FMCG companies may re-engineer the packaging of coconut hair oil by increasing the grammage to escape the purview of the Central Board of Excise & Customs' decision to impose eight per cent excise on product packs under 200 ml.
The CBEC had in a circular on June 3 decided to impose the excise under section 37B of the Central Excise Act, 1944.
"The companies might go for re-engineering of packages. Packs of 200 ml could be phased out and 220 or 230 ml grammage packs might be brought into the market. This will allow them to dodge payment of excise," according to an industry source.
Most branded coconut oils in the market come in packs of 50 ml and 100 ml. Hitherto, coconut oil, being an edible oil, was exempted from excise duty.
FMCG player Marico had earlier said it was contemplating action against the CBEC decision. An official of Marico, which owns the Parachute hair oil brand, shared that he was not aware of any decision to increase the package size but added "as and when any decision is taken, we will inform you."
In an information update issued on the company's website, Marico has stated that coconut oil is a 100 per cent natural product and meets all standards of edible oils under the Prevention of Food Adulteration Act.
"However, recently, there have been, pursuant to a CBEC circular, some developments on the exciseability of coconut oil in small packs. The company is contemplating appropriate action in this matter in accordance with legal advice," it said.
Coconut oil is currently classified as a vegetable oil.
Marico, with brands like Parachute, Nihar and Oil of Malabar, is the largest player in the estimated-Rs 1,500 crore branded coconut oil market and has a share of 55 per cent in it.
Marico's update, however, does not focus on the financial implications of the CBEC order.
"The current facts and advice received by us as of now seem to suggest that the net financial impact of these developments is unlikely to be material. However, it would be wise to move towards conclusions on this matter only as we get better clarity over the next few weeks," the company said.
Meanwhile, the other big player in the coconut oil market, Dabur India added it is watching the situation but will not undertake any legal action.
"We are not doing anything, we are watching the situation. We will go with any decision taken by the court," a Dabur India spokesperson said.
