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POLICY & REGULATIONS

Tax benefits & increased allocation to food processing will boost FMCG
Saturday, 03 February, 2018, 08 : 00 AM [IST]
Ashwani Maindola, New Delhi
Union Budget 2018-19 addresses the major pain points of the economy at the current juncture and would go a long way towards facilitating the path of 8+% GDP growth rate, stated the Confederation of Indian Industry (CII) in a press statement here on Friday.

The MSME sector has received high attention in the Budget. Relief in corporate income tax rates to 25% for companies with turnover of below Rs 250 crore will greatly ease the burden for smaller enterprises. On the tax side, 100% tax deduction to companies registered as farmer-producer companies with turnover of Rs 100 crore is another big step, which would boost the Operation Greens Mission of the government.

Commenting on Budget, Oliver Mirza, managing director & CEO, Dr Oetker India, said, “We welcome government’s move to reduce corporate tax from 30% to 25% for companies with revenue of up to Rs 250 crore. This initiative will give a boost to company revenue and allow businesses like us to invest more in expansion leading to employment generation, which is a primary focus for the government. This move will also provide a great stimulus to the government’s initiatives like ‘Make in India’ and ‘Startup India.’ Tax benefits combined with increased allocation to the food processing sector will give a great impetus to the overall FMCG industry.”

“The Budget provides impetus to the sectors of agriculture and rural economy with many significant measures which will add to overall consumption and demand and boost growth. The support to MSME sector through lowering of corporate tax rate to 25%, increase in access to finance, and addressing non-performing assets would help alleviate the stress in the sector,” stated Shobana Kamineni, president, CII.

“Strengthening of  22,000 rural markets will be done as Gramin Agricultural Markets with physical infrastructure and digital technologies, to be exempted from the APMC Act. This will eliminate bottlenecks in linking farmers to markets,” she added.  

Meanwhile, Dabur India Ltd CEO Sunil Duggal said, “The budgetary allocation for cultivation of specialised medicinal and aromatic plants is another big positive and will help promote India’s Ayurvedic heritage.”

According to market research firm, Frost & Sullivan, Budget will have a positive impact on the agriculture and food processing sectors. Demand for agriculture related products such as fertilisers, crop protection chemicals, micro irrigation equipment will go up. Since the focus will be on technology and modernisation, warehousing and logistics industry will also get benefitted. Financing for these sectors will increase. We will also witness an increase in exports of processed foods with the setting up of many testing labs.

Dr Prabodh Halde, president, AFSTI, said that government realised that food processing sector is the engine for farmers’ growth and in order to double the income of farmers, even allocation of food processing ministry has been doubled to Rs 1,400 crore for 2018-19. AFSTI welcomes this move.

According to Halde, the Highlights for Food Processing
1) Go Local: Encourage each district to focus on cultivation of specific crops, the government will re-orient current schemes and promote cluster-based development of agri-commodities.

2) Protect Farmer: To protect the domestic industry, the government has proposed to hike customs duty on orange fruit juices from 30 per cent to 35% on other fruit juices and vegetable juices from 30% to 50%, on cranberry juice from 10% to 50% and on miscellaneous food preparations (other than soya protein) from 30% to 50%. This will help domestic industry and work as trade barrier positively. 

3) Cashew Story: To help the cashew processing industry, it has proposed to cut customs duty on raw cashew from 5%to 2.5%.

4) Food Processing as Growth Engine: Accepting the fact of food processing industry as growth engine for farmers, Jaitley said that the food processing sector was growing at an average rate of 8% per annum so “the allocation of the ministry of food processing is being doubled from Rs 715 crore for 2017-18 to Rs 1,400 crore in 2018-19.”

5) Strengthening Kisan Sampada: The total funds allocated to the ministry for the next fiscal, Rs 1,313.08 crore will be for implementing the Pradhan Mantri Kisan Sampada Yojana (PMKSY), which is higher than Rs 633.84 crore allocated for the current financial year. Under the scheme, the funds are given as grant-in-aid for setting up of Mega Food Parks, development of infrastructure for agro-processing clusters, integrated cold chain and value addition infrastructure, creation of backward and forward linkages among others. This will see huge benefit to small/medium entrepreneurs in area of food processing. However we need to see its implementation.

6) IIFT/NIFTEM to Grow and Support: About Rs 61.20 crore have been earmarked for Indian Institute of Food Processing Technology (IIFPT) and National Institute of Food Technology Entrepreneurship and Management (NIFTEM) for the next fiscal. To facilitate financing for specialised agro-processing projects, Jaitley announced setting up of ‘specialised agro- processing financial institutions’ in this sector. This is very good news and specially for students, we will see huge benefit to student community who are seeking admission to this institute. Now also the responsibility has increased on this institute to showcase the real success and help start-ups and entrepreneurs in area of food processing. Need to wait for more details about what are Special Agro Processing financial institutes and also government needs to support other food processing institutes which are all over India under various universities.

7) Operation Greens: To check volatility in prices of basic veggies like onion and tomato, the minister proposed the launch of ‘Operation Greens’ on the lines of ‘Operation Flood’ that helped increase milk output in the country. He said Rs 500 crore has been allocated for the ‘Operation Greens’ to promote Farmers Producers Organisation (FPOs), agri-logistics, processing facilities and professional management.

8) Post-harvest Focus:  Every one knows India lost over 25% fruits and vegetable during post-harvest phase and to encourage FPOs in post-harvest activities of agriculture, Jaitley said the government will allow 100% tax deduction to FPOs having annual turnover of Rs 100 crore in respect of their profit derived from such activities for a period of five years from 2018-19 fiscal.

Halde, however, pointed out that though the overall Budget was very positive and focus has been given to food processing sector, some of the areas have been missed out. He observed, “There should have been start-up funds in food processing sector, allocation for skill improvement, SAMPADA schemes are for food park but what about other areas, time has come to focus on market development some allocation should be given on market development, focus on exports, some incentive should have been given for exports, incentives for basic research in area of food processing (R&D activities).”

MoFPI - Changes in Customs Duty Rate

Sl. No. HS Code Product Description From To
1 8013100 Cashew nuts in shell (Raw Cashew) 5% 2.50%
2 20091100, Orange fruit juice 30% 35%
  20091200,      
  20091900      
3 20092100 to Other fruit juices and vegetable juices 30% 50%
  20099000      
4 20098100, Cranberry juice 10% 50%
  20099000      
5 210690   Miscellaneous food preparations (other 30% 50%
      than soya protein)    
6 1508, 1509, Crude edible vegetable oils like ground 12.50% 30%
  1510, 1512 nut oil, olive oil, cotton seed oil, safflower    
      seed oil, saffola oil, coconut oil, palm    
      kernel/ babassu oil, linseed oil, maize    
      corn oil, castor oil, sesame oil, other fixed    
      vegetable fats and oils    
7 1508, 1509, Refined edible vegetable oils, like ground 20% 35%
  1510, 1512, nut oil, olive oil, cotton seed oil, safflower    
  1513, 1515, seed oil, saffola oil, coconut oil, palm    
  151620, kernel/ babassu oil, linseed oil, maize    
  15171021, corn oil, castor oil, sesame oil, other fixed    
  15179010, vegetable fats and oils, edible margarine    
  15180011, of vegetable origin, sal fat; specified    
  15180021, goods of heading 1518    
  15180031      
 
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