Ease of business? Agricultural, dairy FMCGs need to meet 3k obligations a year, says report

The report said India’s fourth-largest economic sector could show better results if the business regulatory framework was helpful.

(Representational image) Workers fill sacks with wheat at the market yard of the Agriculture Product Marketing Committee on the outskirts of Ahmedabad | Reuters/file photo

New Delhi: Any fast-moving-consumer-goods (FMCG) firm involved in agricultural and dairy products in India is required to comply with over 3,000 obligations a year, a report has found, resulting in a complex regulatory framework for this sector.

The report by TeamLease Regtech – which provides compliance management software to companies – comes at a time when the government says doing business in India is getting easier.

The findings state: “While increasing awareness, accessibility, and lifestyle transformation have been the key growth drivers, ignorance of regulatory obligations, intricacies of compliance processes, and the sheer volume of updates have complicated the sector’s regulatory framework.”

The report “Simplifying Compliance Management for the FMCG sector” – shared with ThePrint – noted that FMCG was the fourth-largest economic sector and boasts a 3-million strong workforce. The sector’s growth, it said, can be attributed to consumer-driven factors such as a rise in rural consumption, an increase in disposable income, and higher standards of living.

Noting that there was support from the government for making in India via initiatives such as Production Linked Incentives (PLIs), the report added these schemes could show results only if the business regulatory framework was helpful.

“With the government actively promoting ‘Make in India’ via Production Linked Incentives (PLIs), the food processing industry is expected to become a major export player in the coming years, realising the goal of becoming the ‘Factory to the World’. However, all schemes, initiatives, and programs can only bear fruit if the business regulatory framework is conducive,” it said.

The report added that while increasing awareness, accessibility, and lifestyle transformation have been key growth drivers, ignorance of regulatory obligations, intricacies of compliance processes, and the sheer volume of updates have complicated the sector’s regulatory framework.

In the 2021-22 financial year, the government implemented a PLI Scheme valued at USD 1.4 billion, specifically for the Food Processing Industry (FPI), aimed at facilitating export growth and India’s transition into a prominent global manufacturing hub.

It explained that an enterprise involved in producing agricultural and dairy products must obtain 23 licences, permissions, and approvals before it could start operations. These include registration as a food business operator (FBO), factory licence, fire compliance certificate, approval for sewage discharge, municipal corporation licence and a permit to purchase produce directly from farmers, among others.

In addition, separate licences have to be obtained for every unit wherein it manufactures, stores, sells, or exhibits food items for sale. All raw materials, ingredients, and water used in the process need to be approved and certified annually by an Food Safety and Standards Authority of India (FSSAI) approved laboratory.

“Such an Enterprise is required to abide by 831 regulatory requirements, of which 576 are enforced at the Union level, 250 are Stateenforced and 5 are at the municipal level,” it said.

In addition, 138 of these need to be complied with annually, while 156 have to be kept up with monthly.

“Furthermore, if such an enterprise operates warehouses for storage and distribution, it must adhere to 421 compliance obligations per warehouse. As a result, the business can end up with over 3,000 compliance obligations for a single production unit in a year,” the report said.

Edited by Tikli Basu