India's Food Processing MSMEs Crushed by 11,500+ Compliance Rules: Report

The report said food processing businesses operate within a multi-layered framework involving central, state and local authorities, making compliance a continuous and resource-intensive exercise.

According to the report, a typical mid-sized multi-state food processing enterprise is subject to over 3,285 unique compliance obligations, which rise to 11,554 annual compliance actions when filing frequencies are taken into account.

These cover food safety, labour welfare, taxation, packaging, environmental protection and other regulatory requirements. Labour laws alone account for nearly 50 per cent of the total compliance universe, significantly increasing the operational burden on businesses.

The report further highlighted that nearly 29 per cent of these obligations carry criminal provisions, including imprisonment for procedural lapses, exposing businesses to substantial legal risks even for minor non-compliance.

It also noted that the sector witnessed more than 130 regulatory changes in the last one year, making it difficult for businesses, particularly MSMEs, to keep pace with evolving compliance requirements.

According to the report, MSMEs are especially vulnerable because many lack dedicated legal and compliance teams to monitor and implement rapidly changing regulations.

"This constant change is especially difficult for MSMEs, which often lack specialised legal or quality assurance teams. These smaller businesses struggle to track and implement new rules in real-time," the report stated.

It added that delays in adapting to new rules increase the risk of financial penalties, licence suspensions and costly product recalls.

The report highlighted that food processors must navigate overlapping jurisdictions involving the Food Safety and Standards Authority of India, Bureau of Indian Standards, AGMARK and state-level enforcement bodies.

In many cases, products such as honey, ghee and packaged water require multiple certifications, leading to duplicate testing and higher operational costs.

The industry also faces challenges from infrastructure gaps, especially in smaller cities and semi-rural clusters, where access to accredited laboratories, cold-chain logistics and certified equipment vendors remains limited.

Rishi Agrawal, Co-founder and CEO of TeamLease RegTech, said such regulatory compliance needs digital systems, trained staff, management supervision, regular third-party audits, and trusted regulatory partners, which are often unviable for MSMEs.

"Without this strategic shift, the mounting weight of compliance becomes more than just an administrative hurdle, it becomes a tangible barrier to national and global expansion," Agrawal said.

The report noted that high-risk segments such as meat, dairy, seafood and ready-to-eat foods are now under stricter scrutiny, with regulators increasingly requiring real-time cold-chain monitoring and advanced testing standards. Compliance with these norms often requires expensive technology upgrades and infrastructure retrofitting.

Piruz Khambatta, Chairman of Rasna International, said compliance has become essential for businesses operating in the sector.

"In today's world compliance is not a choice but absolute necessity for growth and even survival of organizations," Khambatta said in the report.

The report notes, India's food processing sector structurally dominated by small enterprises, with around 24.59 lakh food processing units operating in the unregistered segment, accounting for over 98 per cent of all units.

It called for simplification, harmonisation and digitisation of compliance frameworks to improve ease of doing business and unlock the sector's growth potential.

- ANI