Rabo lobbies for tax exemption for foods sector

Rabo India Finance has recommended tax exemption for the domestic food processing sector and further reduction of state excise duties on processed foods.

"If food processing is considered as a sunrise industry then it has to be given the commensurate priority to provide an impetus," Sonal Shah, head strategic advisory, food and agribusiness, Rabo India Finance.

"Currently the state level taxation for processed food alone comes up to at least 25 per cent. In most European countries food products other than alcoholic beverages have zero taxation. India too has to adopt such a policy," she said.

Value addition by the sector was only 7 per cent as compared with 23 per cent in China, 45 per cent in Philippines and 188 per cent in the UK.

The quality of food produced in India was rated low in international markets fetching lower prices or facing rejection.

Another area requiring immediate concern was bank credit to the sector. Credit touched Rs 4,000 crore in the last decade compared with Rs 300,000 crore for the entire agriculture sector. The credit ratio for food processing to agriculture is at present 1.06: 10.

Food processing projects were entitled to automatic approval for investment upto 100 per cent in all areas except liquor and small scale industries.

Shah said banks could not boost growth unless food processing was deemed a priority sector.

The food processing industry was ranked fifth in the country in terms of sales and employed over 20 per cent of the country's labour force. It accounted for 14 per cent of the total industrial output and 5.5 per cent of the gross domestic product (GDP).