Answer:

♤ Forward and backward linkages mean the connectivity of the Food Processing Industry with the market and source of raw materials respectively.

♤ One important linkage falling under the backward linkages is the raw material linkage to the extent the FPI procures the raw material from the agro sector of the country. Other important backward linkages include the demand for the capital goods and machinery used in production, packing of the finished material.

♤ Some of the products of forward linkages are directly consumed by the people whereas some products may be used as input in other industries for production of more refined agro based products.

♤ For example, if one makes jams on a small scale, his backward linkage is the infrastructure, which connects him with his source of raw fruits, and his forward linkage is the infrastructure which connects him with the market

♤ The backward linkages of the production process involves searching for and extracting raw materials. This part of the production process does not do anything with the material itself, such as processing the material. This part of the process simply finds and extracts the raw material. Thus, any industry that relies on the extraction of raw materials commonly has an upstream stage in its production process.

♤ The forward linkage in the production process involves processing the materials collected into a finished product. The forward linkages further includes the actual sale of that product to other businesses, governments or private individuals. Forward linkages have direct contact with customers through the finished product.

Importance of forward and backward linkages

♤ The extent to which the FPI will generate the needed impetus for the overall industrial development of the state will depend upon their various linkage effects.

♤ Companies in the processed food manufacturing space face problems on the inbound supply chain side in terms of inconsistency of inputs quality, high level of wastages as the product reaches the manufacturing base and unwanted cost additions with minimal value additions.

♤ This is due to the long and fragmented supply chain which results in these wastages and price escalations. This generates requirement for companies to invest in creating backward linkages through contract farming, which would enable the company to control the inputs at an assured quality level with minimal wastages.

♤ Both backward and forward linkages are important for the uninterrupted temperature and climate controlled agricultural supply chain from the farm gate to the market. Majority of the processed foods require controlled temperature at the point of sale.

♤ Coming of food processing industries with strong forward and backward linkages will push farmers to cultivate crops as per the demand in market. With other benefits, this will cut our heavy import of oilseeds and pulses.

♤ As per some estimates, strengthening of backward and forward linkages will help in controlling the food wastage, which is estimated at over Rs 40,000 crore, and also aids in curbing inflation.