Biscuits are common product of consumption for rich and poor alike. As per Indian biscuit manufactures association (IBMA) data, India produces 5000 tons of biscuits everyday which gets well absorbed in the market. This industry is a huge contributor of Indian government supported ‘Make in India’ initiative since biscuit is made of agricultural products such as wheat, vegetable oil, sugar and milk which are produced indigenously on large scale supporting many SMEs. The higher production of biscuits in India helps SMEs and large number of farmers. Moreover, biscuit industry employs about 7.5 lakh workforce directly and more than 30 lakh persons indirectly in marketing, retail network, transportation etc.
Despite these staggering figures, the Industry biscuit industry is facing tough days when the overall growth is almost at standstill. Speaking on same, B.P. Agarwal, President, IBMA said,” Despite being the market size of staggering 30,000 cr, the Indian biscuit sector is not getting any investments and there is absolutely no innovation happening. Moreover, the overall sale and production are decreased by 15% to 20% since the GST implementation. Overall the industry is suffering a huge loss. Furthermore, this industry is devoid of automation thus not growing at its actual rate.
So what is going wrong?
The tax structure: Earlier and now
The current market share of biscuit industry stands at staggering 20,000 cr. This is the industry which is still ruled by Indian players, even the industry leaders such as Parle, Britannia are Indian companies. The recently rolled out GST is touted to create the biggest hurdle. Biscuit is a mass consumption food item but has been suffering due to unjustified imposition of Goods & Service Tax (GST) at a very high rate of 18%. As per Agarwal, “The government has mistakenly understood as a premium product by placing it in the higher tax slab denying level playing field for biscuits vis-à-vis similar products. Let’s shed light on few similar items and current tax slab.
Recently, IBMA has also sought intervention and support from Members of Parliament from various political parties for favorable consideration of levy of GST at lower slab of 12%. Speaking on same, Deepak Bherwani, Director, Krown Biscuits said,” Lowering the rate of GST on biscuits would result in higher production and would not affect revenues to the Central and State Governments”.(Data Source: IBMA)
Apart from GST, high inflation on raw material and packaging material is yet again marring the growth of biscuit industry. Moreover, the recent proposals from government to revise the minimum purchase price of wheat, sugar in order to relief the farmers will ultimately effect the pricing of biscuits. Furthermore, in order to comply with high GST slab manufactures will be forced to increase the price. Speaking on same, Pankaj Agarwal, CEO, Bonn Biscuits said,” Biscuit Industry is subjected to escalation in cost of inputs/ingredients due to higher cost of transportation, fuel, packaging, wages etc. “
Biscuit is an item which is still largely sold by the general traders. “We are facing a lot of challenges at retail level, when a shopkeeper sold different food items marked with different GST slabs then it becomes an arduous task to bill or sale. And, this is one of the biggest deterrents of switching to plastic money transaction to purchase biscuits. That is the reason we are requesting the government to put all food items on similar GST slab.” Said Shekhar Agarwal, Director, Surya Food & Agro Ltd. (Priyagold Biscuits)
Moreover, apart from small cookies manufacture nobody dares to initiate direct retail. “Nobody can survive by opening their own direct stock since the size of industry is huge, it is really not possible for vast companies to have their exclusive retail distribution,” informed Agarwal.