|
|
|
You can get e-magazine links on WhatsApp. Click here
|
|
|
|
|
|
High input prices and VAT at 12.5% hit growth of bakery industry
|
|
Sunday, 01 November, 2009, 08 : 00 AM [IST]
|
|
Mamata Chanda, New Delhi
|
While the growth rate of Indian bakery industry has been stagnating during the last 4 years, it has picked up momentum during 2007-08 and the first quarter of 2008-09 mainly on account of exemption from Central Excise Duty on biscuits with MRP up to Rs 100/per kg, as per Union Budget for 2007-08, according to Indian Biscuit Manufacturers’ Association (IBMA).
However, the industry is not satisfied with the current growth rate and said that the cost of major inputs such as wheat flour, sugar, fuel, power was shooting up to the extent of 30% resulting in stagnant growth of Indian bakery industry. The imposition of a high rate of VAT of 12.5 per cent has put further pressure on the industry.
Bakery industry in India is the largest of the food industries with an annual turnover of about Rs 3000 crore. India is the second largest producer of biscuits. The biscuit industry in India comprises organised and unorganised sectors. Bread and biscuits accounting for 84% of total bakery products produced in the country.
India’s bakery products can be divided into three main product type’s viz., bread, biscuits and cake. Only 30 per cent of the bakery industry is in the organised sector, and the rest comprises unorganised tiny local units and small scale units.The Indian bakery market is still in the early stage only. In India bakery items are not very high on the list of priorities for the masses. Awareness is nearly 100%, however, penetration is lower in rural areas at 15-20% and at 60% in urban areas. This is mainly because these products are consumed as snacks, and do not form part of the main course meal. The industry has traditionally been and largely continues to be in the unorganised sector contributing over 70% of the total production. Bakery products once considered as sick man’s diet have now become a common essential food item.
The biscuit industry in India witnessed annual growth as 15% in 2003-04, 14% in 2004-05, 14% in 2005-06, 13% in 2006-07, 15% in 2007-08 and 17% in 2008-09.
The major challenge faced by the organised bakery industry at present is low margins of profit. Hike in the prices of major raw materials like sugar, vegetable oil, milk, and wheat flour has been accounted for the industry's low margins of profit. The biscuit market has a total production volume of 1.1 million tonnes. The growth drivers for the biscuit industry are focused advertising, urban market, and new launches.
According to IBMA, the organised biscuit manufacturing industry‘s annual production was 11 lakh tonnes in 2003-04, 12.54 lakh tonnes in 2004-05, 14.29 lakh tonnes in 2005-06, 16.14 lakh tonnes in 2006-07, 17.14 lakh tonnes in 2007-08.
The organised and unorganised sectors of the biscuit industry are in the proportion of 60:40% ratio. Export of biscuit was estimated at around 15% of the annual production during the year 2007-08. Import of biscuits into India has not shown any significant growth during the last two years and has not affected production/sales by the Indian biscuit industry.
Biscuit Industry, especially the Small & Medium Sector, consisting of around 150 units are facing erosion in their profitability and competitive capability, due to steep hike in cost of production on account of increase in the prices of major raw materials, i.e. wheat flour, vegetable oil, sugar, milk, packaging materials, fuel and wages, said IBMA sources.
Per capita consumption of biscuits in the country is only 1.8 kg, as compared to 2.5 kg to 5.5 kg in south eastern countries and European countries & USA respectively. The per capita consumption will increase considerably in case the industry’s plea for reduction in the rate of Value Added Tax (VAT) from 12.5% to 4% is conceded, the sources pointed out.
Popular Brands of Biscuits in the country are Britannia, Parle, Priyagold, Anmol, Sunfeast, Biskfarm, Dukes, Cremica, Priya, Veeramani, Bonn, Bhagwati, Raja, Champion, Sobisco, Madhabi, Nezone, Windsor, Cookieman Ankit, Shangrila, Nalanda, etc
On behalf of the industry, IBMA has been pursing the issue with the chief ministers, finance ministers of all states and also with the Chairman of the Empowered Committee on VAT, seeking reduction in the rate of VAT on biscuit to 4%. IBMA estimates annual growth in the range of 15-20% during the next five years, in the event of reduction in the rate of VAT on biscuits to 4%.
|
|
|
|
|
|
|
|
|
|