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Tax holiday for food processing likely

Our Bureau

MUMBAI, Dec. 5

THE Government is likely to offer a 10-year indirect tax holiday for the food processing industry, the Secretary, Department of Food Processing Industries, Ministry of Agriculture, Mr Omesh Saigal, has said.

``The Finance Ministry is favourably inclined in offering this 10-year tax holiday,'' Mr Saigal told delegates at the International Conference on Cold Chain Warehousing in Mumbai, organised by the Federation of Indian Chamber of Commerce and Industry.

The food processing industry was a high risk low gains industry and required heavy investment. Currently, the sector paid very high taxes of around 40 per cent, he said.

``A tax holiday will not only help the agricultural sector but also help the country's gross national product,'' Mr Saigal said, adding that a decision in this regard would be taken up in the next budget session. The relief would be in terms of exemptio n from sales tax, octroi and excise.

The approach paper towards formulation of a national policy on food processing industry had identified tax levels on processed foods among the highest in the world. The increase in food processing sector by 10 per cent would push up the GDP by seven per cent and would generate 13 million jobs.

The proposed Processed Food Development Bill was awaiting clearance from Parliament. The main objective of the Bill was to create a single authority to administer all the food laws under a single umbrella, he said.

The food chain on an average had five different middlemen between the farmer and the consumer. ``The difference in the prices between the farmgate and the consumer is sometimes 10-15 times the former,'' he said.

Processing of agricultural produce in India was abysmally low at around two per cent and value-addition was seven per cent. Two-thirds of the workers contributed only one-third to the GDP because of the low value-addition. This was in sharp contrast to C hina where value-addition was around 40 per cent, he said.

``If we have to increase the level of processing from two per cent to 10 per cent, we will need Rs 1,40,000 crore or $30 billion,,' Mr Saigal said.

Food processing was essential to enhance the shelf-life of the agricultural products. While agreeing on the need for setting up a cold chain, he said the industry should set up a cold chain system that adapted well to the Indian needs. The Processed Food Development Bill has been drafted to replace the Prevention of Food Adulteration Act (PFA) of 1954. The Bill has provisions for futures market, setting up of equalisation fund for compensating food processors when raw material prices go up, creation of development fund and evolve food fortification parameters.

The PFA Act, Fruits Products Order, Meat Products Order, Milk and Milk Products Order will be covered under this Bill. It will include provisions of Agricultural Produce Grading and Marketing Act (AGMARK), Standards of Weights and Measures Rules and Expo rt (Quality Control and Inspection) Act.