Sunday story: Going bad

The $100 bn processed food market has clocked an annual growth of 8.4 per cent, a rate the regulator can hardly keep pace with.

The battlelines were drawn well before the country’s food regulator passed its June 5 order that imposed a country-wide ban on Nestle India’s Maggi noodles. Less than a month ago, on May 11, the regulator — the Food Safety and Standards Authority of India (FSSAI) — had issued a note alongside a set of ‘Comprehensive Scheme and Guidelines on Product Approvals’, in which its CEO YS Malik made a pointed reference to the “industry’s anguish” on the “highly contentious issue of product approvals”.

Stating that while “aggrieved” food and beverage manufacturers appeared to be swearing by the Prime Minister’s “Make in India” initiative, Malik claimed that most of them were “conveniently forgetting that it is also accompanied by the words Zero Defect and Zero Effect”. “The extent of unilateral condemnation of a sector regulator by the people whom it is meant to regulate has been unprecedented…,” he said in the note.

Since then, the high-decibel battle involving the makers of one of the country’s most enduring snack brands and a regulator who has vociferously cited the larger public health as the reason behind its move, has resulted in a clampdown on six other food companies and 20 more products.

While the Nestle case has now reached the Bombay High Court, it holds in balance the fate of what is perhaps the country’s fastest-growing sunrise sector — the processed food industry — and the debate on whether the regulations governing this sector, and the regulatory apparatus itself, have failed to keep pace.

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The processed food industry has continued to grow at a fast clip despite the slowdown in the economy. The value of products sold by the 13 top players in the organised segment of the country’s processed food industry — including Nestle, Pepsico, Britannia, HUL, Dabur and Gujarat Co-operative Milk Marketing Federation — shows a compounded annual growth rate of almost 21 per cent in the four-year period between March 2010 and March 2014.

The National Accounts Statistics 2014 bears this out and pegs the average annual growth rate of the processed food sector for the five-year period between 2008-09 and 2012-13 at a healthy 8.4 per cent, significantly higher than the overall GDP growth rate of 7.1 per cent and the manufacturing GDP growth rate of 6.6 per cent for the same period.

While the Ministry of Food Processing Industries has estimated the size of the Indian food market at $191 bn (Rs 11,84,200 crore), the processed food market is projected to be over $100 bn. The sector, which is also the biggest employment generator in the country accounting for 12.13 per cent of the jobs created, followed by textiles (10.86 per cent), is central to the government’s plan to push manufacturing and generate jobs.

The sheer size and rate of growth of the sector is what makes the regulator’s job so daunting — and vital. Though the existing standards cover 362 food products (apart from the horizontal standards on additives, toxins) — that’s about 90 per cent of the volume of processed food consumed in India — the growing sector requires new standards to constantly evolve.

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The problem is also with a regulatory framework that’s seen as creaky and sometimes ineffective. The regulator, by its own admission, has pointed to the legal framework being “marked by a serious dichotomy”.

“While a new Food Safety Act was promulgated in 2006, the regulation pertaining to the limited number of food product standards and the additives, as also the regulation dealing with prohibition and restrictions, have been imported in the scheme of the new Act from the erstwhile regime without a serious review thereof,” the FSSAI had noted in its May 11 guidelines.

Many of these existing standards, according to a senior FSSAI official, call for a review, “failing which we may end up seriously compromising with the health of the people of this country”.

The FSSAI, a relatively new body that started operations in 2011, may be the central regulator entrusted with the task of law enforcement, but much of the groundwork is expected to be done by the food safety apparatus in states, especially in dealing with food adulteration, misbranding, sub-standard products, or violation of food safety rules. While many states have severe shortage of technical staff, others simply lack infrastructure in terms of laboratories for testing the samples.

This, coupled with the lack of coordination between the FSSAI and states’ food and drug administration, has exacerbated the challenge of food safety in India. Several state officials The Sunday Express spoke to complained about the lack of technical manpower and laboratories amid rising work load.

It doesn’t help that not many are clear about the FSSAI’s existence as the regulator. An industry survey conducted by the Federation of Indian Chambers of Commerce and Industry in May 2013 bears this out, with about one-third of the industry representatives claiming to be unaware about the FSSAI and therefore ignorant about the rules. An overwhelming percentage of those surveyed hoped for harmonisation of India’s new regulatory rules with internationally accepted standards like Codex.

The FSSAI, though, thinks it’s simpler said than done. “We often find it convenient to make references to and draw parallels with the US Food and Drug Administration or the EU regulatory system, little realising that self-regulation is rather compelling in those economies, thanks to a very conscious and aware consumer base, coupled with an effective and responsive legal system. The Indian consumer is much less aware and largely gullible, and we carry the constraints of our legal system,” the FSSAI officer said.

While most countries in the world have a recall policy, India has only recently – on April 22 this year – framed draft regulations for recall. While India follows the federal structure when it comes to what people in a particular state can eat, countries such as the US have a recall policy in place and one authority takes a call on behalf of the entire country.

States, meanwhile, are struggling. A senior official from the Uttar Pradesh food department said the state only had five working labs and 55 technical staff. While the number of sanctioned posts is 662, only 229 are filled. A proposal to fill the vacancies is pending and though the state government has completed the recruitment process, it has been unable to fill the vacancies due to a court case, he said.

“On an average we receive 100-150 samples every day. Earlier we took it for granted that processed food would be safe and we did not conduct many checks and tests. Ninety per cent of our enforcement was for food produced locally. But after the Maggi case, we have started conducting random tests for processed and packaged food too. Our staff strength is very low and the number of cases have been rising,” the official said.

Regulators in other states contacted by The Sunday Express, including Andhra Pradesh and Kerala, had similar problems. An Andhra Pradesh official from the food and drug administration department said the state currently had two food safety officers and one designated officer for its 13 districts as opposed to the 13-14 food safety officers required in each district. “There is a pending proposal to recruit 8-10 food safety officers in each district. There is shortage of manpower and the workload is too much. There are just two labs in the state but they are not statutorily recognised. The FSSAI has to recognise it. We need more labs and more staff to meet the demand,” the official said.

A former director of the Central Food Laboratory in Kolkata pointed to the practical problems plaguing the labs — involving both man and machinery. In small towns of UP and Bihar such as Raxaul and Gorakhpur, supplies for laboratories are to be procured from outside. These towns often do not have a steady supply of electricity and when available, the voltage is too low to run sophisticated equipment. And then, like everywhere else, it all boils down to staff shortage.

Kerala, a state official said, has four labs and though there is no vacancy, the infrastructure falls short of the demand. While the FSSAI provides assistance to states, it will take some time to meet challenges of infrastructure and modernisation, the official said.

The challenges, meanwhile, have kept rising. Data collated by the FSSAI gathered from all states and union territories clearly shows a rise in adulteration over the last few years.

While less than 13 per cent of the samples collected by all states were found to be not conforming with standards in 2011-12, the percentage rose to 14.8 in 2012-13 and further jumped to 18.8 per cent in 2013-14.

Also, this has resulted in a rise in convictions and the amount collected in penalties has jumped five times from Rs 764 crore in 2011-12 to Rs 3,845 crore in 2013-14. A look at the report of annual testing laboratories across states shows that five states — UP, Maharashtra, MP, Kerala and Andhra Pradesh — account for more than 90 per cent of the total penalties levied in 2014-15 and 84 per cent of the amount raised in penalties. The trend is similar even for previous years.

Some states have also started lobbying for harsher punishment as an effective deterrence to food adulteration. Maharashtra, for example, has asked the FSSAI to increase the penalty for food adulteration from the current six months for minor cases and 5-6 years for major cases to life imprisonment. Uttar Pradesh seems to be the most active state when it comes to checking and penalising consignments.

According to a number of big retailers that The Sunday Express spoke to, there has been a rise in vigilantism in the last couple of weeks, with food inspectors randomly raiding stores and warehouses and picking up food articles for checking. Uttar Pradesh has been singled out by more than one retailer as a case in point.

“It seems the inspector raj is back. Over the last two weeks, we have seen food inspectors across various states randomly raiding our stores and taking away samples of various food products in the name of checking them. They are even checking the warehouses at the back of our stores where we keep food items that have been pulled off the shelves to be sent back to the companies,” said a senior official with a leading retailer in the country.

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At least on paper, it is not just domestically manufactured food items that need to go through the checks; every product that enters the country is supposed to undergo laborious filters before it is declared fit for use. A large volume of the import is handled by sea ports such as JNPT in Maharashtra, Chennai port, Kandla port in Gujarat, Kolkata port, Tuticorin port and Cochin port.

When an import container enters the port, the importer is required to file a bill of entry, which is usually done electronically by the importer’s Customs House agents. Once the customs department examines the document and the consignment on various risk parameters, it is sent to the agencies concerned such as the FSSAI, plant quarantine, animal quarantine, drug controller or textile committee, as the case may be, for checking if the product is fit to enter the country.

However, the shortage of staff in these agencies at the ports poses a big challenge for fast and reliable clearances. Agencies at these ports usually take between a week and 15 days to clear a consignment.

For example, JNPT handles 120 bills of entry every day for food products, when it has just 14 officials from the FSSAI. Kolkata handles 464 bills of entry for plant quarantine department and 449 per month for the FSSAI, with no desk of either of these departments at the port.

Arabind Das, COO, Godrej Tyson Foods, however, prefers to look at the brighter side of the process. “We have come a long way from where we were 10 years ago, and the FSSAI was created after a serious debate. However, as need arises, there are government bodies that will debate and take appropriate steps for the industry to grow,” he said.