Uptake of Encapsulated Ferrous Fumarate Double Fortified Salt in the Public Distribution System in India: A Value Chain Analysis

Raw Materials Used in EFF-DFS Production (Iodized Salt and DFS Premix)

India ranks third in salt production behind the United States and China, producing approximately 28 million of the 280 million tons of annual global salt production. Of the 28 million tons produced annually in India, human consumption accounts for 6 million tons, mostly as iodized salt. Three states: Gujarat, Rajasthan, and Tamil Nadu, produce respectively 70%, 18%, and 11% of the iodized salt produced in the country. The private sector contributes to more than 95% of salt production. The Bureau of Indian Standards sets production standards for iodized salt and DFS. The specifications for EFF-DFS production require a higher salt purity (when compared to iodized salt) of ≥98% sodium chloride, lower moisture (<1.5%), and magnesium contents (<0.1%).²⁹

DFS is prepared by adding the EFF-DFS premix to refined iodized salt. The premix consists of a ferrous fumarate iron core that is color-coated using food-grade titanium dioxide and encapsulated using hydroxypropyl methylcellulose and hydrogenated soy oil to form an encapsulated ferrous fumarate premix. Ferrous fumarate is the common form of iron used in multi-vitamin-mineral tablets. It is a recommended formulation for salt fortification based on organoleptic and bioavailability considerations. However, it is dark brownish and needs to be color masked before encapsulation and blending with salt for addition to foods. Titanium dioxide is an [U.S. Food and Drug Administration] -approved food-grade whitener, which is used in EFF-premix production to mask the dark brownish color of ferrous fumarate and make a white premix particle for blending into salt — Levente Diosady, University of Toronto, Personal communication, June 2020

This premix is added to iodized salt at a 1:160–200 ratio to produce DFS with iron content at the specified level (850–1100 ppm).^30,31

DFS Premix and DFS Production

Three DFS premix production plants in India—located in 3 states: Rajasthan, Gujarat, and Maharashtra—use the EFF technology. These plants supply premix on-demand to the DFS manufacturing plants that are currently operational in the country. The capital cost of building a premix production plant with a capacity of 1500 tons/year is estimated to be approximately INR 70 million (approximately US$1 million). To date, India has a DFS premix production capacity of approximately 6,000 metric tons/year (adequate to produce approximately 1 million metric tons of DFS). However, only 10%–20% of this capacity is currently used due to low market demand for DFS.

There are nearly 19 salt producers in India who hold a license from the Food Safety and Standards Authority of India (FSSAI); however, only 6–7 are currently operational. Figure 2 maps the number and the geographical locations of the DFS and premix producers in the country. DFS manufacturers must purchase the premix and blend it with refined iodized salt in their salt plants to produce DFS. To blend the premix with iodized salt, DFS producers require additional equipment costing approximately INR 10 million (approximately US$0.14 million). Salt fortification in India has 2 unique advantages: an established domestic salt production and distribution capacity and the concentration of more than 60% of the edible salt market across a small number of private producers (4 to 5), potentially facilitating a public-private partnership. Four years since the inclusion of DFS interventions among public health approaches to address iron deficiency anemia, the DFS market in India is still in its infancy. DFS reached approximately 4% of the country's population mainly contributed by the public-sector distribution across 6 states in 2018. Based on geographic coverage of the DFS interventions, the implementing states accounted for varying levels of population coverage ranging from (1% to 23%) (author's calculations) (Table 2).

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FIGURE 2

Map of Double Fortified Salt and Premix Producers in India

The Current Market and Distribution Channels of DFS

DFS distribution in India is predominantly routed through VCs of 3 major public food distribution programs with a minuscule contribution through private sector markets. Consequently, the beneficiaries of the public food distribution programs are the major consumers of DFS. The 3 major public food distribution channels operational across India are the public distribution system (PDS), the mid-day meal scheme for school children, and the Supplementary Nutrition Program for preschool-age children under the Integrated Child Development Services Scheme. The PDS (implemented through the Ministry of Consumer Affairs, Department of Food & Civil Supplies) is the key arm of India's food security system to provide essential foods to low-income populations at subsidized prices. There are more than 500,000 PDS outlets across India (also called fair price shops), serving more than 800 million beneficiaries (75% of the rural population and 50% of the urban population in the country).³² To date, at least 20 states procure free-flow refined iodized salt for distribution through the fair price shops. In 2016, DFS was introduced through the PDS, starting with Jharkhand and Uttar Pradesh, followed by a few other states: Andhra Pradesh, Telangana, Karnataka, and Rajasthan. Iodized salt and DFS distribution through the PDS are state-initiated interventions and not centrally funded. They vary in coverage (statewide vs. few districts, processes (prices/subsidies and quantities distributed), and sustainability (duration of government commitment to supply subsidized DFS/replace existing subsidized iodized salt).

In 2017, the Ministry of Women and Child Development, which oversees the Integrated Child Development Scheme, and the Ministry of Education, which oversees the mid-day meal scheme (the central government's 2 food distribution programs that serve hot cooked meals to preschool and school-age children) issued directives requiring the use of DFS in those schemes.³³ Following the directive, the supply of DFS through these channels was expected to increase significantly. In public institutions such as panchayats, Integrated Child Development Scheme block offices float local DFS procurement tenders for distribution of DFS to their beneficiaries. Medium-sized retailers bid for these tenders purchase DFS from manufacturers (often rebranding the DFS with their names) and supply the Integrated Child Development Scheme and mid-day meal programs. Notwithstanding the strong political commitment and the promotion of DFS by the Government of India, the process of scaling up DFS in the public sector at the state level has been slower than expected.

DFS flows through established commercial distribution channels for iodized salt in the open market and passes through 4–5 middle-level wholesalers and retailers before it reaches retail stores for sale. Although there are currently at least 10 different brands of DFS launched in the private sector, these brands have near negligible sales and have not penetrated the commercial market. High production cost, low demand for DFS, and organoleptic changes in stored salt and cooked food have been identified as the main reasons. Nonetheless, India is the single largest producer and consumer of DFS globally,³⁴ mainly due to the inclusion of DFS in the government's food security programs. The DFS-VC in India is a unique model of private production and public distribution. A total of approximately 180,000 metric tons of DFS was produced by private sector salt manufacturers and supplied to public distribution programs in 2018 (Table 2).

The Consumer VC of DFS

Institutional markets currently drive the demand for DFS in India. The beneficiaries of the PDS and ICDS are the primary consumers of DFS in the country (estimated DFS coverage under these schemes in 2018 at 50 million of the approximately 750 million active beneficiaries in India). They constitute a large population, mostly low-income, primarily concentrated in the rural areas, with often low awareness on nutrition and even lower on fortification, and a preference for low-cost products for daily household needs. These populations rely more heavily on purchasing essential foods at subsidized prices through the PDS. However, these populations also have cultural habits related to salt usage, such as a preference for the crystal salt and family traditions of buying specific salt brands. They also have expectations of the taste and appearance of cooked food that DFS formulations have to meet (research experiences of the author).

VC Governance and Policy Environment

VC governance can be categorized at 2 levels: (1) Internal, coordination of the VC stakeholders directly involved in the production and supply of the fortified commodity; (2) External, legislative, and governmental policies that govern the functioning of the VC.²⁰ The internal governance mechanism of the DFS-VC in India is currently fragmented and unorganized. At the external level, the FSSAI under the Ministry of Health is the central regulating and monitoring agency for food products, including DFS. It has set standards for nutrient levels and permitted stabilizers/coating agents in DFS; standards of DFS quality, packing, and labeling of DFS packets; and standards for quality assurance at DFS factory premises.³⁵ FSSAI also houses the Food Fortification Resource Centre, which acts as a program management unit for the FSSAI to inform, promote, manage, and coordinate activities related to fortified food products. Table 3 lists the key stakeholders involved in the DFS-VC and their functions that contribute to the VC.

Technology-Related Barriers

The technology-related barriers mainly affect 3 aspects of the VC requirements: availability, affordability, and acceptability. Fortification has added costs, which the consumers often bear unless the costs are subsidized through public interventions. The premix cost is a significant addition to the price of fortified foods (estimated at 80%–90% of the incremental cost). Consumers must either be willing to pay for this incremental cost (with the precondition that they are aware of the increased nutrient content) or be provided with subsidized DFS through public funding. Another limitation of technology that affects affordability and availability is that high-quality salt is required for DFS production. Approximately 60% of salt in the Indian market falls in the high-grade category. Refining some salts to suit the technological and regulatory requirements of DFS is cost-intensive. State governments who invite proposals to supply DFS set up a competitive process based on the lowest-bidder contracting system, lowering the price to a bare minimum with minimal profit margins for the producers. This results in salt manufacturers compromising the quality of salt and premix used for DFS supplied to public programs.

Food fortification works best when it is a covert intervention and indistinguishable from the regular food items in its sensory properties. Technological limitations of the premix encapsulation and the compromised quality of encapsulation during commercial scale-up affect the product acceptability. Under well-controlled manufacturing conditions, it is possible to produce a high-quality premix that would produce DFS with minimal organoleptic changes when blended with a high-quality refined salt. However, when the quality of the premix or the raw salt is compromised (such as weak encapsulation of premix or substandard raw salt), the premix particles are more visible, and the discoloration of food (an inherent property of iron) is more intense.

Private and Public-Sector Market-Related Barriers

Market-related barriers are identified as the main constraints to the VC development of DFS. The barriers resulting in a weak DFS market affect almost all aspects of the VC requirements such as nutrition awareness; nutrition signaling; availability; affordability (on the demand side) and capturing value; sufficient investments for the VC stakeholders; VC coordination and governance; and managing costs, risk, and uncertainty (on the supply side). There is currently an uncreated demand for DFS, especially as a nutritional product. Low awareness regarding fortification is the primary reason for this uncreated demand. Mechanisms for nutritional signaling in the case of DFS are inadequate and have not reached most consumers, especially from the low-income groups. Institutional demand for DFS from public sector markets has been unpredictable and inconsistent. Bundling DFS with ration kits in the PDS did not necessarily ensure utilization at the consumer level (as consumers preferred to use their regular salt to which they were habituated). At the same time, behavior change interventions by governments were minimal.¹⁰ Additionally, the low market value of DFS and unpredictable returns make DFS a high-risk investment for salt and premix manufacturers. Fortification also involves an increase in the cost of production, primarily contributed by the premix. In the absence of subsidizing mechanisms, these costs are transferred to the consumers. Salt is a low-priced and inelastic commodity offering little scope for value capture by VC actors. An average family of 5 members spends less than INR 180 (US$2.40) annually on salt. Increased purchase and consumption of DFS is possible only if it replaces the iodized salt that consumers currently buy. Price-conscious consumers opt for a lower-value product of the same brand. In the absence of information on fortification and the low value given to salt as a nutritional product, lower-income households prefer to buy the low-priced options of iodized salt (several such brands are available with a sizeable rural market). The slow-moving DFS-VC due to uncreated demand for fortified foods is the main reason the VC stakeholders cannot capture sufficient value for the services they provide. Additionally, the DFS-VC is still undeveloped and fragmented, and the VC stakeholders are not organized. Also, policy support for risk-sharing between public and private sectors has been inadequate.

Policy Barriers

Policy barriers for DFS uptake relate to nutrition awareness, nutrition signaling; availability; affordability; acceptability; sufficient incentives along the VC; VC coordination and governance; managing costs, risks, and uncertainty; and appropriate institutional environment. Nutritional awareness and empowering consumers with signaling mechanisms are primarily public-sector functions. Such mechanisms, though existent, have been inadequate. The private sector rarely highlights this function unless directly related to commercial gains (profit margins). Salt being an indispensable component of household food purchases, there is a large rural market for low-priced salt brands that cannot be double fortified. Therefore, subsidizing the additional costs through policy initiatives is essential to reach this largely rural and low-income consumer segment with nutrient-enriched salt. However, the funding for subsidization of DFS needs to come from state-government budgets that are often stretched and are inadequate and inconsistent. Additionally, insufficient quality control mechanisms and their implementation resulting in poor quality DFS affected the acceptability of the product.

Efficient coordination between VC stakeholders is essential for well-functioning VCs. India has built adequate capacity for the primary production of DFS; however, “producer organization” and a well-coordinated VC is yet to be developed. Despite central governing authorities such as FSSAI and Confederation of Indian Industry (a nongovernmental trade association and advocacy group) (Table 3), linkages between the different actors in the VC are weak. Public policies play a vital role in managing the costs, risks, and uncertainty in VCs. Most DFS producers said DFS was a risky investment and expected public-sector leadership to develop the DFS market. The institutional environment for DFS scale-up is weak, despite the inclusion of DFS in policy documents. Even with political support, there is a lack of committed central government funding (that could flow to states to support PDS-based DFS interventions). The low consumer demand for DFS due to poor awareness further contributes to the low priority for DFS as a political instrument of change among policy makers. Perceived threats of public disapproval due to color changes of stored salt and cooked food (a fallout of past experiences of governments with previous DFS formulations without iron encapsulation) and change of state governments and bureaucrat transfers that initiated DFS interventions are some of the additional policy barriers affecting DFS roll-out and uptake.