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Centre plans 10-year tax holiday for food processing sector
Our Commodities Bureau
New Delhi, Nov 7: The Centre is considering giving a 10-year tax holiday to the food processing sector in order to give a boost to investment in this sector. According to a paper prepared by the department of food processing, currently being looked into by the committee of secretaries, the investment needed in the sector was to the tune of Rs 1,40,000 crore, including foreign investment. The food processing department's presentation on the national food processing policy was unanimously accepted by the parliamentary consultative committee of the ministry of agriculture, at its meeting held in Bangalore under the chairmanship of agriculture minister Nitish Kumar. Mr Kumar has already spoken to Mr Sinha after the consultative committee meeting on the subject and a detailed meeting is slated to be held shortly.Thrust of the policy is to increase food processing from the present 2 per cent to 10 per cent, proposed tax holiday for ten years, enactment of food processing development Act, generic promotion, strengthening data base and special provision for the north-eastern region, hilly areas and islands in the short term period. The salient features of the policy include:
Establishment of a network of R&D institutions Identification of anchor industries and development of food parks Establishment of a cold chain and development of related infrastructure Development and transfer of new technologies and product specific packagingFutures tradin, equalisation fund and exports.Confirming that the government is contemplating the policy initiatives on the food processing sector, food processing department secretary, Omesh Saigal told The Financial Express: "The enhanced investment (of Rs 1,40,000 crore) would generate direct employment for about 77 lakh persons and indirect employment of some three crore people". According to figures available with the government, growth in fruits and vegetables was 6 per cent as against 3 per cent in food grains. But the market surplus in fruit and vegetables was 90 per cent as against just 15 to 20 per cent in food grains. It is imperative, therefore, that fruit and vegetables sector was in need of a marketing mechanism. This was possible only through large scale investment. One of the biggest disincentives in the growth of the food processing sector has been the tax structure. When excise duty was first levied on processed food in 1997-98, it was just 8 per cent. Last year, however, the rate has been hiked to 16 per cent. As a result, investment in the sector became a big casualty. According to the department of food processing, the food processing sector attracted an investment of about Rs 10,000 crore between 1991-92 (when the sector was delicensed) and 1996-97 (when no excise was imposed). It declined soon after, following levying of taxes. Hence, the need for a tax holiday. Significantly, the government is simultaneously working on a processed food development Act which is expected to provide a single window system and will move from the regulatory penal regime to that of promotional and developmental mechanism. The argument in its favour is that it will serve the interests of the Indian food industry and make it viable and competitive . Copyright © 2000 Indian Express Newspapers (Bombay) Ltd.
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