The government is likely to accord special economic zone status to the proposed mega food parks that come up during the 11th Five-Year Plan (2007-12).

Each food park is expected to see substantial investments in cold storage, refrigerated vans, transport services, grading centres, laboratories as well as other supporting services.

"Providing the benefits of an SEZ will reduce the cost of production and increase competitiveness of processed food items," Subodh Kant Sahai, Minister of State for Food Processing Industries (independent charge), told Business Standard.

In a proposal sent to the Planning Commission, the ministry has also said that since food processing units are not typically spread over a large area, the minimum area limit applicable for food SEZs should be relaxed.

"Prescribing the minimum size of 1,000 hectares for a food SEZ is bound to discriminate against small food processors. So, we have proposed the minimum size of the SEZ for food processing industry be reduced to 10 hectares, which will enable smaller food processing units within the ambit of the SEZ scheme," an official in the ministry said.

"Currently, the ministry is in talks with corporate houses like Reliance [Get Quote] Retail, Bharti Enterprises, ITC, Tata among others to develop the infrastructure and build a supply chain for the unorganised food processing sector," sources said.

The ministry of food processing industries has envisaged an initial investment of Rs 120 crore (Rs 1.2 billion) for setting up the common infrastructure in a park. It is of the view that by providing a grant of Rs 1,500 crore (Rs 15 billion) for 30 parks, Rs 50 crore (Rs 500 million) for each, the private sector would be encouraged to invest up to Rs 9,000 crore (Rs 90 billion) in various parks across the country.

India's great rush for SEZs

Considering the higher risks involved in the food processing sector, the central government will also provide a subsidy of Rs 50 crore per park to private investors. Thus, the total financial outlay proposed for 30 parks, to be spread across 1,50,000 hectares in next five years, would be Rs 1,500 crore.

The government has also appointed Infrastructure Leasing & Financial Services Ltd as a consultant to look into the infrastructure constraints for the project. IL&FS has been given two months to submit its report to the government.

"The consultant would identify the location of the food parks that will be launched in five regions of the country this year," an official, who did not want to be named, said.

"The consultant would identify the location of the five park that will be launched in five regions of the country this year," an official, who did not want to be named said.

IL&FS will also facilitate formation of a special purpose vehicle, with an initial corpus of Rs 350 crore (Rs 3.5 billion). The SPV will be co-funded by the central and state governments, and private sector.

"The food parks will give a fillip to the retail sector and play a prominent role in increasing the overall economic activity. It benefits both the producer and the consumer," Sahai said. The parks would also provide direct employment to 2.8 million people, he added.