Recent research says that at Rs 2,50,000 crore, the Indian food market is one of the largest in terms of production, consumption, export and growth prospects. Value-added products, at Rs 80,000 crore, alone comprise some 30 per cent of the total market.

Yet, the processing level is very low. Consider this. India’s share of processed food is about 1.6 per cent. A paradoxical situation considering that the country is among the largest producers of fruits and vegetables in the world, but only around 2.2 per cent of the yield is processed. Processed poultry fares better only marginally at 6 per cent of total produce, while milk and meat are at more respectable figures of 35 per cent and 21 per cent respectively.

In order to explore and exploit the untapped potential in the food processing sector, industry chambers seek a reduction in the average incidence of tax applicable to this sector from the current level of 25 per cent to under 10 per cent. Their list of demands also includes tax sops for technology upgradation and R&D, and improved infrastructure for the food processing segment.

The total incidence of tax on processed products in India is as high as 40 per cent on certain items. Considering the importance of this sector, while a few countries have kept the incidence of tax at zero per cent, most others have pegged the tax burden at between 12 and 14 per cent.

Speaking to The Indian Express, president, Ficci, S.K. Poddar said, “Indian policymakers must have bigger picture in mind while drafting any policy for food processing. Mere reduction in excise duty would not serve the purpose. The incidence of tax needs to bring down to comfortable level. R&D in this sector needs special attention of the government.”

... contd.