FMs message: just chill

Updated: Mar 1 2006, 05:30am hrs
In a year in which the Cola prices had almost stabilised after a series of price wars, the finance minister's announcement of 8% reduction in excise duty (from 24% to 16%) was met with guarded reaction from cola majors. While indications are that the cola companies might have to reduce prices of aerated soft drinks, the cola majors were reluctant to commit any reduction.

Coca-Cola India's spokesperson said the removal of special excise duty (SED) was a long pending demand of the beverage industry. "The removal of SED will enable the industry to make further investments that will fuel growth in demand, resulting in higher employment, revenue to the government and overall positive impact in related sectors and the economy," he said.

Pepsi too, voiced similar reactions to the finance minister's announcement of 8% reduction in SED without commenting on any hint to reduce pricing of cola.

In his statement, Rajiv Bakshi, PepsiCo India head said: "This move should release the resources for us and our Indian bottling partners to make required investments in cooling infrastructure and distribution, which are the major drivers of growth of our sector."

Ravi Jaipuria, Chairman, Varun Beverages, the authorised bottler of Pepsi in India, too aligned with PepsiCo. Mr Jaipuria said that the reduction in excise duty would bring the viability back in the business and free up funds for investments needed to grow the aerated drinks industry.

Voicing his comments to the Budget initiative in the soft drinks sector, Piruz Khambatta, MD, Rasna Pvt Ltd, hinted at a marginal increase in pricing of soft drinks. "There could be a marginal reduction in soft-drink prices but this was a long standing demand of the industry and was expected in this budget," he said.

The Budget also brought in a 10% rebate on import of packaging machinery. The move is seen as a step in the direction of rationalisation of prices, especially in the processed food and beverage industry.

Reacting to the announcement, Dabur Foods noted that there was no rebate given on the packaging material such as aseptic bags and cans, which would have helped in reducing costs, thereby making our produce more competitive in the global market.

The Budget also gave exemption from excise duty to ice-cream and processed milk products. This move, according to industry observers, is likely to lead to a 15% reduction on ice-creams.

Commenting on the support given to food processing sector, Mr Bakshi of Pepsi added,"We see the cut in excise duty for processed food from 16% to 8%, exemption of certain products, like ice cream and poultry to 0% as a growth impetus."