Policy Initiatives:

Since liberalization several policy measures have been taken with regard to regulation & control, fiscal policy, export & import, taxation, exchange & interest rate control, 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 are as follows:

Regulation & Control:

Fiscal Policy & Taxation:

• Wide ranging fiscal policy changes have been introduced progressively. Excise & Import duty rates have been reduced substantially. Many processed food items are totally exempt from excise duty.

• Custom duty rates have been substantially reduced on plant & equipments, as well as on raw materials and intermediates, especially for export production.

• 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 thrust areas identified for exports. Free trade zones (FTZ) and export processing zones (EPZ) have been set up with all infrastructure. 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 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.

• All profits from export sales are completely free from corporate taxes. Profits from such exports are also exempt from Minimum Alternate Tax (MAT).

Though no industrial license is required for setting up F & V P industries, setting-up 100% EOUs require specific Govt. approvals.

This sector is regulated by the Fruit Products Order, 1955 (FPO), issued under the Essential Commodities Act. The Ministry of Food Processing Industries administers this order. The order lays down product specifications and quality control requirements on production-hygeine, re-labelling and marketing of processed fruits and vegetables.

All processing units are required to obtain a license under this order. Periodic inspection of units is also carried out.

In addition, consignments of fruit & vegetable products intended for export are subject to pre-shipment inspection under the FPO. However, recognized Export Houses and Star Trading Houses are exempt from this inspection.

Some items like: pickles & chutneys,tapioca sago and tapioca flour are reserved for exclusive manufacture in the small scale sector.

Export of fruit & vegetable products is freely allowed.

Many F & V P industries are eligible for automatic approval of foreign technology agreement and upto 51% foreign equity participation. These include: tomatoes, mushrooms and other frozen vegetables, fruit, nuts, fruit-peel, fruit jellies, marmalades, fruit juices and vegetable juices etc

Schemes In M/O Food Processing Industries

Source - Food Processing Industries in India