Planning Commission, on Thursday, expressed reservations on Kelkar Committee proposal to bring processed foods under excise duty net saying it will badly affect growth in the sector.
"To again levy excise duty on food processing industry as recommended by the committee on tax reforms will be a retrograde step, which will stifle growth in the sector," Member, Planning Commission, Sompal, said in New Delhi.
Only two years ago was the sector exempted from excise duty and it should be given a reasonable period of time to utilise the untapped potential before the policy is reviewed, he said.
Inaugurating the annual conference of the All India Food Processors Association, he lamented that while India is a leading producer of fruits, vegetables, milk, grains and sugar, hardly two per cent of its natural produce is processed.
Minister of State for Food Processing Industry T N Shanmugham, presiding over the function, stressed on the need for an integrated policy and food law to promote the sector.
If the food processing sector is burdened with taxes or put through an impractical system, it will discourage investment in this sector, association's president S Jindal said.
He said there is a growth potential of at least 25 per cent annually but current production capacities are utilized only upto 31 per cent, which is a matter of serious concern.