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BISCUIT INDUSTRY IN INDIA-

STATUS PAPERAnnual Growth

The biscuit industry in India witnessed annualgrowth as below:-

2003-04 - 15%2004-05 - 14%2005-06 - 14%2006-07 - 13%

2007-08 - 15%2008-09 - 17%2009-10 - XX%2010-11 - XX%

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While the growth rate has been stagnatingduring last 4 years, it has picked up

momentum during the 2007-08 and the firstquarter of 2008-09 mainly on account ofexemption from Central Excise Duty onbiscuits with MRP up to Rs.100/per kg, as perUnion Budget for 2007-08.

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Indian Biscuit ManufacturersAssociation (IBMA), instrumental inobtaining the excise duty exemption,

estimates annual growth of around 20% inthe year 2008-09.

Growth in biscuit marketing has been

achieved also due to improvement in ruralmarket penetration.

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Annual Production:

The organized biscuit manufacturingindustrys annual production figures aregiven below:

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(In Lakh Metric Tonnes)

2003-04 - 11.002004-05 - 12.54

2005-06 - 14.29

2006-07 - 16.14

2007-08 - 17.44

2009-10 - XX.XX2010-11 - XX.XX

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Segments:

The organized and unorganizedsectors of the biscuit industry is in theproportion Of 60%:40% ratio.

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EXPORTSof Biscuit is estimated to bearound 15% of the annual production

during the year 2007-08.

IMPORTSof biscuits into India has notshown any significant growth during the

last two years and has not affectedproduction/sales by the Indian Biscuitindustry

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Rural-urban penetration of Biscuit:

Urban Market : 75% to 85%

Rural Market : 50% to 65%

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Marketing:

Wholesale and Retail marketing in theBiscuit industry is carried out with anetwork of C & F Agencies (for Statesand specific Districts), Dealers /Wholesalers and Retail shops.

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HIKE IN COST OF PRDUCTION

Biscuit Industry especially the Small & Medium Sector,consisting of around 150 units are facing erosion in theirprofitability and competitive capability, due to :-

a) Steep hike in cost of production on account ofincrease in prices of major raw materials, i.e. WheatFlour, Veg. Oil, Sugar, Milk, Packaging Materials, Fuel.Wages,etc.Recent increase in prices of Petrol/Diesel

in May 2008 has further resulted n cost push.

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The above rates are excluding VAT &other Taxes as well as

Cost escalation due to increase pricesof

Laminate, hike in prices of Petrol/Diesel, Revision of wages

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IMPACT OF ABOVE IN FINISHEDPRODUCTS

S.No Cost per KG Jan 08 May 08 Difference inRs

In%age

1 Glucose 85 gm 31.08 31.73 0.65 2.09

2 Crunchy bite 150

gm

30.18 32.40 2.22 7.36

3 Golmol 150 gm 34.06 34.26 0.20 0.59

4 Butter 250 gm 41.59 43.82 2.23 5.36

5 2 in 1 75 gm 39.01 41.06 2.05 5.26

6 Milk Cream 75 gm 46.38 47.28 0.90 1.94

7 Marie 17 gm 40.37 41.21 0.84 2.08

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Value Added Tax

Imposition of Value Added Tax (VAT) bythe State Governments @ 12.5%compared to VAT at 4%/0% levied on

other similar food products has alsoadversely affected biscuit industry.

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VALUE ADDED TAX

On behalf of the industry, IBMA has been pursing theissue with the Chief Ministers/Finance Ministers of allStates and also with the Chairman of the EmpoweredCommittee on VAT, seeking reduction in the rate of VATon biscuit to 4%. IBMA delegations have already met ShriAsim Dasgupta, Chairman, Empowered Committee onVAT, as well as Deputy Chief Ministers & FinanceMinisters of Bihar, Orissa, Jharkhand, Punjab,Haryana,Delhi, Andhra Pradesh, and oficials of UttarPradesh etc.While most of the State Ministers haveexpressed their support of IBMAs representation,however the issue has not so far received favourableconsideration by the Empowered Committee on VAT.

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IBMA estimates annual growth in therange of 25% and above in the event ofreduction in the rate of VAT on Biscuits to4%.

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PER CAPITA CONSUMPTIONof Biscuits in the country is only 1.8kg, as compared to 2.5 kg to 5.5 kg inSouth East Asian countries and

European countries, and 7.5 kg USA

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Pattern of Biscuit Consumption(On Zonalbasis) in the country are as below:

Northern Zone - 25%

Western Zone - 23%

Southern Zone - 24%

East and NorthEast Zone - 28%

(Including N.East)

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The per capita consumption as well aspattern of consumption in the four regions,as shown above, will also increase

considerably, in case the industrys pleafor reduction in the rate of Value AddedTax (VAT) from 12.5% to 4% is acceded

to.

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Main Categoriesof Biscuits are broadly as under:

Glucose, Marie. Sweet, Cream, & Milk,

Popular Brandsof Biscuits in the country are, Britannia,Parle, Priyagold, Anmol, Sunfeast, Biskfarm, Dukes,Cremica, Priya, Veeramani, Bonn, Bhagwati, Raja,Champion,Sobisco,Madhabi, Nezone, Windsor,Cookieman Ankit, Shangrila, Nalanda, etc.