The Hindu Business Line : FDI in retail will help food processing sector: Sahay

"FDI in retail could fuel growth in the food processing sector in the country," said Mr Subodh Kant Sahay, Minister for Food Processing Industries, here today.

He believes that allowing FDI in the segment will provide for the much needed technical know-how to the farmers which the established retailers across the world will bring along with them when they open shops in the country.

He stressed on the fact that without growing exports of processed foods, the sector would not be able to grow by itself. "FDI is the solution," he said.

On being asked whether opening up the retail segment might hurt the regional players, he said, "Even if 20 per cent of the consumers resort to buying their supplies from the likes of Wal-Mart, there would still be the remaining 80 per cent who would continue their purchase in the mom and pop stores." According to the Minister, foreign retail giants are willing to buy as much as $30 billion worth of processed food from the country. Wal-Mart should be given an opportunity, Mr Sahay said.

He further emphasised that the country could attract as much as Rs 1.5 to Rs 2 lakh crore in 10 years' time, if it opens its doors to FDI in retail. And the attainment of the figure would only be faster, the sooner the Government allows FDI.

Speaking on the current tax and duty levels on processed foods, Mr Sahay said, "We are hoping that the VAT and excise levels would be brought down from the existing 12.5 per cent to 4 per cent and excise duty in the 4 to 0 per cent range." It doesn't make sense to levy a tax of 12.5 per cent on milk powder while milk itself attracts no tax, he added.

Explaining the fact that the processed food segment is still not considered a prime lending sector, the Minister said that the Group of Ministers (GOM) have been discussing to set up a division in Nabard or a bank per se to focus on financing for the sector. He said that he had proposed to initiate an "Indian Agriculture Banking Division" for the purpose.

Expressing his concern on the lack of infrastructure in the supply chain, Mr Sahay said that cold chain facilities and packaging and laboratories must be thought of as a part of the infrastructure sector in the country and that investment in these projects (both old and new) should be exempt from income tax by providing them with a 10 year tax holiday as opposed to the current five year holiday time frame.

The food processing industry has to be nurtured further by developing a demand-oriented approach, the Minister said. "Policy reforms are the need of the hour," he added.

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