The Budget is also expected to announce suitable fiscal sops for the food processing industry and allow them to import technology, machinery and packaging materials at reduced custom duty.
The Sugar Development Fund (SDF) Act is likely to be amended for the use of the corpus by the mills for producing ethanol, power co-generation and for defraying expenditure on internal transport and freight charges to mills on export of sugar.
The government has already noted that the country has little comparative price advantage in production of oilseeds and extraction of edible oils. Most of the oil mills are running on obsolete traditional technology as edible oil production is still reserved for small scale sector. If the edible oil sector is dereserved, it can attract more investment leading to technological upgradation.
At present, the import duty on food packaging machines is 50.8 per cent and the customs on its spares is 62.86 per cent. Import duty on other packaging materials like ultra thin aluminium is 30.80 per cent and on LLDPE/LDPE is 41.26 per cent. Import duty on paper board is 41.26 per cent. All these levels of customs duty on packaging materials is very high as compared to Pakistan and China where the levels range between 10 to 15 per cent on an average. In absence of a Cenvat, the domestic companies are unable to claim back the paid heavy duty. In this context, the government feels that the import duty on packaging materials needs to be brought down to reasonable levels. Excise duty on packaging materials like OTS cans, bottles and jar is also ranging between 8 to 16 per cent.
The government feels that suitable encouragement to the food processing sector can enhance employment generation in agriculture and rural areas which is showing a decline for the first time. Similarly, the annual growth in value added in agriculture and allied sectors in the last four years has averaged to only 1.2 per cent as compared to 4.5 per cent in 1993-97.