Processed food industry needs changes in duty structure, laws

With India fast emerging as a major market for processed food, questions are being raised on whether the country's laws and duty structures will be able to facilitate the growth of the processed food industry.

The questions are being raised at a time when the sector as such has the potential to become a huge industry in the wake of changing needs of the Indian consumers.

"Today factors like credit cards and equated monthly installments have led to a shift from savings lifestyles to spending lifestyles. This apart, kids and teenagers get more pocket money today, leading to an increasing spend on food and beverages and personal care. In fact, by 2006-07, 40 per cent of the Indian population will be a part of the very rich class who will be a strong market for processed food," Partha Dutta Gupta, general manager, Agro Tech Foods Ltd said.

Agro Tech's key business includes edible oils like Sundrop. It has also forayed into packaged food products like Healthy World atta and Act II popcorn.

"The demand for ready-to-eat and instant foods is also expected to rise because of changing lifestyles," O P Goenka, president of Federation of Andhra Pradesh Chambers of Commerce and Industry (FAPCCI) points out.

Local players, however, need to be helped to meet this growing demand by reforming existing laws, according to Parna Dasgupta, director of Confederation of Indian Food Trade and Industry (CIFTI).

"For instance, for the chocolate industry, cocoa is an important ingredient. But since India does not produce cocoa in sufficient quantities it needs to be imported. The customs duty on such imports is 30 per cent. So the local players have to shell out huge sums for such purposes. We need to revise the duty structure on products that are important ingredients of our food processing industry," she added.

"Besides, there are certain harmless additives also, that require approval under the archaic Prevention of Food Adulteration Act. The domestic manufacturer therefore spends a minimum of one year in getting approval for using even one additive," Dasgupta said.

"As a number of additives and ingredients used by foreign firms are not allowed in India, the domestic companies are at a disadvantage. The government is, however, contemplating on allowing the use of certain harmless additives without approval, and may come out with reforms soon," Dasgupta adds.

"A unified food law is the need of the hour. At present, there are a number of laws that govern the food industry leading to multiple legislations and duplication of food standards," S Sivakumar, chief executive "� Agri businesses, ITC Limited said.

A Group of Ministers consultation is going on for this purpose and we hope that the unified law comes into existence within a month, he added.

So while all harp on the growing demand of processed food in India, efforts need to be taken to change the archaic laws like the Prevention of Food Adulteration Act and bring in simplified laws in the form of Unified Food Law.

Besides, high import duties on important ingredients of processed food industry also need to be taken care of, so that domestic industries make hay while the sun shines.