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“Processed foods are necessities, should be taxed zero”
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Monday, 26 September, 2016, 08 : 00 AM [IST]
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fiogf49gjkf0d fiogf49gjkf0d  The philosophy of Rasna International Pvt. Ltd, a leading player in the concentrated drink and instant powder categories, is to provide superior value to customers by producing and marketing best-in-class products in the beverage category. The company is committed to excellence in keeping with its ranking as one of the world’s largest soft drink concentrate manufacturing companies. In an e-mail interaction with Anurag More, Piruz Khambatta, chairman and managing director, Rasna International Pvt. Ltd, and brand ambassador, Make in India, spoke in detail about processed foods and beverages and issues such as taxation that the industry has been facing. Excerpts:
How do you see the future after foreign direct investment (FDI) is allowed in manufacturing and marketing of food and beverage products in India? Should it also allow the same in multi-brand retail?
It is a very good move to allow foreign direct investment in food retail. One hundred per cent FDI is already there in manufacturing and marketing and it was missing in retail. But it should be limited to products made in India with 80 per cent value addition so that imported products that are merely packed or labelled in India do not get in. This would ensure that the benefit goes to farmers, thereby improving their livelihoods, with overall positive impact on the economy and benefits to consumers.
What are your future plans as the ambassador of Government of India’s Make in India campaign?
I believe India has a huge opportunity to export processed food products. What we need is a campaign for food from India wherein Indian companies can be positioned as best suited to feed the world. I thank the Government of India for including me in propagating this concept. Rasna has been doing exactly the same for over 20 years. We have been exporting our products to countries where no fast-moving consumer goods (FMCG) have been exported in the past. The biggest benefit of food from India is that Indian products get promoted abroad and it is beneficial to the rural economy and farmers. I would encourage more and more companies to join hands in the Make in India revolution.
Do you think the allied infrastructure (power supply, logistics and water supply) is sufficient to develop food parks in India? What do you suggest to improve the situation?
All the three – power supply, logistics and water supply – need improvement. Mega food parks, which are not limited to food processing but across the industry, are a step in the right direction to resolve it. They require the above three, especially because local freight is very expensive. For example, a 20-foot container can be sent to Dubai at $80 (Rs 5,000), while the freight from Ahmedabad to Delhi is Rs 40,000. We really need to work on this.
Do you think that while planning for food parks, there should have been representatives from government departments like power, water and transport? Will horizontal planning to connect ministries in India be a solution to this challenge?
Actually, food park projects are stuck due to the lack of support from state and local authorities, so they need to be brought on board for the success of this unique initiative of the government.
What is the impact of taxes on food processing?
Unfortunately, there is the impact of high taxation, which in certain states, has been increased from 12 per cent to 20 per cent. On processed foods, there is the impact of value-added tax (VAT) and excise, which, on an average, is 25 per cent (peak 40 per cent). That means when a consumer buys a product for Rs 100, actually he is paying Rs 25 tax, which is a very big barrier. For sales of food products, actually you are taxing value addition, which benefits farmers and consumers and saves crops from perishing by processing them. Today, processed foods are not luxuries but necessities and should be taxed at par with agri produce with zero or minimum tax. In fact, goods and services tax (GST) on food products should also be either zero per cent or eight per cent. If this is not done, there will be no growth, it would not be beneficial to farmers and consumers would be forced to pay a higher price for convenience foods, which are a necessity nowadays.
How have the recent relaxations by the Food Safety and Standards Authority of India (FSSAI) in regulations like those pertaining to imports resulted in leaving a positive impact on the food and beverage industry?
It has brought back confidence among investors and has had a positive impact. New launches which were stuck have restarted.
How do you see the growth in cold chains as it is one of the industries which is required immediately after the products have been manufactured?
We need integrated cold chains right from the farm to the consumers’ palate and piecemeal cold chain initiatives would not work. We need an integrated policy, which requires massive investment. We need to look at the private-public partnership (PPP) model like highways, railways, etc. to bring in the investment required.
What is the impact of water shortage in several parts of the country on the food industry, especially the beverage players?
Of course this is a big issue, especially for companies that require a lot of water in states like Maharashtra. Companies have to find solutions to such problems. They are doing so by getting water tankers from outside.
Several beverage manufacturers are said to have been drawing water from the government resources by paying them. Is it true? Though it is legal to buy water, will it not end up in them dominating other players?
Of course any player, irrespective of its size, can buy water or any other raw material by paying for it. Why should one expect it free? There will be no domination.
Project Orange Unnati for the development of orange growers has been undertaken by the Maharashtra government during the Make in India week. Will there be similar initiatives across the nation under the Make in India campaign?
Yes, it is a good initiative and a good role model for other states.
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