New Delhi, Feb 28 : Its a soft sop for the beleaguered carbonated softdrinks industry. For, the reduction of special excise duty (SED) on aeratedwaters from 24 per cent to 16 per cent has come with a caveat; asimultaneous reduction in abatement of the maximum retail price of softdrinks from the current 55 per cent to 50 per cent has also been announced.The net impact: Its a reduction of mere 2 per cent duty on aerated waters.Said PepsiCo India Holding Pvt Ltd chairman PM Sinha: "While the reductionof excise duty on aerated waters is welcome, it is disappointing as thesimultaneous reduction in abatement substantially offsets the excise dutybenefit."Commenting on the government's move, Coca-Cola India president and chiefexecutive officer (CEO) Alex von Behr said: "I welcome the government'sdecision to rationalise the excise duty on soft drinks, more in line withother processed foods. While the soft drink industry even today contributessignificantly to the economy by way of backward and forward linkages, thispositive step of reduction of excise duty will help the industry realise itsfull potential."
As per the Budget, the industry will now have to pay excise duty of 32 percent on Rs 5 (after abatement of 50 per cent on the MRP of Rs 10) per bottlerather than Rs 5.05 (after abatement of 55 per cent). The industry washitherto paying excise duty of 40 per cent on Rs 4.05 (after abatement of 55per cent on the MRP of Rs 9) per bottle rather than Rs 4.50 (after abatementof 50 per cent).
Whether the move will help stimulate volume growth or more importantly,whether a consequent price benefit will be passed on to the consumer isstill being debated in the corridors of soft drink majors. "A marginalreduction in price is unlikely to reach the consumer. However, the bottlersnow need to get together and decide how they can pass on the benefit to theconsumers," Mr Sinha added.
Copyright © 2001 Indian Express Newspapers (Bombay) Ltd.
