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Budget

Launch of Mission on Food Processing, Budget’s big bonanza to food sector
Saturday, March 17, 2012 IST
Irum Khan, Mumbai

When finance minister Pranab Mukherjee opened his bundle of financial offerings to the nation it was almost certain that not any major news was likely to come by or a 360-degree turnaround was possible, given the twin ghosts of inflation and global economic crisis still haunting the government.

The Union Budget 2012-13 ratified the guess.

A GDP (Gross Domestic Product) growth of 7.6% in 2012-13 and 8.6% in 2013-14 has been anticipated. How much of it would be achieved would be known only a year later.

Though, the Budget did bring in some new schemes for the food industry accompanied by a slew of incentives.

The National Mission on Food Processing is one promising scheme proposed in the Budget to be started in 2012-13. This scheme is proposed to take care of the huge wastage in the country by effectively leading raw materials to the processing plants. The government will have to ensure that the design of the implementation plan is cogent and transparent.

“The food processing sector has been growing at an average rate of over 8 per cent over the past 5 years. In order to have a better outreach and to provide more flexibility to suit local needs, it has been decided that a new centrally-sponsored scheme titled “National Mission on Food Processing” would be started,” said the FM.

When it came to food, the government has realised that the problem of malnourishment was far greater for the country than that of food security.

The Union Budget has offered initiatives to take care of the nutritional needs of the masses. Towards this it proposed a multi-sectoral Nutrition Augmentation Programme.

Following the decision taken in the Prime Minister’s National Council, the programme designed to address maternal and child malnutrition in selected 200 high burden districts, was being rolled out during 2012-13.

The project would harness synergies across nutrition, sanitation, drinking water, primary health care, women’s education, food security and consumer protection schemes.

In this context, Integrated Child Development Services (ICDS) scheme was being strengthened and restructured. For 2012-13, an allocation of Rs 15,850 crore has been made as against Rs 10,000 crore in 2011-12. This amounts to an increase of over 58 per cent to the ICDS scheme.

Further, for 2012-13, the FM proposed to allocate Rs 11,937 crore for the National Programme of Mid-Day Meals in school, up from Rs 10,380 crore in 2011-12.



Mukherjee claimed that the National Programme of Mid-Day Meals in Schools enhanced enrollment, retention, attendance, and also helped in improving nutrition levels among children.

Protein deficiency among women and children is one of the most common sources of malnutrition in India. The FM proposed to reduce basic customs duty on soya protein concentrate and isolated soya protein from 30 per cent or 15 per cent respectively to 10 per cent. “Simultaneously, excise duty on all processed soya food products was being reduced to the merit rate of 6 per cent,” the FM said.

Consumption of iodised salt that prevents iodine deficiency and related diseases has also received a mention in the Budget. The FM proposed to provide a concessional basic customs duty of 2.5 per cent along with reduced excise duty of 6 per cent on iodine.

Further, the customs duty on probiotics, a cost-effective means of combating bacterial infections, has been reduced from 10 per cent to 5 per cent.

On food security, the government clarified that it would get more weightage even if that meant curtailing subsidies like fertiliser and petroleum. “From 2012-13 subsidies related to food and for administering the Food Security Act will be fully provided for,” the proposal said.

On the status of the Bill, which had been receiving recurring mention ever year, Mukherjee informed that the Bill was before the Parliamentary Standing Committee.

The platform of Unique Identification System Aadhar would be used as a first step to revive the notorious Public Distribution System Network. A National Information Utility for the computerisation of PDS is also being created. It will become operational by December 2012, the minister informed.

On storage capacity the minister informed that nearly 15 million tonnes capacity is being created under the Private Entrepreneur’s Guarantee Scheme, of which 3 million tonnes of storage capacity will be added by the end of 2011-12 and 5 million would be added next year.

The next on the offering for the food industry was the investment-linked deduction of capital expenditure incurred in the business of cold chain facility, warehouses for storage of food grains and fertilisers which would be provided at an enhanced rate of 150 per cent as against the current rate of 100 per cent.

In addition, to promote investment in research and development, the Budget proposed to extend the weighted deduction of 200 per cent for R&D expenditure in an in-house facility beyond March 31, 2012, for a further period of five years. A weighted deduction of 150 per cent on expenditure incurred for agri-extension services in order to facilitate growth in the agriculture sector has also been offered.

Another respite for the industry came from reduction in customs duty. The basic customs duty on sugarcane planter, root or tuber crop harvesting machine, rotary tiller and weeded has been reduced from 7.5 % to 2.5% and that on coffee plantation and processing machinery it has been reduced from 7.5 per cent to 5 per cent.

The Budget has also proposed to extend project import benefit to green house and protected cultivation for horticulture and floriculture at concessional basic customs duty of 5 per cent. It has reduced basic customs duty on some water soluble fertilisers and liquid fertilisers, other than urea, from 7.5 per cent to 5 per cent and from 5 per to 2.5 per cent.

It further extended concessional import duty available for installation of Mechanised Handling Systems and Pallet Racking Systems in mandis or warehouses for horticultural produce.

Infrastructure

During the Twelfth Plan period, infrastructure investment will go up to Rs 50 lakh crore. About half of this is expected to come from the private sector.

Taxes

Direct Tax Code would not applicable this year, the FM further mentioned.

The service tax completed its adulthood by completing 18 years this year. This tax needed major overhaul through expansion of the tax base. As a measure of harmonisation between the Central Excise and Service Tax, a number of alignments have been made. These include a common simplified registration form and a common return for Central Excise and Service Tax, to be named EST-1. This common return will comprise only one page, which will be a significant reduction from the 15 pages of the two returns at present.

A Study Team would be set up to examine the possibility of a common tax code for service tax and central excise, which could be adopted to harmonise the two legislations as much as possible at the right time.

For the hospitality sector, the news on service tax may not be good enough with increase in the rate of the tax.

Looking at our vast commitments and to maintain a healthy fiscal situation, the FM proposed to raise the service tax rate from 10 per cent to 12 per cent, with consequential change



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