Agro Based Industries in India

Agro-Based industries in general are those industries that have direct or indirect links with agriculture. It covers a variety of industrial, manufacturing and processing activities based on agricultural raw materials as well as activities and services that go as inputs to agriculture.

The Famine Enquiry Commission,1944 defined Agro-based industries as “those, which are involved in supplying the farm with agricultural inputs besides handling the farm products.”

In this article, we shall be discussing various aspects of Agro-Based industries in India, issues surrounding the sector. Further, this article covers other important dimensions, keeping in mind the demands of the preliminary as well as main examination of the UPSC IAS Exam.

Why is it in News?

Recently the honourable Vice President M. Venkaiah Naidu, in one of his addresses, has emphasized the need to promote agro-based industries in rural areas so as to create employment opportunities for the rural youth. He further stressed the role of agro-industries in augmenting the income of the farmers with allied activities. 

Why are Agro-Based Industries Needed?

  • Helps in the upliftment of the rural economy.
  • Proper utilization and achieving the potential of the rural economy sector, where plenty of raw materials are available.
  • Provide rural populations with an opportunity for employment.
  • Generate income and thereby improve the economic condition of people – which in turn creates the potential for demand-based industries.
  • Provide an opportunity for the dispersal of industries instead of concentrating at a particular place.
  • Solve the problem of exploitation of the farming community by traders and middlemen.
  • Farmers could be assured of better prices for their produce.
  • Encourage bringing more and more areas under various crops – increase agricultural production and improve the nation’s economy.
  • The transportation cost of agricultural products can be minimized – thereby helping to minimize the cost of finished goods.
  • Avoid wastage of perishable agricultural products.
  • Help to develop backward areas based on their suitability for setting up agro-industries.
  • Prevent migration of people from rural to urban areas.
  • To encourage balanced growth between agriculture and industry.

What are the Different Constituents of the  Agro-Based Industries?

Agro-produce processing units:

  • It deals with processing the raw material so that it can be preserved and transported at a cheaper cost.
  • No new product is manufactured. e.g.  – Rice mills.

Agro-produce manufacturing units

  • Manufacture entirely new products. 
  • Finished goods will be entirely different from their original raw material. 
  • Example-Sugar factories, bakery, solvent extraction units, textile mills, etc.

Agro-inputs manufacturing units

  • Industrial units which produce goods either for mechanisation of agriculture or for increasing productivity come under this type. 
  • Example: Agricultural implements, seed industries, pumpset, fertilizer and pesticide units, etc.

Agro service centres

  • They provide auxiliary and necessary services for the sectors.
  • Example- Workshops and service centres that are engaged in repairing and servicing pump sets, diesel engines, tractors and all types of farm equipment.
IAS exam aspirants can boost their preparation with the help of following links:

  1. Previous Years’ UPSC Question Papers
  2. Topic-wise GS 3 Questions of UPSC Mains
  3. IAS Agriculture  Questions
  4. 100+ Difference Between Articles for UPSC
  5. General Studies GS 3 Structure and Strategy
  6. IAS Geography  Questions & Answers

What are the Challenges in Establishing Agro-Based Industries?

  • Proper guidance is not available to entrepreneurs.
  • It involves some element of risk-taking
  • Change in crops/cropping pattern
  • Change in variety of crop due to technological improvement
  • Failure of monsoon may hit the raw material supply.
  • The multiplicity of agricultural produce and the absence of suitable methodology to select the best-suited industries to a given region.
  • Seasonal supply of agricultural produce may result in underutilization of capacity of the units as the unit will not be working throughout the year. 
  • Industries based on fruits and vegetables may not get the same variety throughout the year, but they may get some other variety.
  • Uncertainty about future market demands.
  • Absence of information about quantity and quality of the market.
  • Absence of proper integration among the various agencies of development in the district.
  • Proper guidance, training for modern and sophisticated agro-industries are not available.
  • As modern small industries are capital intensive, the supply of finance will be a considerable problem.
  • Promotional activities such as conducting intensive campaigns, identifying industries and explaining to entrepreneurs about prospects are inadequate.

Institutional Arrangements for Promotion of Agro-Based Industries

Different Government Departments and Agencies

  • Ministry of Agriculture-Deals with rice mills, oil mills, sugar mills, bakeries, cold storage.
  • Khadi And Village Industries Board: Covers traditional agro-based industries like “gur‟, handicrafts, khandsari.
  • Agro-Industries Development Corporation-  In each state mainly supply agricultural machinery, inputs and agricultural advisory services to farmers. Some corporations have also undertaken certain manufacturing activities in the agro-industries sector.
  • Small Industry Development Organization-  Deals with small agro-industries like hosiery, processing of food products, beverages, food and fruit preservation, agricultural implements.

Policy Directives by the Government

Agro Processing Cluster

  • The scheme aims at the development of modern infrastructure and common facilities to encourage groups of entrepreneurs to set up food processing units based on a cluster approach.
  • It seeks to link groups of producers or farmers to the processors and markets through a well-equipped supply chain with modern infrastructure.
  • At least 5 food processing units with a minimum investment of Rs. 25 crores. 
  • The units are set up simultaneously along with the creation of common infrastructure. 
  • At least 10 acres of land is required to be arranged either by purchase or on lease for at least 50 years for setting up an Agro-Processing Cluster.
  • Each agro-processing clusters under the scheme have two basic components i.e. 
    • Basic Enabling Infrastructure, such as roads, water supply, power supply, drainage.
    • Core Infrastructure or Common facilities such as warehouses, cold storage, IQF, tetra pack, sorting, grading.

Mega Food Park

  • The Mega Food Park Scheme is based on the “Cluster” approach and envisages the creation of state of art support infrastructure in a well defined agri-horticultural zone for setting up modern food processing units in industrial plots provided in the park with a well-established supply chain.
  • It aims at providing a mechanism to link agricultural production to the market by bringing together farmers, processors and retailers.
  • Intends to ensure maximizing value addition, minimizing wastage, increasing farmers income and creating employment opportunities particularly in the rural sector. 
  • Mega food parks typically consist of supply chain infrastructure including collection centres, primary processing centres, central processing centres, cold chains and around 25-30 fully developed plots for entrepreneurs to set up food processing units.
  • The Mega Food Park project is implemented by a Special Purpose Vehicle (SPV) which is a Body Corporate registered under the Companies Act. 
  • State Governments, State Government entities and Cooperatives are not required to form a separate SPV for implementation of the Mega Food Park project. 
  • Subject to fulfilment of the conditions of the Scheme Guidelines, the funds are released to the SPVs. 
  • There are 41 Mega Food Parks funded under the scheme.

Creation/ Expansion of Food Processing/ Preservation Capacities (Unit Scheme)

  • The main objective of the Scheme is the creation of processing and preservation capacities and modernisation/ expansion of existing food processing units with a view to increasing the level of processing, value addition leading to reduction of wastage. 
  • The processing activities undertaken by the individual units cover a wide range of post-harvest processes resulting in value addition and/or enhancing shelf life with specialized facilities required for the preservation of perishables.
  • While the expansion of processing capacity is necessary to increase the level of processing and reduce wastage, the induction of modern technology is intended to make a clear difference in terms of process efficiencies as well as improve the quality of the end product. 
  • The setting up of new units and modernization/ expansion of existing units are covered under the scheme.
  • Scheme is implemented through organizations such as Central & State PSUs/ Joint Ventures/ Farmer Producers Organization (FPOs)/ NGOs/ Cooperatives/ SHGs/ Pvt. Ltd companies/ individuals proprietorship firms engaged in establishment/ upgradation/ modernization of food processing units.


Agro-based industries are going to be the driver of growth for India in the coming decades. Further, as the government strives to double the farmers’ income, reduce employment dependence on the agriculture sector, and also the labour contribution, developing competitive agro-industries is crucial for generating employment and income opportunities. Agro-industries have the potential to provide employment for the rural population not only in farming but also in off-farm activities such as handling, packaging, processing, transporting and marketing of food and agricultural products. 

Further, Agro-Based tourism will boost the farm economy and will also act as a detox therapy for urban tourists by letting them experience the natural beauty of the place, ethnic food, unique flora, and fauna. Agricultural journalism is growing to promote information dissemination and help thrive entrepreneurship. It is high time the potential of Agro Based industries is leveraged to their full potential.

This article is relevant for the sections of Economy and Current Affairs part of the UPSC Syllabus prescribed for Preliminary and Main Stages of Civil Services Exam.

Relevant Links:

Indian Economy Notes for UPSC Agriculture in India
Export of Agricultural & Processed Food Products APMC
Director General of Foreign Trade Director-General of Trade Remedies


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