Fortified rice scheme to create Rs 3,000-crore market for just five big firms

The Centre’s decision to provide only fortified food items under government schemes rekindles the debate on whether fortification helps combat malnutrition and who actually benefits from the move

By Jitendra
Published: Tuesday 17 September 2019
Fortification is a lucrative business and a government backing translates into an assured market worth crores of rupees. Illustration: Tarique Aziz

Addressing the nation in his monthly radio programme, Mann Ki Baat, on August 25, 2019 Prime Minister Narendra Modi announced that rice provided to India’s poor categorised under five government schemes, including the public distribution system and mid-day meals, will soon be fortified with micronutrients such as vitamin B12, iron and folic acid, to help fight malnutrition.

The government believes that micronutrients, which enable the body to produce enzymes and hormones essential for growth, can play a crucial role in the country where 38 per cent children under five years are stunted and 36 per cent are underweight, as per the National Family Health Survey 2015-16.

The rice fortification scheme will be implemented in 15 districts of 15 states on a pilot basis from this kharif season. The announcement has rekindled the debate on whether fortification helps combat malnutrition and who actually benefits from the move.

“There is no proven case in any part of the world where fortification has reduced malnutrition,” says Umesh Kapil of the department of gastroenterology and human nutrition unit at the All India Institute of Medical Sciences, Delhi.

“Sometimes it can have the opposite effect. Natural foods contain protective substances such as phytochemicals and polyunsaturated fat that are adversely affected by the process of blending micronutrients,” says Delhi-based paediatrician Arun Gupta.

FORTIFICATION IS A lucrative business and a government backing translates into an assured market worth crores of rupees. Globally, just five multinationals — Germany’s BASF, Switzerland’s Lonza, France’s Adisseo and the Netherlands’ Royal DSM and ADM — manufacture micronutrients and all Indian entities that sell micronutrients import from them.

“These multinationals govern the world market through a cartel,” says Vijay Sardana, a Delhi-based agribusiness and trade analyst.

Rice is the fifth food item that the government is promoting with fortification — salt, edible oil, milk and wheat being the others. The total annual market for fortification of rice, wheat and milk, as per 2018-19 demand provided by the Union Ministry of Consumer Affairs, Food and Public Distribution (MOCAFPD) and the volume of fortifying mixture required given by the Food Safety and Standards Authority of India (FSSAI), is over Rs 3,000 crore.

Fortified rice alone will create an assured market of Rs 1,700 crore because its process is costlier than the other items.

Mixing it up

Fortifying rice is a complex and expensive procedure

Preparation of fortified rice starts with collecting broken rice grains, which otherwise have no market value. These are used to make rice flour in which a pre-mix of nutrients is added. A dough made of this mixture is processed through a machine (that costs about Rs 2 lakh) which cuts rice-shaped kernels. These kernels are then mixed with rice. Fortifying wheat flour also requires a blender that costs about Rs 1.5 lakh. Fortified rice and wheat require special packaging to retain the potency. Manufacturing fortified milk, oil or salt is easier since it just requires adding pre-mix to the food item.

For the first time since the 1980s, when the government made addition of iodine to salt compulsory, there is a renewed focus on fortification of food items. The decision on fortification of wheat was announced last year and is being implemented in 12 states under India’s flagship Poshan Abhiyaan to improve nutrition among children, adolescents, pregnant mothers and lactating mothers.

Fortification of edible oil, too, was made compulsory across the country by FSSAI in 2018. Fortification of milk was started in 2017 under which the National Dairy Development Board of India (NDDB) is pushing companies to add vitamin D. In the past two years, 25 milk federations across 20 states have been fortifying about 5.5 million litres of milk per day, estimates NDDB.

Surprisingly, Gujarat-based dairy cooperative Amul has refused fortification. “We favour natural fortification to address vitamin deficiency. The current fortification is based on synthetic or artificial fortification which would be dangerous for health,” says RS Sodhi, managing director of Amul.

For rice fortification, MoCAFPD is the nodal agency and has allocated Rs 150 crore (Rs 10 crore to each district) for three years. The amount includes the cost for supplying of fortified rice kernel, blending, lab and transportation. MoCAFPD estimates the cost of fortifying rice is Rs 0.60/kg, which will be shared between the Centre and the states in the ratio of 75:25. So far, only nine of the 15 states have agreed to participate in the initiative.

In June 2019, MoCAFPD sent notices to all the states and Union Territories in the country, asking them to designate one district each for the pilot scheme, but only Andhra Pradesh (West Godavari), Assam (Bongaigaon), Gujarat (Narmada), Kerala (Ernakulam), Karnataka (Raichur), Maharashtra (Gadchiroli), Tamil Nadu (Tiruchirappalli), Odisha (Malkangiri) and Uttar Pradesh (Chandauli) have agreed so far.

“Most states have not responded fearing an increase in the cost that they will have to bear,” says an MoCAFPD official requesting anonymity.“The Rs 0.60/kg seems very less but the final amount required for purchasing millions of tonnes of the grain will be in hundreds of crores of rupees,” he adds.

Worse, the Union government has not taken into account the goods and services tax (GST) while calculating the costs. “With 18 per cent GST, the cost of premix rises to Rs 0.71 per kg,” says an official with NITI Aayog on anonymity.

“As per my assessment only Uttar Pradesh, Gujarat, Odisha and Kerala will roll out this scheme by December,” says the official. He adds that NITI Aayog is planning to suggest the Economic Advisory Council to the Prime Minister to waive off GST on micronutrients.

Source: Ministry of Consumer Affairs, Food and Public Distribution; Food Safety and Standards Authority of India and National Dairy Development Board of India (NDDB)
*The total demand under government schemes; 
#Consumption estimate by NDDB

FSSAI HAS AUTHORISED 15 companies to supply micronutrients to the government. These firms, which are Indian entities, are listed on its website.

“All these companies have created their own sub-cartels across the country,” says Sardana. On the one hand, the government is enforcing fortification, and on the other it has not put in place a mechanism to check its prices.

“In the past three years, the price of pre-mixes has risen by 40 per cent,” Sardana says, adding that if miconutrients are essential, their prices should be governed under the Essential Commodities Act, 1955.

In 2001, the European Union imposed a fine of €855.2 million (US $952 million) on firms for cartelising the European micronutrient market and hiking the prices. These companies include Hoffmann-La Roche of Switzerland, BASF and Merck of Germany, Aventis SA of France, Solvay Pharmaceuticals of the Netherlands, and Daiichi Pharmaceutical, Esai and Takeda Chemical Industries of Japan.

Since then, these multinationals have merged, taken new names, formed new entities and are continuing operations.

“These companies create non-profits on the pretext that they will provide technical assistance to small and medium enterprises, but what they actually do is push them towards fortifying foods. They also lobby for food fortification with governments,” says Subodh Jindal of Delhi-based All India Food Processors’ Association. “Foreign non-profits prepared India’s rice fortification plans,” he alleges.

FSSAI has created a Food Fortification Resource Centre in New Delhi to advise and provide technical support to the regulatory body in collaboration with non-profits like TATA Trusts, PATH, World Food Programme and World Bank.

“These are all vested interest groups and are backed by multinationals,” claims Ashwini Mahajan, convenor of Swadeshi Jagaran Manch, an affiliate of the Rashtriya Swayamsevak Sangh. “We have written to the prime minister asking for an inquiry into this conflict of interest,” says Mahajan. 

(This article was first published in Down To Earth's print edition dated September 16-30, 2019)

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