Budget 2010-11, if implemented in the right earnest, will go a long way in providing impetus to the food processing industry, which is currently suffering due to  infrastructural bottlenecks

Ravi Chandra, national sales and marketing head of Scandic Food India Private Limited

Govt initiatives

In order to spur growth in the agriculture sector and reduce wastage of farm produce, finance minister Pranab Mukherjee announced tax relief that includes concessional customs duty and exemption of service tax on setting up of cold storages and refrigeration units. This is a welcome measure because in India the wastage of perishable fruits and vegetables stands at Rs 55,000 crore a year. It is estimated that more than 30% of the fruits and vegetables grown in the country rot even before they reach the consumers, thereby leading to high inflation rates.

Farm produce worth crores of rupees are wasted every year due to lack of storage, cold chain facilities, transportation and other infrastructure support. Exemption of service tax on setting up of cold chains will help in minimising losses in transit and storage. The current losses are compensated by high retail prices, thereby making fruits and vegetables very expensive for consumers. This is first time that a Budget aims to bring about an overall development of the agriculture sector by making provisions for post-harvest technology, cultivation, credit flow and conservation.

Emphasis laid by the finance minister on the need to focus on creating a strong supply chain for perishable farm produce, setting up infrastructural facilities for processing of such produce and infusion of technology to boost agri-production is a step in the right direction to minimise wastage. The food processing industry is currently bogged down by infrastructural bottlenecks such as inefficient supply chain, lack of adequate quality control and testing methods and inadequate cold chain facilities, among others.  This hopefully will change in the years to come with Mr Mukherjee proposing a concessional import duty of 5% with full exemption from service tax to set up and expand cold chains in order to preserve large quantities of farm produce.  Exempting food processors from service tax for expansion of their units would undoubtedly benefit manufacturers of processed food items.  In addition, allowing external commercial borrowings (ECB) to be raised for food processing will aid in developing the food supply chain, which is expected to benefit producers.