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MoFPI aims to double FDI in food processing sector to $1 billion in two years
Thursday, 12 January, 2017, 08 : 00 AM [IST]
Ashwani Maindola, New Delhi
The ministry of food processing industries (MoFPI) aims to double the foreign direct investment (FDI) in the sector, which is currently estimated to be approximately $500 million, in the next two years. It is hopeful of achieving this target, as the government of India has permitted 100 per cent FDI in the sale of food products manufactured in India.

Stating that the ministry had, in the recent past, had talks with a number of food giants who expressed their interest in investing the country, a senior MoFPI official stated, “The ministry is hopeful that the momentum will continue after the target has been achieved, and a billion dollars will be pumped into the food processing sector every year.”

The signs are already visible, as sources in MoFPI confirmed that food e-tailers such as Big Basket, Grofers and Amazon had sent proposals to the government for FDI in online food retails. However, the ministry was yet to achieve policy-related clarity.

It is pertinent to mention here that the investors have demanded that the policy related to the sale of home and personal care products manufactured in India be opened with that of food products.

According to the presentation submitted to the ministry, they claimed that the international model permitted the sale of both food and home and personal care, and was thus more viable.

However, how the government will go ahead with such a situation remains a question.

Meanwhile, claiming that the fear amongst the micro-, small and medium enterprises (MSME)in food processing sector was misplaced, a senior MoFPI official stated that the ministry was in constant talks with the ministry of finance on the goods and service tax (GST) rates for the food processing sector.He added that the rates of tax and duty would remain the same as they were at present (about 12 per cent).

“We have been assured by the finance ministry officials about lowerGST rates on processed foods. The current level of duties and taxes that include excise and value added tax (VAT) is around six per cent and around 4-6 per cent, respectively, which would eventually fall at 12 per cent under GST,”the source said.

He added that under the current vision about GST, it was applicable only to those whose annual turnover is above Rs 20lakh, and 80 per cent of the processed food products will fall in the 12 per cent category, while some would attract 0-5 per cent, and some sin products like carbonated drinks and products perceived as higher-value items would attract a higher tax of 18 per cent.
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