressing investor concerns, identifying key manufacturing sectors, to creating a common platform to unite state governments, bureaucracy and corporate leaders.

India is blessed with a large labour pool and admirable levels of judicial transparency. We can leverage our territorial position to play a critical role in the global supply chains. Doubling up as a potential high consumption market can keep demand fluctuations in check as well as save up on the logistics costs.

I trust that our Industries need to strengthen on three fronts: cost (cheaper labour), quality (high skilled workforce), and supply chain (robust infrastructure), India can call itself the next global factory in future.

We shall emulate a ‘culture of manufacturing’ in India which is prevalent in a few countries such as Germany and South Korea. We need to attract our best brains and encourage them to join the manufacturing sector. We need to establish manufacturing linkages. The lack of infrastructure pushes up the logistics cost, which at 14 per cent of GDP is one of the highest globally.

The idea of promoting manufacturing is to ensure our demographic dividend finds meaningful employment. We launched the Make in India campaign to create employment and self-employment opportunities for our youth.  We are working aggressively towards making India a Global Manufacturing Hub.  We want the share of manufacturing in our GDP to go up to 25 per cent in the near future.

We are also aware that under the pressure of this campaign, the government machinery will be required to make a number of corrections on the policy front.  There is an increasing need to stress on zero defect and zero effect manufacturing.  We shall place high emphasis on energy efficiency, water re-cycling, waste to energy, clean India and river cleaning.  These initiatives are directed at improving quality of life in cities and villages.  These initiatives provide you additional avenues for investment in technologies, services and human resources.

Keshav C Das

Sectoral Strategies for Transforming the Food Processing Industries in India

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In the context of India’s vision of becoming the ‘Global Manufacturing Hub’; food processing is the ‘SUNRISE SECTOR’. The Food & Grocery market in India is the sixth largest in the world. Food & Grocery retail market in India further constitutes almost 65% of the total retail market in India. The Government of India through the Ministry of Food Processing Industries (MoFPI) is taking all necessary steps to boost investments in the food processing industry. The government has sanctioned 42 Mega Food Parks (MFPs) to be set up in the country under the Mega Food Park Scheme. Currently, 17 Mega Food Parks have become functional. Our food and retail markets are all set to touch $ 828.92 billion investment by 2020. The Processed food market is expected to grow to $ 543 bn by 2020 from $ 322 bn in 2016.

By 2024, the Food Processing industry will potentially attract $ 33 bn investments and generate employment for 9 million people. These are all remarkable targets and asipiration for us. The Government has been working to linking Indian farmers to consumers in the domestic and international markets. The Ministry of Food Processing Industries (MoFPI) is making all efforts to encourage investments across the value chain.

The potentiality of the food processing sector is huge. We shall acknowledge that India offers the largest diversified production base and has a growing food industry. We are the largest milk producing nation. We are the largest producer, consumer and exporter of spices. We are world’s second largest producer of food grains, fruits, and vegetables. Hence, we have a glorious legacy, excellent track records and necessary skills-technologies and know-how to become a ‘manufacturing Hub in the food processing sector.

To make this aspiration we need only three things: firstly promoting profitable farm production with appropriate agronomical practices, secondly, linking farmers with market and thirdly attracting investment for transforming this important sector.

The government has been already working to secure these ‘development triangle’. For instance, under the Nivesh Bandhu program, which is an investor facilitation portal to assist investors on the investment decisions. A special fund of $285 Mn has been set up in National Bank for Agriculture and Rural Development (NABARD) for affordable credit.

The government has also 100% FDI in the food processing sector. Sector-specific Skill Development Initiatives are also being taken up, with National Institute of Food Technology, Entrepreneurship and Management (NIFTEM) and Indian Institute of Food Processing Technology (IIFPT) being recognized as Centres of Excellence.

Apart from growing population and burgeoning purchasing power, rising urbanization, rising retail trade due to initiatives such as Digital India, together with the presence of global players of the industry can be considered as the major growth drivers for the segment.  We have a population base of 1.3 bn offering a large demand-driven market, with the retail sector expected to treble by 2020. Hence, this is our time now to make India Better! This is our time to make India a leader in the food processing Industry’.

Climate Resilient Economic Growth

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Climate change creates a new context for policy-making in developing countries. The economic costs of climate change can put their economic growth prospects at risk and endanger the achievement of their development objectives. At the same time, development can inadvertently increase vulnerability to climate change. Building “climate resilience” into development policies can help to reduce the costs of climate change and sustain economic growth and social well-being over time. Climate-resilient development includes climate change in the baseline for development planning.

The cross-sectoral nature of climate impacts calls for a co-ordinated approach by the public sector, civil society and development partners across levels of governance. Climate-resilient development needs to go beyond individual programmes and projects and consider systemic aspects and linkages between economic development, climate change and resilience. This need has been acknowledged in international discussions that have recently shifted from project- and programme-based approaches for adaptation to promoting national, strategic responses to the effects of climate change. This includes the call for Least Developed Countries to develop National Adaptation Plans (NAPs) in the framework of the United Nations Framework Convention on Climate Change (UNFCCC).

There is a strong link between socio-economic development and resilience to the effects of climate and climate change. Extreme climate events can reduce economic growth(McDermott et al., 2013; UNISDR, 2013). This slowdown, which can affect a country for several years, is in marked contrast with developed countries, where disasters have the potential to act as an economic stimulus (Cavallo and Noy, 2010; Loayza et al., 2009). Developing countries also bear the heaviest human burden. Between 1970 and 2008, 95% of deaths due to natural disasters occurred in developing countries(IPCC, 2012). This vulnerability is due to a combination of factors, including a lack of coping capacity, low levels of disaster preparedness and high dependence on the agricultural sector for development and livelihoods.

Development itself is one of the most effective means to increase the capacity to cope with disasters. Higher disposable income, better education and healthcare, and improved transport infrastructure are some of the characteristics of development progress that also strengthen resilience. But this is not automatic. Development choices can lead to a concentration of economic activities and assets along rivers and coastlines; places which are vulnerable to flooding, storm surges and sea-level rise. There is also evidence that certain characteristics of middle-income countries, such as a high reliance on physical infrastructure for GDP creation and a high interconnectedness between economic sectors, can increase their vulnerability to extreme events (Benson and Clay, 2004; Ghesquiere and Mahul, 2010; Okuyama, 2009; Cummins and Mahul, 2009).

Climate change adds a new dimension to this relationship between development and resilience. Development as usual – and even development that strengthens resilience against current variability – might not be a sufficient strategy to prepare for future climate challenges. Gradual changes in climate can reduce labour productivity and give rise to additional costs for climate-proofing infrastructure and productive activities. This can even lead to shifts in countries’ comparative advantages. Disaster risk is likely to increase, as certain phenomena such as temperature extremes, heavy precipitation and extreme coastal high water levels become more frequent (IPCC, 2012). The parallel developments of economic and population growth and climate change can have significant consequences.

To get benefitted from the growth model of economic growth with the climate resilient development, countries need to adopt the below recommendations:

Sustain leadership and high-level political commitment: climate resilience efforts need to be driven by strong and visible leadership. This will help to establish and maintain high-level political support across the government.

Formalise national development visions and defining key climate resilience objectives: The formulation of a national vision for climate-resilient development helps raise awareness of the benefits and opportunities of enhanced resilience, thereby building momentum for institutional and policy change.

Create institutional mechanisms that encourage cross-sectoral co-ordination and high-level political commitment:

The institutional system needs to be explicitly designed to facilitate and encourage co-ordination across ministries.

Secure dedicated financing for resilience investments: Financing for resilient activities needs to be leveraged and it should support coherence in investments for climate change resilience and economic growth projects. Alignment with the national budget should help to ensure that domestic resources complement international financing.

Keshav C Das

May 28, 2016

 

FINANCING REDD+ AND GREEN CLIMATE FUND*

5fe714a62d2417e54a50d9a48eeea001Result Based Financing (RBF) was a new addition to the REDD+ domain, incorporated during COP.19 under the Warsaw Framework for REDD+. This new set of financing instruments is designed for disbursing payment against pre-determined performance indicators (both carbon and non-carbon benefits and performance). However, the Warsaw Framework does not address non-carbon benefits of REDD+ or provide methodological guidance on non-market-based approaches for defining performance indicators while implementing REDD+ program interventions. Parties continued discussions of these aspects of REDD+ at the 40th session of the Subsidiary Bodies to the UNFCCC (SB 40) as well as during the meetings of Subsidiary Body for Scientific and Technological Advice (SBSTA). Unfortunately, there is very little progress on this agenda item, and further consideration of these issues was postponed to future sessions. Encouragingly, there are a few promising progresses with respect to the modality of the result based financing of REDD+, which is expected to be linked to the Green Climate Fund (GCF). The key development on this financing modality is presented below.

  1. Parties agreed while developing the Warsaw Framework for REDD+ that the GCF would play an important role in channelling REDD+ payments to developing country governments, and that results-based payments will depend partially on the submission of a reference level for review by experts from an assessment team. Assessment guidelines and procedures were also established, so that developing countries know how their reference levels will be evaluated.
  1. In addition, developing countries wanting to participate in GCF REDD+ activities will have to establish national forest monitoring systems (NFMS) as a basis for estimating forest-related greenhouse gas (GHG) emissions if they do not yet have such systems in place. Changes in emissions levels will be measured against respective national reference levels. In addition, parties officially mandated a link between safeguards (such as respecting livelihoods, the rights of indigenous peoples and local communities, and biodiversity) and payments. REDD+ beneficiaries must submit summaries identifying strategies to address the safeguards framework. Furthermore, all information submitted, including data on payments should be posted on an “information hub” that parties requested the Secretariat to create.
  1. During the fifth part of the second session of the Ad Hoc Working Group on the Durban Platform for Enhanced Action (ADP 2-5) and the Ministerial Dialogue on the Durban Platform, the need to capitalize the GCF was underscored. Much anticipation around whether the GCF will be able to provide the necessary financing for REDD+ surrounds the ongoing efforts to operationalize the Fund. Some parties suggested COP 20 should open a REDD+ window in the GCF. During the TEM on land-use, the GCF reported that its initial focal areas include REDD+ implementation and sustainable forest management (SFM).
  1. At the seventh Board Meeting of the GCF, the final six items needed to operationalize the Fund were agreed, including an initial Results Management Framework (RMF). The RMF, as it applies to REDD+, differentiates itself from the Warsaw Framework in that it will also be used for ex ante payments. However, plans for more specific guidance on REDD+ are in the pipeline, as the Board requested the Secretariat to “develop a logic model and performance framework for ex post REDD+ results-based payments, in accordance with the methodological guidance in the Warsaw Framework for REDD+, for consideration at the third Board meeting of 2014.” As an operating entity of the financial mechanism of the UNFCCC, the GCF’s REDD+ approach should be in line COP decisions.
  • Complexities:

The board meeting of GCF and UNFCCC’s meetings (SB, SBSTA, ADP etc.) did not create an enabling environment for motivating financial institutions (donor countries, UN funds, multi-laterals fund like FCPF etc.) to operate under a single umbrella of REDD+ finance. Rather, the FCF stated during it last board meeting that entities not beholden to the UNFCCC COP, however, can continue to operate as they please. The Forest Carbon Partnership Facility (FCPF), which was originally intended to sunset once the GCF became operational, has recently completed a methodological framework for its Carbon Fund based on its experience thus far, and there is no indication that the FCPF will twilight soon. Likewise, UN-REDD, at its recent policy board meeting, adopted a roadmap for the development of a new strategy beyond 2015. Meanwhile, the Food and Agriculture Organization of the UN (FAO) takes its own approach to REDD+, based on its Strategic Framework.

Donor countries also continue to offer REDD+ funds to developing forest countries through bilateral agreements, making their own stipulations as they do so. Norway, through its Climate and Forest Initiative, and Germany, through its REDD Early Movers Program, have taken this approach while REDD+ issues were being sorted under the UNFCCC. Despite the adoption of the Warsaw Framework, donor countries inclined to do so cannot be prevented from making bilateral deals under their own terms and conditions. The primary implication of having various scattered institutions distributing REDD+ finance is that developing countries, their capacity already stretched, have to follow different rules, produce different documents and reach different benchmarks depending on where they turn for REDD+ financing.

With this background, question marks surround the future of REDD+ financing. Some cooperative efforts, such as between UN-REDD and the FCPF, to consolidate financing are yielding positive results for REDD+ readiness, but as financing is scaled to move beyond the readiness and pilot programme phases, will cooperation and coordination efforts be scaled as well? Will the capitalization of the GCF lead to a convergence of REDD+ finance under the GCF?

There is no clear lead to find answers of these questions. The only hope is that parties agreed to continue considering these difficult questions (including the methodological issues related to non-carbon benefits) in 2015 at SBSTA’s 42nd session and to discuss non-market-based approaches at SBSTA 41, to be held in Lima, Peru (FCCC/SBSTA/2014/L.8).

 Lima Expectation:

 Expectations are high for COP 20, which will convene in Lima, Peru, in December, as it is the last negotiating session of the COP before a new legal instrument is to be agreed in Paris in 2015. In Bonn, some developing countries expressed support for including REDD+ in the negotiations of a global agreement, in particular the inclusion of the Warsaw Framework for REDD+. Keeping Lima in mind, UNFCCC parties and the GCF can take a number of actions between now and Lima to build confidence in the efficacy and authority of the guidance created at COP 19. From capitalizing the GCF, to submitting reference levels, to completing the GCF’s “logic model and performance framework,” showing the Warsaw Framework in action will be the most expedient way to encourage convergence to its methodology.

Keshav C Das

New Delhi, August 08, 2014.

[1] Source: http://climate-l.iisd.org/policy-updates/the-direction-of-redd-financing-merging-ahead/

ENERGY SMART FOOD – LINKING FOOD AND CLEAN ENERGY

If energy prices continue to rise, the global food sector will face increased risks and lower profits. The efforts from low-GDP countries to emulate high-GDP countries in achieving increases in productivity and efficiencies in both small and large-scale food systems may be constrained by high energy costs. Lowering the energy inputs in essential areas, such as farm mechanization, transport, heat, electricity and fertilizer production, can help the food sector mitigate the risks from its reliance on fossil fuels. Hence, a major focus of food processing industries should be to reduce energy demand and/or promoting efficient energy management as well as introducing renewable energy technologies (RETs) to reduce the food sector’s dependence on fossil fuels. Indeed, introduction of RETs should happen from field to factory (processing) and up to the retail-outlet.  Energy.Smart

The encouraging development is that there is increasing consensus on the necessity on energy smart food and very recently in a study on energy-smart food, the Food and Agriculture Organization of the UN (FAO) stresses that agriculture’s dependence on fossil fuels is undermining efforts to build a more sustainable world economy. The paper, which is titled “Energy-Smart Food at FAO: An Overview[1],” notes that world food production consumes 30% of all available energy, most of which occurs after the food leaves the farm. The paper calls for: increasing the efficiency of direct and indirect energy use in agri-food systems; using more renewable energy as a substitute for fossil fuels; and improving access to energy services for poor households. It outlines numerous approaches to adapt practices to become less energy intensive.

However, to promote the campaign on energy smart food, we need affordable technologies at farm-level and food processing level. Unfortunately, most of the ‘energy efficient’ technologies in the agriculture sector of developing countries are expensive and not within the reach of poor farmers. Similarly, financing is also pivotal. Most farmers do not have upfront investment for introducing energy efficient devices in to their farm operations. Can we think of introducing a concessional loan systems into the farm system to meet this requirement as well as provide a really doable and practical contract farming model to the farmers, where, farmers will receive advance market commitments from global retailers and big MNCs in food market chain, and therefore, farmers will be in a comfortable situation to produce more and trade more? Indeed, agriculture insurance is also a key and obligatory intervention in the current context; particularly to reduce the risk of damage and loss due to climate change related adverse effects.

We also need enabling policies: strong and long-term supporting policies and innovative multi-stakeholder institutional arrangements are required if the food sector is to become energy-smart for both households and large corporations. Financial policies to support the deployment of energy efficiency and renewable energy will also be necessary to facilitate the development of energy-smart food systems. Examples exist of cost-effective policy instruments and inclusive business schemes that have successfully supported the development of the food sector. These exemplary policy instruments will need to be significantly scaled up if a cross-sectoral landscape approach is to be achieved at the international level.

Indeed, development organisations like SNV Netherlands Development Organisation has a major role to play in this domain so that the agriculture sector of developing countries are ready for the deployment of appropriate technologies; introduction, sharing and adaptation of energy-smart technologies; and carrying out capacity building, support services, and education and training on energy smart food production supply chain. Nevertheless, addressing the energy-water-food-climate nexus is a crucial and complex challenge. It demands significant and sustained efforts at all levels of governance: local, national and international.

 

Keshav C Das

Senior Advisor, Renewable Energy and Climate Finance

SNV Netherlands Development Organisation

 

[1] http://www.fao.org/docrep/014/i2454e/i2454e00.pdf