Bleeding biscuit industry faced with over 30,000 lay-offs

Bleeding biscuit industry faced with over 30,000 lay-offs

NEW DELHI, APRIL 8: The biscuit industry, both organised and unorganised, is faced with large scale lay-offs and over 30,000 people will go off jobs if the government does not reverse its decision to double excise duty on biscuits from eight to 16 per cent.

"We want the biscuit manufacturers to be treated at par with packaged tea, coffee, namkeen and bhujia makers. We have been categorised as a luxury item and put in the 16 per cent excise bracket in the Union Budget 2000-01. We have asked the government to immediately reverse this decision and sought removal of excise duty on biscuits... such a move would lead to a drop in biscuit prices and fuel a 20-25 per cent demand growth," Nikhil Sen, president of Federation of Biscuit Manufacturers of India (FBMI) told newspersons here today.

"Though Sinha has not committed anything either way, the manufacturers have promised that if excise duties are removed, we will drop prices of our products with immediate effect. However, if excise duty is retained at 16 per cent, we will see around 50-60 per cent of the small manufacturers closing down leading to large scale lay-offs."

"It has already been two months since the budget was announced and we are bleeding. If this goes on for another month or two, we will be seeing closure of several units," he added.

According to Sen, the steep hike in excise duty will negatively impact the industry as the manufacturers would be forced to hike prices, which would result in a drop in demand.

FBMI has also held meetings with the chairman and other senior officials of the Central Board of Excise and Customs. The meeting was to highlight that biscuit has been clubbed with luxury items like confectionery, chocolates, sausces, jams, cakes, ice-creams and even pan masala.

Last year, when the duty on tea, a mass consumption item was raised from zero per cent to eight per cent, the demand fell. The duty was subsequently reversed. Biscuits, like tea, are mass consumption items and should be treated at par, Sen said.

Adding to the woes of the biscuit industry, various states have increased sales tax on biscuits ranging from 16 per cent in Andhra Pradesh and eight per cent in Uttar Pradesh, Karnataka, Delhi and Haryana. The recent five per cent hike in railway freight has pushed up cost of raw materials and inputs such as sugar, edible oil and packing material.

Sen stressed that the doubling of excise duty would result in a drop of demand for biscuits. He also added that the growth rate of the biscuit industry in India is negligible and the per capital consumption of biscuits in our country is a mere 1.52 kg as compared to more than 12 kg in developed countries.

On account of the biscuit industry's exceptional nature and sensitivity to price increases, it deserves special treatment and should be granted exemption from the levy of excise duty, he added.