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Consumer products: Immediate hits, long-term benefits likely

Consumer products: Immediate hits, long-term benefits likely
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First Published: Thu, Mar 01 2007. 12 51 AM IST
Updated: Thu, Mar 01 2007. 12 51 AM IST
Mumbai: The Budget offered a mixed bag of bad news and hope for the fast-moving consumer goods and consumer electronics industry.
Most companies reacted to the Budget with the hope that the overall thrust on farm and social sector will enhance incomes of rural households and that, in turn, will push consumption, thereby, boosting their sales and revenues in the long term. But, in the shortterm, the direct tax moves might impact their balance- sheets adversely.
The Budget has proposed to fully exempt instant food mixes and biscuits whose retail sale price is not more than Rs50 per kg. Besides, duty on refined edible oils has been exempt from the additional countervailing duty of 4% and duty on sunflower, crude and refined both, has been reduced by 15 percentage points. The duty on food processing machinery has also been cut from 7.5% to 5%.
“Around 70% of our sales come from Rs50 per kg segment. We will try to pass on the benefit to the consumers,” said Ajay Chauhan, executive director, Parle Industries.
But Chidambaram has increased specific excise duty on cigarettes by 5%, which is not good news for cigarette major ITC. An ITC spokesperson, however, said: “The Budget has many timely initiatives for the agriculture sector, which should benefit rural consumers and hence, consumer products companies. Announcements regarding hospitality and food-processing sectors are likely to benefit us in particular,” he said.
Procter & Gamble Hygeine & Healthcare’s chairman Bharat Patel also welcomed the rural push in the Budget. “Increased spending in agricultural and social sectors will definitely help raise the standard of living for the masses, which in turn should help boost the demand for daily consumption products.” The proposals to levy fringe benefit tax on ESOPs, increase the education cess and tax dividend distribution, though, have been largely criticized by the industry. “FBT on ESOPs is a retrograde step and will make it difficult for companies to retain talent,” said Sunil Duggal, CEO, Dabur India. Consumer electronics industry didn’t seem too enthused. “The only relief is in the form of reduction in peak rate of customs duty from 12.5% to 10%, which gives marginal relief for products that are imported as CBUs,” said R Zutshi, deputy MD, Samsung India. Gulu MirchandaniMirc Electronics
Priyanka Mehra contributed to this story
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First Published: Thu, Mar 01 2007. 12 51 AM IST
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