Business Magazine

Food Processing Industry – Approvals

Posted on the 23 March 2011 by Epmworld @EPMWORLD_HYD


Policy Initiatives:

After liberalization several policy measures have been taken with regard to regulation and control, export and import, fiscal policy, exchange and interest rate control taxation, export promotion and incentives to high priority industries. Food processing and agro industries have been accorded high priority with a number of important relieves and incentives. Some of the important policy changes towards food processing industry are as followsRegulation and Control:
  • Most of the processed food items have been exempted from the purview of licensing under the Industries, Development and regulation, Act, 1951, except items reserved for small-scale sector and alcoholic beverages.
  • As per extent policy Foreign Direct Investment up to 100% is permitted under the automatic route in the food infrastructure like Food Park, Cold Chain and warehousing.
  • Asfar as food retail is concerned the FDI policy does not permit FDI into retail sector except Single Brand Product Retailing. This policy is uniform for all retailing activity.
  • FDI policy for manufacture of items reserved for the Small Scale Industry sector is uniform for all items so reserved and a separate dispensation for items in the food-processing sector is not contemplated.
  • The policy for distillation of alcohol has been announced vide Press Note 4 (2006) according to which FDI upto 100% is permitted on the automatic route for distillation and brewing of alcohol subject to licensing by the appropriate authority.
  • No industrial license is required for almost all of the food and agro processing industries except for some items like beer, potable alcohol and wines, cane sugar, hydrogenated animal fats and oils etc. and items reserved for exclusive manufacture in the small scale sector. Items reserved for S.S.I. include pickles and chutneys, bread, confectionery, excluding chocolate, toffees and chewing-gum etc., rapeseed, mustard, sesame and groundnut oils (except solvent extracted), ground and processed spices other than spice oil and oleoresins, sweetened cashew nut products, tapioca sago and tapioca flour.
  • Use of foreign brand names is now freely permitted the government.
  • MRTP (Monopolies and Restrictive Trade Practices Act) rules and FERA (Foreign Exchange Regulation Act) regulations have been relaxed and given more freedom to encourage investment and expansion by large corporates.
  • Most of the items can be freely imported and exported except for items in the negative lists for imports and exports. Capital goods are also freely importable, including second hand ones in the food-processing sector.
Fiscal policy and taxation:
  • Custom duty rates have been substantially reduced on food processing plant and equipments, as well as on raw materials and intermediates, especially for export production.
  • Wide-ranging fiscal policy changes have been introduced progressively in food processing sector. Excise and Import duty rates have been reduced substantially. Many processed food items are totally exempt from excise duty.
  • Corporate taxes have been reduced and there is a shift towards market related interest rates. There are tax incentives for new manufacturing units for certain years, except for industries like beer, wine, aerated water using flavouring concentrates, confectionery, chocolates etc.
  • Indian currency, rupee, is now fully convertible on current account and convertibility on capital account with unified exchange rate mechanism is foreseen in coming years.
  • Repatriation of profits is freely permitted in many industries except for some, where there is an additional requirement of balancing the dividend payments through export earnings.
Export promotion:
  • Food processing industry is one of the growing areas identified for exports. Free Trade Zones (FTZ) and Export Processing Zones (EPZ) have been set up with all infrastructures. Also, setting up of 100% Export oriented units (EOU) is encouraged in other areas. They may import free of duty all types of goods, including capital foods.
  • Capital goods, including spares upto 20% of the CIF value of the Capital goods may be imported at a concessional rate of Customs duty subject to certain export obligations under the EPCG scheme, Export Promotion Capital Goods. Export linked duty free imports are also allowed.
  • Units in EPZ/FTZ and 100% Export oriented units can retain 50% of foreign exchange receipts in foreign currency accounts.
  • 50% of the production of EPZ/FTZ and 100% EOU units is saleable in domestic tariff area.


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