The Finance Minister Mr. Arun Jaitley, with a view to provide incentive to the food processing industry has announced, in the Budget 2014 – 15, a reduction from 10% to 6% in excise duty on specified food processing and packaging machinery.
The food sector has shown a mixed reaction to this announcement. Chairman of the Confederation on Indian Industry (CII) called the reduction insignificant and said that the new government will have to understand the needs of the industry before it can make significant changes like raising the machinery depreciation percentage that can be offset against tax. The demand by the CII to have zero percent duty on all processed foods has also not found mention in the budget.
The Federation of Indian Chambers of Commerce and Industry (FICCI) have, however, welcomed the move as one that would help the small entrepreneurs. It is also likely to boost farm level processing and prevent wastage.
The food processing industry plays a key role in increasing shelf life, preserving food nutrients in the supply chain and providing fortified products targeted at micronutrient deficiencies but this role needs to be widened to benefit others in the value chain and needs to be more ‘agriculture’ centric. The industry must work on forming a bulwark to extend farm services, improve price realization for farmers, reduce intermediaries, and strengthen supply chain through forward and backward links. The food industry needs to take a closer look at business prospects the agri-food sector and study the effectiveness of the various initiatives led either by the government or private players so as to remove hurdles in implementation.
The food packaging industry which had sought rationalization of excise duty on raw materials used in packing industry, particularly on tinplate which is used extensively for food as well as non-food products also stands disappointed. President of Metal Container Manufacturer Association of India said that the lowering of exercise duty was being seen as a necessary step in reducing the debt burden which the industry badly needs if it is to stay afloat.
For the last 25 years, the food processing industry has been called a sunrise sector even though the industry is estimated to be around INR 8 lakh crore with a GDP contribution anywhere between 1.3 to 1.5%. Considering that India is more than a billion strong the government would have to incentivise the food processing industry on a larger scale for the industry to play a more significant role in the ‘agriculture plus’ sector.