Radical proposals to overhaul India food processing sector tabled

10-Jun-2009 - Last updated on 11-Jun-2009 at 11:11 GMT

Related tags Food processing Investment

Sweeping plans to revamp the Indian food processing industry have been put forward in a bid to boost the sector and attract foreign investment.

The government, industry players and Assocham, a national business body, have all come up with initiatives this week to shake up the domestic food processing industry and stimulate growth.

Tax holiday

Subodh Kant Sahai, the recently appointed food minister, said the industry should have a total tax holiday until 2017 and has pledged to include the proposal in the upcoming budget.

"This sector should be treated like the infrastructure sector. An eight-year complete holiday is required for the sector to boost growth and we are trying to send all recommendations on fiscal taxation to the finance ministry," he said.

Sahai also indicated he wanted to remove VAT completely for perishable goods. He said the food processing industry had assumed a vital role in agricultural areas and said the sector had the potential to grow a hundred times “with the right incentives”.

The minister added that the Indian Government was also considering proposals to give foreign investors a five-year tax holiday in a bid to attract direct investment from abroad. It is hoped such a cash injection could see annual growth in the domestic food processing segment double to 27 per cent over the next few years.

The government was aiming to tap into the growing purchasing power of the expanding middle classes as well as seeking to reach out to rural areas "through demand-driven, market-oriented policies to build the economic sustainability of our farmers," said Sahai.

Regulatory reform vital

PepsiCo India's director of corporate affairs Sunil Duggal backed the proposals calling for 100 percent tax-breaks for investments in R&D in food processing. He also said the infrastructure and fiscal regimes were hampering growth and needed to be reviewed.

The Association of Indian Chambers of Commerce and Industry (Assocham) has urged authorities to deregulate the food processing sector – particularly for fruits, vegetable, meat and fish – to attract further foreign investment.

The body said the country’s unwieldy licensing process and tough rules were stifling growth.