India: Effects of Tariffs and Nontariff Measures on U.S. ... - USITC

For processing <strong>of</strong> fruits <strong>and</strong> vegetables, an income tax rebate for 100 percent <strong>of</strong> pr<strong>of</strong>its
for the first five years, <strong>and</strong> 25 percent <strong>of</strong> pr<strong>of</strong>its for the next five years.
Zero excise duty on most processed food products, compared to an 8 percent excise
duty on most other products.
Permission for futures commodity trading for agricultural produce.
Financial assistance to investors from various ministries <strong>and</strong> government agencies for
building infrastructure, establishing or modernizing food processing facilities,
conducting research <strong>and</strong> development (R&D), <strong>and</strong> other efforts. 23
<strong>India</strong> has established a network <strong>of</strong> SEZs—specified geographical areas in which domestic
<strong>and</strong> foreign investors receive tax incentives <strong>and</strong> other benefits. In many cases, the central
or state government has given investors preferential access to ports or has developed
special infrastructure within SEZs, such as dedicated electric power, minor ports <strong>and</strong>
jetties, or inl<strong>and</strong> container depots <strong>and</strong> container freight stations. However, since SEZs
have been created to promote <strong>India</strong>n exports, only 50 percent <strong>of</strong> production from the
zones may be sold in the local market, <strong>and</strong> the remainder must be exported. Thus, SEZs
are unlikely to meet the needs <strong>of</strong> investors primarily interested in accessing <strong>India</strong>n
consumers. 24
Separate from the existing SEZ program, the Ministry <strong>of</strong> Food Processing has developed
a new Mega Food Parks scheme. Under the program, the ministry will provide financial
assistance for private-sector firms to develop up to 30 large food industry parks, aimed at
developing strong forward <strong>and</strong> backward linkages among farmers, food processors, <strong>and</strong>
retailers. The parks are envisioned as “agri/horticultural-processing zone[s] containing
state <strong>of</strong> the art processing facilities with support infrastructure <strong>and</strong> well established
supply chain.” 25 Unlike the SEZ program, the Mega Food Parks program is focused
primarily on domestic investment <strong>and</strong> establishing linkages between the different
segments <strong>of</strong> <strong>India</strong>’s food industry, rather than on exports or foreign investment. However,
the program may well <strong>of</strong>fer opportunities for foreign as well as domestic food industry
investors. The Mega Food Parks scheme has only recently been implemented, with
construction beginning on one <strong>of</strong> the first parks, the Western Agri Food Park in Pune,
Maharashtra, in March 2009. 26
A number <strong>of</strong> state governments also <strong>of</strong>fer incentives to investors that establish
manufacturing facilities in the state, although these regulations are subject to change. For
example, as <strong>of</strong> 2008, Jammu <strong>and</strong> Kashmir <strong>of</strong>fered l<strong>and</strong> at concessional rates <strong>and</strong>
investment subsidies on fixed capital investment. The Himachal Pradesh government
<strong>of</strong>fered concessions on sales tax <strong>and</strong> electricity rates <strong>and</strong> other incentives for setting up a
plant in its tax-free zones. 27
23 Ibid., 7, 108; Goyal, Big's Easy Reference Customs Tariff 2009–2010, July 7, 2009, 76–78.
24 Industry representative, interview by Commission staff, Washington, DC, April 30, 2009; Rabo <strong>India</strong>
Finance Pvt. Ltd, Vision, Strategy <strong>and</strong> Action Plan for Food Processing Industries in <strong>India</strong>, vol. 1,
April 2005, 6–7; <strong>and</strong> industry representative, interview by Commission staff, Mumbai, <strong>India</strong>, May 30, 2009.
25 Government <strong>of</strong> <strong>India</strong>, <strong>India</strong>.gov.in Web site, March 23, 2009.
26 <strong>India</strong> PR Wire, “Western Agri Food Park (P) Ltd Under Govt. <strong>of</strong> <strong>India</strong>’s Mega Food Scheme to be
Launched at Shirwal,” March 3, 2009.
27 <strong>India</strong> Br<strong>and</strong> Equity Foundation (IBEF), “Fast Moving Consumer Goods,” n.d., 11; IBEF, “Himachal
Pradesh,” December 2008.
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