The Budget has not entirely been a sumptuous one for the food sector. Apart from a few sops announced on R&D and agriculture that benefit the industry, consumers will have to digest an across-the-board excise duty increase, making packaged food products and ready-to-eat products costlier.
The divisional chief executive (foods) of ITC, Chitranjan Dar, said there will be an impact across all food categories. "We are now assessing the actual impact," he said. Dar said processed food products like biscuits used to attract different excise duties at 5% and 10%. Both have gone up by 1% and 2%, respectively.
"The hike in excise, service tax and transportation will have an impact on prices. We will have to work out the final consumer price after taking into account all these factors. However, benefits to farmers and on agriculture will be positive for the sector," said RS Sodhi, managing director, Gujarat Cooperative Milk Marketing Federation.
Reduction in basic customs duty on probiotics from 10% to 5%, would benefit the likes of Amul. But the increase in excise duty on ice-cream and flavoured milk from 1% to 2% at the onset of the summer season, may not augur well for the largest maker of ice-cream. "We had represented to the government to remove excise on these products which are largely consumed by the children and youth. The excise duty on chocolates and malted milk food also has increased from 10% to 12%, again affecting the kids and youth," said Sodhi.
Those who are health conscious have not been spared either. Prices of low fat spreads and margarine could go up as excise duty has been hiked by 1% to 6%. However, prices of soya food products would come down because of excise duty reduction. Dinesh Shahra, managing director, Ruchi Soya Industries, said benefits from reduction in excise duty on soya food products to 6% will be passed down to the consumer.
"A few of the positives of the budget include raising the plan outlay for agriculture by 18%, initiatives for R&D in agriculture, allocations for improving warehousing and storage facilities for agricultural produce. All of these, executed well and on time, will address the supply side on food and agriculture that will drive domestic demand and consumption, which is one of the key priority areas," said Vinita Bali, managing director, Britannia Industries.
As to whether this will impact growth of the Rs 2,50,000-crore food processing industry, Rasna's chairman Piruz Khambatta said: "Food processing industry will grow in spite of the government... it will grow because people want to eat more processed foods."
Keventer Agro MD Mayank Jalan said potato chip will cost more as there is a hike from 10% to 12%. But Nadia Chauhan Kurup, joint managing director & chief marketing officer, Parle Agro, said with the season just around the corner, the company would not pass on the excise duty hikes to consumers.
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