Excise cut on biscuits, ready-to-eats

Biscuits, ready-to-eat packaged food and soya bari are set to become cheaper with Finance Minister P Chidambaram announcing excise relief on these products in his reply to the debate on the Finance Bill, 2006-2007.

Biscuits with retail price of less than Rs 100 per kg will now be fully exempt from excise duty. While presenting the Budget, the finance minister had announced duty exemption to biscuits with a maximum retail price of Rs 50 per kg.

Ready-to-eat packaged food and soya bari, all of which used to attract 8 per cent excise duty, have been fully exempted now.

Providing a fillip to logistics and food retail, the finance minister reduced the Customs duty on refrigerated motor vehicles from 10 per cent to zero and the excise duty/countervailing duty from 16 per cent to 8 per cent. The market size of the ready-to-eat packaged food segment is around Rs 100 crore.

"The duty relief will undoubtedly be passed on to the end-user. This segment has not been very successful on account of high prices. A price cut will help in increasing the market size," said Gurnam Arora, joint managing director, Kohinoor Foods.

While presenting the Budget, the finance minister had provided 100 per cent excise duty exemption on all kinds of food mixes, including instant mixes.

Since then, biscuit manufacturers have been lobbying for an increse in the price limit for the exemption. "Excise duty exemption at Rs 50 per kg covered mainly glucose biscuits manufactured by one or two big companies like Parle. By increasing it to Rs 100 per kg, the finance minister has provided relief to 99 per cent manufacturers, and more importantly, small and medium enterprises," said BP Aggarwal, president, Indian Biscuit Manufacturers' Association. He added the association would shortly meet to devise ways to pass on the relief to consumers.

"Manufacturers' margins are under pressure. The duty relief will ensure that biscuit prices do not increase. The industry will now decide on repricing the biscuits," said Asad Wasi, secretary, Federation of Biscuit Manufacturers' of India.