The government is expected to shortly classify the entire food products industry into three clearly defined categories, for licensing as well as taxation purposes.
The three categories are products processed from perishable commodities, products from natural produce with longer shelf life and grain-based products including composite foods, biscuits, ready-to-eat foods, etc.
At present, there are around eight segments in the food processing sector, which is one of the largest industries in terms of production, consumption, exports and growth prospects. Government data put the turnover of the entire domestic food market at nearly Rs 2,50,000 crore ($69.4 billion), of which value-added food products account for Rs 80,000 crore ($22.2 billion).
The proposal for the classification has been cleared by a group of ministers (GoM) headed by Agriculture Minister Sharad Pawar. The initiative aims at simplifying the industry's licensing structure and rationalising the taxation structure.
Accordingly, the GoM has proposed that all new food-processing units be allowed a 100 per cent tax deduction for the first 10 years after they are set up. The ministers have also suggested that efforts be made to enable the industry to access zero-cost capital through venture funds.
Given that comprehensive customs and excise duty cuts have also been recommended by the GoM, analysts feel the package of measures will not only provide a general boost to the sector but also help large companies expand into the business.
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