The Hindu Business Line : Soft drinks industry seeks removal of special excise duty

IN a bid to improve margins and operate profitably in a segment that is seasonal in nature, the soft drinks industry has asked for abolition of the Special Excise Duty (SED) of 8 per cent on aerated soft drinks in the forthcoming budget. The argument is simple say industry sources. With strong backward and forward linkages, increase in production and sales of soft drinks would lead to an incremental growth for products such as glass, plastics, refrigeration, transportation, sugar and associated post-production activities, such as merchandising, marketing and sales — all of which would be fuelled by the removal of the 8 per cent SED. Industry officials believe that the impact on refrigeration and transport industries in particular is `very sizeable' and would be evident from the revenue contribution of these two industries to the exchequer.

Reports point out that aerated drinks as a category is consumed across all sections of the society.

In fact, the middle and lower-income groups account for nearly 84 per cent of the total consumption of soft drinks in the country.

It is believed that the elimination of SED and placing soft drinks category alongside other food products would help increase consumption and market growth.

Currently, the per capita consumption of nine bottles per year is supposed to be less than half the level compared to countries like Sri Lanka and Thailand.

Mr Abhiram Seth, Executive Director - Exports and External Affairs, Pepsi, says, "The removal of SED would surely improve the viability and the ability of the business to invest in new initiatives."

Outlining other benefits of the removal of SED, Mr Seth said that as an industry that sustains over four lakh jobs in the economy, the multiplier effect on employment and investment would be substantial. A Coca-Cola India spokesperson observed, "The soft drinks industry is a ticket driver for employment, the industry provides business opportunities to the entrepreneurs and unemployed youth. Hence the elimination of SED would be worthwhile."

At present, aerated drinks with an excise duty of 16 per cent and SED of 8 per cent (taking the effective rate to 24 per cent), continue to remain the only food and FMCG product with an SED element.