High Taxes Impeding Packaging Sector Growth: Tetra Pak Chief

Tetra Pak India managing director Igor Akimov has blamed the high taxes and legislative issues for the restricted growth in the use of aseptic packaging of liquid food beverages and milk in India compared with other developing countries.

The high levels of wastages in fruits, vegetables and milk in the country was due to lack of processing and packaging as high taxes and energy costs had prevented companies from investing in these packaging and filling machines, he said.

Elaborating on why Tetra Pak's aseptic packaging has not caught up in India, Akimov said: "In Philippines, the import duty on aseptic filling machines is 3 per cent and in Pakistan 10 per cent, whereas in the case of India its a high 50 per cent."

 

In spite of Pakistan's economy witnessing a sharp decline in recent times, Akimov said Tetra Pak sold 800 million aseptic packages in Pakistan last year as against 500 million in India during the same period.

"What is surprising is that India ranks No 1 in the world in the production of milk with 80 billion litres produced last year, whereas Pakistan produced only 24 billion litres of milk and yet the demand for aseptic packaging in India is a dismal low," he said.

Even China consumes 4 billion aseptic packages per annum that go into the packaging of liquid foods, beverages and milk. Tetra Pak India's facility at Takwe, near Pune, has projected 70 per cent of its exports to China in the current year due to high demand there.

In the last calendar year, Tetra Pak India exported 400 million aseptic packages to China, while only 550 million packages were consumed locally.

The poor local demand has resulted in the low capacity utilisation of Tetra Pak India's facility. Exports and local demand put together has seen under 50 per cent capacity utilisation of Tetra Pak India's 2.3 billion packages per annum capacity.

On why the company has not gone in for local production of aseptic filling machines instead of importing them, Akimov said, volumes are required to manufacture them locally and India does not make any sense in this regard.

Currently these machines are produced by Tetra Pak only in Sweden and Italy. High energy costs in the country is another factor that has proved to be a stumbling block for the growth of the food processing and packaging industry. As compared to Sweden, electricity cost in India is three times that of this Scandinavian country.

India also has the notorious distinction of having the highest number of power cuts in a year. Tetra Pak India's manufacturing facility at Takwe last year alone witnessed 320 power interruptions, he said.

...new products planned

In a bid to increase capacity utilisation and widen the product base, Tetra Pak India has embarked on a plan to introduce new aseptic packaging products for its clients in India.

"We are at a discussion stage with our clients to supply them with Tetra Wedge, the new shape package that is likely to be launched early next year," Akimov said.

Also on the anvil are plans to launch "Tetra Classic" packages at a later stage. The launch of the new packaging products is expected to boost the company's sales, which have almost remained stagnant. In calendar 1999, the company posted a turnover of Rs 102.1 crore (including domestic sales of Rs 85.9 crore), which increased marginally in 2000 to Rs 117 crore.