Budget 2001: Full Coverage

The industry's expectations of gaining exemption from excise or at least areduction in the excise being charged on sugar confectionery has come to anought as it was completely ignored by the Finance Minister, this year.Worse, the price increase will have to be as high as 50 to 100 per centsince a marginal cost increase cannot be passed on to the consumers due tocoinage issues. ``It's tough to continue with the same prices at the currenttax structure. The minimum hike would be 50 to 100 per cent,'' Mr Dhingrasaid. The sugar boiled confectionery industry which is going through a toughphase had asked the government to include `sugar confectionery' under massconsumption items and retain the excise duty at the previous level of 8 percent on confectionery of unit price less than Re 1. During the last Budget,the excise duty on confectionery was raised from 8 per cent to 16 per centwhereas in the past several years this category was subjected to a maximumof 8 per cent. Significantly, about ninety five per cent of sugar boiledconfectionery is priced below Re 1.

This has had a crippling effect on the industry, claim the players: theindustry which was growing at the rate of about 35 per cent in the past hasregistered a negative growth of about 9 per cent since the last Budget. Thereversal in the growth rate from a robust positive growth to a negativegrowth is attributed to the sudden increase in the rate of excise duty onconfectionery from 8 to 16 per cent.

According to industry sources, the additional burden arising as a result ofduty revision from 8 to 16 per cent though makes a difference of few paiseper piece but it cannot be passed onto the consumers as it will result inthe per piece price going up to odd price points. ``Coinage is a major issuein pricing and hence the product cannot be priced at odd price points,''says Mr Dhingra. As a result, the industry had to exit from the low pricedproducts and as these constitute a major market, the industry has sufferedfinancially and in growth terms.

Apart from the excise duty, the industry also feels burdened by theincreased Central sales tax by respective state governments to 16 per cent,octroi, mandi tax, entry tax , etc.

``In a bid to levy uniform tax rate in all the states, an increase in taxstructure from 1 per cent to 4 per cent would result in the MRP of sugarboiled confectionery at current levels of 25 paise and 50 paise unviable,especially since any cost increase cannot be passed on to the consumers dueto coinage issues,'' says Mr NC Venugopal, director, Parry's ConfectioneryLtd.

The industry will, however, gain from the removal of 10 per cent surchargeon imports as the industry imports most of its raw material requirement suchas cocoa.