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(Source-Food Processing Industries in India)

POLICY INTIATIVES:
Since liberalisation several policy measures
have been taken with regard to regulation &
control, fiscal policy, export & import,
taxation, exchange & interest rate control,
export promotion and incentives to high
priority industries. Food processing and agro
industries have been accorded high priority
with a number of important relieves and
incentives. Some of the important policy
changes are as follows
REGULATION
& CONTROL :
The policy for distillation of alcohol has
been announced vide Press Note 4
(2006) according to which FDI upto
100% is permitted on the automatic
route for distillation & brewing of
alcohol
l h l subject
bj t tot licensing
li i b by th
the
appropriate authority.
No industrial license is required for almost all of
the food & agro processing industries except for
some items like: beer, potable alcohol & wines,
cane sugar, hydrogenated
h d t d animal
i l ffats
t & oils
il etc.
t
and items reserved for exclusive manufacture in
the small scale sector. Items reserved for S.S.I.
chutneys bread
include pickles & chutneys, bread, confectionery
(excluding chocolate, toffees and chewing-gum
etc.), rapeseed, mustard, sesame & groundnut
oils ((except
p solvent extracted),
), ground
g and
processed spices other than spice oil and olio
resins, sweetened cashew nut products, tapioca
sago and tapioca flour.
Use of foreign brand names are
f l permitted.
now freely i d
(Source-Food Processing Industries in India)

• FISCAL POLICY & TAXATION :


• Wide ranging fiscal policy changes have been introduced progressively.
Excise & Import duty rates have been reduced substantially. Many
processed food items are totallyy exempt
p p from excise duty. y
• Custom duty rates have been substantially reduced on plant & equipments,
as well as on raw materials and intermediates, especially for export
production.
• Corporate taxes have been reduced and there is a shift towards market
related interest rates. There are tax incentives for new manufacturing units
for certain years, except for industries like : beer, wine , aerated water using
flavouring concentrates, confectionery & chocolates etc.
• Indian
di currency (rupee)
( ) is
i now ffully
ll convertible
ibl on current account and d
convertibility on capital account with unified exchange rate mechanism is
foreseen in coming years.
• Repatriation of profits is freely permitted in many industries except for
some, where there is an additional requirement of balancing the dividend
payments through export earnings.
(Source-Food Processing Industries in India)

• EXPORT PROMOTION :
• Food processing industry is one of the thrust areas identified for exports.
Free trade zones (FTZ) and export processing zones (EPZ) have been set up
with all infrastructure. Also, setting
g up
p of 100% Export
p oriented units
(EOU) is encouraged in other areas. They may import free of duty all types
of goods, including capital foods.
• Capital goods, including spares upto 20% of the CIF value of the Capital
goods may be imported at a concessional rate of Customs duty subject to
certain export obligations under the EPCG scheme. Export linked duty free
imports are also allowed.
• Units in EPZ/FTZ and 100% Export oriented units can retain 50% of foreign
exchange receipts in foreign currency accounts.
accounts
• 50% of the production of EPZ/FTZ and 100% EOU units is saleable in
domestic tariff area.
• All profits from export sales are completely free from corporate taxes.
Profits from such exports are also exempt from Minimum Alternate Tax
(MAT).

• Ministry of Food Processing & Industries
• The Ministry of Food Processing Industries,
Industries set up in July 1988
1988, is the
main central agency of the Government responsible for developing a strong and
vibrant food processing sector; with a view to create increased job opportunities
in rural areas, enable the farmers to reap benefit from modern technology, create
surplus for exports and stimulating demand for processed food SUBJECTS
HANDLED BY THE Ministry:
The subjects looked after by the Ministry are :
• Fruits and vegetable
g p
processing
g industryy
• Foodgrain milling industry
• Dairy products
• Processing of poultry and eggs, meat and meat products
• Fish processing
• Bread, oilseeds, meals (edible), breakfast foods, biscuits, confectionery(including
cocoa processing and chocolate), malt extract, protein isolate,high protein food,
weaning food and extrudeM/other ready to eat foodproducts
• Beer, including non-alcoholic beer
• Alcoholic drinks from non-molasses base
• Aerated waters / soft drinks and other processed foods
• Specialized packaging for food processing industries
• Technical assistance and advice to food processing industry

Source:Annual Report,MFPI Structure and


Activities
Forming a company
• Indian laws do not permit limited liability partnerships. While small
businesses may be run as sole proprietary or partnership concerns,
concerns
it is prudent to consider a limited liability company for any medium
or large sized businesses. Branches of foreign companies are subject
to restrictions on operations and this form may be generally suitable
onlyl ffor export-oriented
i d activities
i ii F Foreign
i companies i may consider
id
setting up of a liaison office as the first step to starting operations in
India.While permission is required for the setting up of the liaison
office this is expeditiously granted.
office, granted

• The liaison office can act as a listening post for gathering


information but cannot conduct any commercial activity
information, activity.
Consequently, it would not be liable to income tax in India. Its
expenses must be fully met from inward foreign exchange
remittances

• While acquisition of, or buying into an existing business, may be


considered as an alternative to the setting up of a new operation,
certain
t i iincentives
ti and
d concessions
i may nott b
be available
il bl tto such
ha
business.
http://mofpi.nic.in
• P
Procedures:
d
• The procedures to establish an industrial undertaking in
India may involve obtaining:
• Certificate of incorporation under the Companies Act,
95
1956
• An industrial license under the Industries (Development
and Regulation) Act, 1951 or filing an Industrial
E t
Entrepreneur's ' M
Memorandum.
d
• Clearance for the foreign financial and/or technical
collaboration which may be granted automatically
collaboration,
under
certain circumstances.
• Environmental clearance under the Environment
(Protection) Act, 1986.
• Source-Food
Source Food Processing Industries in India,1995-96
India 1995 96

CIFTI –The Apex Food Industry
Association of India
Set Up -By Leading Chamber Of Commerce In India –
FICCI

With Unparalleled Initiatives forAgribusiness Sector:

CIFTI –A
A specialised
i li d body
b d for
f food
f d processing
i

State of the Art food testing laboratory –FRAC

Dedicated agri
g information centre on international news
and views –AIC

Dedicated
D di t d committees
itt on A
Agriculture,
i lt R
Rurall
Development, Water Management & Biotechnology
•Food industry the Largest Sector –Attracting the Largest
Multinationals in the World•Leading Countries Grabbing that
Share –U
U S,
S Canada
Canada, Australia,
Australia UK etc•Indian
etc Indian Processed Food
Industry -US $340 BillionIndian Processed Food Industry
Opportunity That The World PresentsIndian
Processed Food Industry Opportunity That The World
India’s Food Processing Industry -
highlights
Source: KPMG Research
Share in
world
trade –
1.7%

5th largest
Size – US$
industry in
70 billion Indian India
d
Food
Processing
Industry

Employs Low
1 6 million
1.6 penetration
people levels
composed of six key
segments
g
• High
g availabilityy of land – India
• Ranks first in availability of milk,
milk
ranks first in the world in irrigated
pulses and tea, and second in fruits,
land area and second in overall
vegetables, rice and wheat
arable land area

f bl factor
favourable f
conditions to enable
the food processing
sector to flourish

• Ample availability of marine and


fresh water fish, through the long • Low cost of labour – production
coast line of over 7,000 kilometres, costs in India
several large rivers and lakes

Source: KPMG Research


The Government has taken several initiatives
to support the sector
The national policy aims to increase the level of food
processing from 2% to 10% in 2010 and to 25% in 2025

The level of institutional credit to be provided by banks and


Financial Institutions has been increased from US$ 17.41
billion during 2003-04
2003 04 to about US$ 23.76
23 76 billion in 2005
2005-
06

Full repatriation of profits and capital is allowed


• Zero import
p dutyy on capital
p g
goods and raw material for 100%
export-oriented units. Custom duty on packaging machines
reduced. Central excise duty on meat, poultry and fish reduced to
8%

• Income
I tax
t rebate
b t allowed
ll d ((100 % off profits
fit ffor 5 years and
d 25%
%
of profits for the next 5 years) for new industries in fruits and
vegetables besides institutional and credit support

Automatic approvals for foreign investment


up to 100%,
100% except in few cases
cases, and also
technology transfer
The segments can be
assessed for
attractiveness
based on size, growth,
penetration levels and
level of organisation
g

Fruits & Vegetables,


dairy products and
fisheries
appear attractive options
f iinvestments
for
New business models are emerging, as manufacturers look to integrate backward
along
l th
the value
l chain
h i

• The Government of India is looking to promote terminal markets in 8 cities - Mumbai,


Nashik,
hik Nagpur, Chandigarh,
Ch di h Rai, i Patna, Bhopal
h l and
d Kolkata
lk

• Several
S l players
l h
have successfully
f ll ttried
i d outt contract
t t ffarming
i iin IIndia.
di ThThese iinclude
l d
MNCs such as Pepsi Foods