Untouched excise brings relief

FMCG: There will be no immediate price rise in this sector

Industries with a focus on consumers predictably had reasons to cheer after the finance minister decided not to roll back the excise duty by two per cent as expected.

Accordingly, the standard rate of central excise will be maintained at 10 per cent. Most fast moving consumer goods (FMCG), consumer electronics and durable products fall under the 10 per cent excise bracket. With no rollback in excise, there will be no immediate price increase in this segment.

“Definitely, this is a plus. Most of us were expecting some movement there. But it hasn’t happened. That’s good,” said A Mahendran, managing director, Godrej Consumer Products Ltd (GCPL).

Ravinder Zutshi, deputy managing director, Samsung India, said: “We do not foresee any price changes in consumer electronics. The Budget has been growth-oriented with an attempt to boost consumption.”

According to Sachin Menon, executive director at consulting major KPMG, the reason for maintaining the standard rate has been to control inflation. “It has been worrisome. Clearly the government is looking to control inflation by avoiding an outright rollback.”

Even as the government has attempted to do this, it has widened the excise base. Of the 370 items that enjoy exemption from central excise duty but are chargeable under value added tax (VAT), 130, mainly consumer goods, will be subject to a nominal central excise duty of one per cent.

These include items such as candles, flavoured milk, coffee and tea mixes, sausages, ketchup and spectacles, among others.

One item that has found its way into this list by virtue of a reduction in excise duty is sanitary napkins, baby and clinical diapers and adult diapers. The excise on these products has been slashed from 10 per cent to one per cent, which, according to industry sources, has come after much lobbying by the industry.

The companies likely to benefit from this move are Procter & Gamble (maker of the Whisper brand of sanitary napkins), Johnson & Johnson (maker of Stayfree and Carefree sanitary napkins), Kimberly Clarke (Kotex sanitary napkins), GCPL (Snuggies brand of baby diapers) and Wipro Consumer Care & Lighting (Wipro Baby Soft), among others.

“Though the baby care business for us is small at the moment, it will get a boost,” Mahendran of GCPL said.

Executives at Wipro Consumer Care also echoed a similar sentiment.

“It is a good move. These items are fast becoming essential. To reduce the levy on them is welcome,” says a company executive, declined to be quoted.

Other measures that stand to benefit the sector include a reduction in surcharge from 7.5 per cent to five per cent for domestic companies, sanction of 15 new mega food parks and an excise duty exemption on air-conditioning equipment, panels and refrigeration panels for installation of cold chain infrastructure.

The Budget has also reduced the excise duty on LED lights, solar lamps and lanterns, parts of ink-jet and laserjet printers from 10 per cent to five per cent, respectively.