FDI in food processing sector may come with riders

New Delhi: The government is considering a proposal to make it mandatory for foreign players entering the food processing sector to invest part of their FDI in developing back-end agriculture infrastructure.

The food processing ministry has suggested that the Department of Industrial Policy and Promotion (DIPP) make it mandatory for the foreign investee company to invest a certain percentage of FDI in creating back-end infrastructure like transfer of modern farming technology, agri mechanisation, and marketing and cold chain infrastructure.

The ministry has also suggested for enhanced partnership between farmers and investee company for production and sourcing of improved varieties of agricultural produce, sources said. DIPP, which deals in FDI-related matters, is in the process of finalising a Cabinet note on the issue.

The ministry has also recommended that the government shall have the first right for procurement of agriculture products. The government may also have to clarify the proposal as the "intent" is to permit 100 per cent foreign direct investment (FDI) in retailing of food products produced and manufactured in India, they said.

In the Budget, the finance minister has proposed that 100 per cent FDI will be allowed through the FIPB route in "marketing" of food products produced and manufactured in India.

"Marketing mainly means advertisement and promotion, so the ministries would have to clarify it as the intent of the proposal is to permit FDI in retailing," the sources added. The proposal aims to offer benefits to farmers and reduce wastage of fruits and vegetables. During April-December, FDI into the country grew 40 per cent to USD 29.44 billion.