Friday, April 22, 2011


During the last six decades there has been incessant chanting by every government that ruled India that food processing is critical to the development of country's economy. Every politician with every hue does not lose an opportunity to give an expose regarding the low value addition to agricultural commodities achieved in the country and predominance of low value food items in the basket of national exports. That food industry is a logical corollary to agricultural sector is indisputable and GOI did recognize this truth when the specialized MFPI was set up in late 1980s. That this ministry was invariably "managed" by a junior minister. is another matter that reflects the gap between preaching and practice. Umpteen number of seminars, conferences, workshops, meetings with GOI babus have been making the point that processed food must not be taxed at all for at least for a few years to enable the processing industry to establish itself on a firm foundation and making packed foods available to the consumer at the lowest cost possible. Every Finance Minister (FM) of GOi had ignored this so called sun-rise industry and tried to milk it as much as possible to enrich its coffers! Here comes the latest blow to the industry with the present FM putting another economic burden on the food sector through his ill-advised levy in the form of excise duty which ought to be condemned in no uncertain terms.

"The entire food processing industry is feeling the pinch of this announcement (excise duty). We have written a letter to the Finance Minister. I hope he will look into it," Minister of State for Food Processing Harish Rawat told reporters here. He said that industry bodies have complained that the 130 items on which 1% excise duty has been increased include food items as well and this will lead to an increase in prices. Food inflation came down to 9.52% for the week ended February 26 from 10.39% in the previous week. Rawat, while inaugurating the National Seminar on food ingredients and additives on the sidelines of the Aahar 2011 international food and hospitality fair, said, "The ministry has requested the Finance Minister to keep GST and other taxes at a minimum level." The All-India Food Processors Association (AIFPA), which organised the seminar, has sought the removal of 1% excise duty on food and agricultural commodities, besides the waiver of Goods and Services Tax (GST) on food items. "With GST also, there should be no tax on food. When you tax food, you are taxing the value addition in the sector and this will lead to price rise as cost of inputs will go up and my worry is this will further increase the inflation," AIFPA President Piruz Khambatta told PTI.

No wonder many industry captains feel that they do not need any prop from the government and they would be happy if the rigid bureaucratic stranglehold by the government is done way with immediately. If governments do not want to help in any significant way, at least there should not be any road blocks that can affect the morale as well as the motivation of the entrepreneurs. Interestingly total revenue collected by various government agencies through their multiple taxation regimes on food industry is so minuscule that fore going the same will not be a sacrifice in any way. On the other hand, such a step will provide the necessary spark for a strong industry capable of generating millions of job opportunities and a host of products so vital for the consumers. Probably a strong industry after attaining some critical size may even contribute to the exchequer substantially in the long run.


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