PM pitches for simpler tax regime for processed food sector

Prime minister Manmohan Singh today regretted that the food processing sector was subject to "multiple levies" and said there is an urgent need to rationalise tax structure to replicate the success of the information technology (IT) industry globally.

"Though primary agricultural commodities are mostly exempted from taxes, processed foods are subjected to multiple levies. There is an urgent need to rationalise and simplify tax structure," he said here while pointing out that despite being a major food producer, India's share in the global processed food trade is less than 2%.

At present, many states are levying additional cess even when the empowered panel of finance ministers of states on value-added tax (VAT) has suggested a 4% VAT on processed fruits and vegetables, hampering the flow of investment into the sector.

Addressing a conference of food processing ministers of different states, the prime minister announced that the government would formulate a National Food Processing Policy to spell out the vision for rapid growth in food processing.

He noted that "despite economic slowdown, the sector grew at an impressive rate of 14.7% in 2008-09" from 7% in 2005-06.

"If we can get out act together, India can emerge as a leader in the global food processing industry ... I would like the Indian industry to think big and to think globally. There is no reason why they should not emerge as global brand names just as in our IT industry," he said. Though Singh listed out a "slew of supportive policies" by the UPA in boosting growth of what he called a "sunrise" sector, he said he recognised constraints of infrastructure, among others, and pitched for higher investment from public and private sectors.

"Expanded public investment is also necessary in building rural on-farm infrastructure like primary processing centres, collection centres, cold chains. We should reflect on how to increase private sector investment," the prime minister said.

Singh pointed out that the country lags global peers pathetically in the processing of food items, which stands at 6% against 80% in some developed nations.

"There is clearly very high wastage and very low value addition in our country, with corresponding loss of business opportunity and farm income," he said.

On the proposed policy for the sector, he said it "will have to adopt a number of legislative, administrative and promotional measures." It should promote viable agri-business models based on different climates and regions, he added.

Appreciating the endeavour of certain states, which have formed own policies for the sector, he asked others to follow the suit and remove "teething problems faced by the industry".

Singh said states should amend the APMC Act, aimed at facilitating more market-driven farming, and strictly enforce food laws. He also stressed harmonising the Indian food safety norms with global standards.