Press release from Business Wire India
Source: Amul
Friday, September 04, 2009 05:50 PM IST (12:20 PM GMT)
Editors: General: Economy, Food & drink, People, Politics; Business: Agriculture, Banking & financial services, Business services, Commodities & materials, Retailers
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Gujarat Dairies Submit Memorandum to Honorable Prime Minister
Anand, Gujarat, India, Friday, September 04, 2009 -- (Business Wire India) -- Dairies of Gujarat have submitted memorandum to Honorable Prime Minister Dr Manmohansingh with suggestions to take following action:
-- Restore custom duty on Milk Powder to 15 % on 10,000 MT TRQ and to 40% on butteroil.
-- Impose export duty on export of Oilmeals, de-oiled cake, cattlefeed etc which helps in price reduction of cattlefeed and Removal of VAT & Excise duty on use of Molasses in cattlefeed.
-- Reduce Income Tax on co-operatives which will help in improving returns to farmer members.
-- VAT on all value-added Dairy products to be fixed to 4%.
In today's critical situation affecting every citizen of the country, Government urgently needs to act and protect dairy farmers of India which will help in keeping control over input prices to milk farmer and ultimately to check milk prices in the country also.
"Milk" is the largest crop in India in value terms above Rs 2.25 lakh crore and the milk group contributes highest to the total output of the agricultural sector surpassing the output value of wheat, rice and oilseeds. "Milk" directly affects livelihood of country's almost all farmers including landless and marginal farmers. Today at the time of unprecedented drought like situation prevailing in country, it is necessary that Government pays immediate attention to the country's dairy co-operative industry and ensure that it does not cripple. Interestingly, "Milk" also forms the largest share of expenditure on food item in a consumer basket and hence the rise in milk price affect each common man of India the most.
-- Proposal to restore custom duty on Milk Powder and Butteroil
Recently there has been news in the media that NDDB plans to import 10,000 MT skimmed milk powder to meet the domestic demand. However, country is soon entering into flush milk season and such announcement of import will results into substantial drop in market prices which will affect the milk farmers very badly. We have suggested Government not to rush into SMP import at this juncture but review the milk scenario in March-April 2010 (at the end of flush season) and if required may take a call to import SMP.
Further, Government of India had issued a customs-tariff notification no. 42/2008 dated 1st April 2008 to reduce import duty of Butter, Ghee and Butteroil to 30% from previous level of 40%. Government has also issued a customs-tariff notification no. 56/2008 dated 29th April 2008 to reduce import duty on milk powders to 5 % from 15 % on the Tariff Rate Quota (TRQ) of 10000 MTs.
However, the developed nations like EU and USA are giving very high subsidy to their farmers and artificially reduce prices of dairy products in the world market. Such subsidized products are dumped into developing nations which create an attractive market for them and they get rid of their surplus production.
It is anticipated that the import of SMP would result into substantial price fall in dairy product market and as a result the domestic milk producers will be affected very badly due to cheap import from world market at subsidized rates. Further, we understand that some of the private traders have already imported more than 11000 MT of butteroil which is dumped by New Zealand at cheaper prices than prevailing international market rate.
The Government therefore needs to restore the original rate of 15 % duty on TRQ of 10,000 MT on milk powders and 40 % duty on Butter, Butteroil and Ghee with immediate effect.
It is therefore recommended to the Honorable Prime Minister that:
- Government should postpone their plan to import Skimmed Milk Powder till March 2010 and import decision shall be taken very consciously after reviewing the stock at that time.
- Restore 15 % custom duty on milk powders and 40% duty on butteroil with immediate effect in the interest of dairy farmers of country.
-- Proposal to impose export duty on export of oil-meals, de-oiled cake, cattlefeed etc. and remove Excise as well as VAT on Molasses for use in cattlefeed.
As Government is aware, over the last one year, there has been a severe increase in price of several cattlefeed inputs like de-oiled cake, molasses, jowar etc. which has put tremendous cost burden on the milk producers. We have shown the details on input cost for cattlefeed during last 4 years in the below table.
Details on Input Cost for Cattlefeed during last 4 years
The average price of cattlefeed charged by our union has increased from Rs 6600 per MT April 2008 to Rs 8600 per MT in July 2009, an increase of 30%. However, it may be noted that our dairies are not charging the actual cost of manufacturing cattlefeed and are subsidizing it for the milk producer members. The cost of major inputs in manufacturing of cattlefeed viz. De-oiled Rice bran, Rice Polish Fine, Jowar, Maize, Molasses etc. have increased by over 25-30% over the last one year. This has put pressure on the viability of cattlefeed plants since we have manufacturing capacity of 3500 MT per day. It is pertinent to note that a loss of Re 1 per kg in cattlefeed manufacturing would amount to an annual loss of Rs 100 crore per annum to the dairy cooperatives of Gujarat which they cannot afford.
It is irrational to note that country is exporting "NUTRITION" in large quantity in form of de-oiled cake which is rich in crude protein. These Oilmeals are extractions of sunflower, cottonseed, soyabean, groundnut, rice bran and rapeseed which are important ingredients in manufacturing of cattlefeed and even poultryfeed. They have very high levels of total digestible nutrients (about 60-70%) and the milch cattle can convert the crude protein roughage into high value nutritious food like milk. It is unfortunate that India chooses to export such valuable ingredient (and import other forms of edible protein like pulses etc.)
The export of Oilmeals has increased considerably in last two years out of India which results into increase in its prices as shown in the table. This increases feeding cost to the animal and ultimately increases production cost of milk which contributes to inflation in the consumer prices of milk. Hence, India should discourage export of de-oiled cake which will help in increasing availability of crude protein esp. for cattle and will help reducing input cost to the milk farmers which will make milk production more competitive. This will also boost availability of nutrition in the country and will help exports of dairy products at more competitive prices.
It is interesting to note that during 1965 to 1989 - the period when dairy development was at its peak, Government has consciously kept export duty of Rs 125/- per MT on export of de-oiled cake / Oilmeals and animal feed. Thus, Government was clear in its objective of discouraging export of input products for milk to ensure that the feed cost does not go up.
As regards Molasses, till March 2006, Govt. of Gujarat had classified Molasses for use of cattlefeed as separate category having 4% Sales Tax. However, since implementation of VAT from 1st April 2006, it was classified in 12.5% VAT category and there was no specific mention about molasses being used for cattle feed.
Total tax burden on Molasses is around 30% including excise and VAT of its basic cost. If tax (excise and VAT) is removed from molasses being used for cattlefeed as earlier, molasses would be cheaper by around 20%. This would lead to better health of animal, increase in milk production and ultimately reduction in milk prices. The reduction of VAT on Molasses for use in cattlefeed will not make much big difference to the state exchequer however, it will help greatly in reduction of cost of cattlefeed to the milk farmer.
It is therefore recommended that:
- In order to discourage export of valuable oil-meals, we recommend Government to impose 25% export duty on Oilmeals, De-oiled cake and cattlefeed which will help to reduce input cost to the milk farmer.
- The Government fixes a special quota for supply of molasses from sugar mills to co-operative cattlefeed plants. This is possible since the Excise Department has deputed staff at each of the cattlefeed plants (salary paid by the plant) which monitors the usage as per the approved capacity.
- The current Excise duty on molasses is Rs 750 per MT + 3% cess. This should be waived for usage in manufacturing of cattle-feed in view of the increasing cost pressure on producers.
- We have also represented to Government of Gujarat that the 15% VAT on molasses should be removed for usage in cattlefeed so that it gets similar treatment as that of any other agricultural product and reduces the burden on producers.
-- Proposal to reduce Income Tax on co-operatives
At present, Milk Cooperatives are taxable in the highest bracket of 30% + 3% education and higher education cess. Milk Cooperatives are primarily engaged in the removal of rural poverty and economic development of farmers in the country. The agricultural income of farmers is exempted from the purview of Income tax. Income earned from the dairy business is nothing but the part of agricultural as animal husbandry is supplementary to agriculture.
However, we feel that co-operative organizations like GCMMF who undertakes commercial operations on behalf of millions of milk producers of India who are primarily in the agriculture sector, should contribute to the development of the country by way of paying income tax at reasonable rate. About 15 years ago, tax on the co-operatives was always lower than the corporate rates and same difference be maintained. In view of this, we request you to reduce the existing income tax rate of 30% to 15% and also remove education and higher education cess.
Further, milk Co-operatives are involved in rural development programs by spending the money for improvements in productivity and on health of milch animals. For encouraging the rural development programs, we suggest weighted deduction of 125% of expenses should be allowed u/s 35 CCA of the Income Tax Act.
It is therefore recommended that:
- Reduce the existing income tax rate of 30% to 15% and also remove education and higher education cess OR Allow tax holidays to farmer owned co-operatives for two years which will help them to recover during this period of crisis.
- Allow weighted deduction of 125% of expenses should be allowed u/s 35 CCA of the Income Tax Act.
-- Proposal to fix VAT on all value-added Dairy products at 4%.
We have drawn attention of the Government that many dairy products like Baby Milk Food, Butter, Ghee, Cheese, Ice-cream etc. are now-a-days products of mass consumption. These products are classified under the category of 12.5% VAT in the most of the States. Dairy cooperatives provide these products at very reasonable rates to the consumers of India. This has led to affordability for the common man to include these products in his daily consumption.
In the interest of consumers from all sections of society, we firmly believe that if VAT rates applicable to dairy products are reduced, it would increase consumer demand, boost milk products and improve their health by way of better nutrition. It will also improve rural milk producers' income and result into overall socio-economic development in rural areas.
We, therefore, urged the Government to intervene and recommend to the Empowered Committee of State Finance Ministers on VAT to reduce VAT rate on Baby Food Powder, Butter, Ghee, Cheese, Ice-cream etc. from 12.5% to 4%.
It is therefore recommended that:
- VAT on all value added dairy products may be fixed at 4% across all the states.
To view the Hindi and Gujarati Translations, please click on the links given below:
Hindi Translation
Gujarati Translation
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CONTACT DETAILS
R. S Sodhi, Chief General Manager, G.C.M.M.F. Ltd, +91 (2692) 221211/ +91 9824011058, sodhi@amul.coop
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