1. ANNEXURE 1 ANNEXURE 1 BISCUIT INDUSTRY IN INDIA- STATUS PAPER Annual Growth The biscuit industry in India witnessed annual growth as below:- 2003-04 - 15% 2004-05 - 14% 2005-06 - 14% 2006-07 - 13% 2007-08 - 15% 2008-09 - 17% (April – June)

2. ANNEXURE 1 While the growth rate has been stagnating during last 4 years, it has picked up momentum during the 2007-08 and the first quarter of 2008-09 mainly on account of exemption from Central Excise Duty on biscuits with MRP up to Rs.100/per kg, as per Union Budget for 2007-08.

3. ANNEXURE 1 Indian Biscuit Manufacturers’ Association (IBMA ), instrumental in obtaining the excise duty exemption, estimates annual growth of around 20% in the year 2008-09. Growth in biscuit marketing has been achieved also due to improvement in rural market penetration.

4. ANNEXURE 1 Annual Production : The organized biscuit manufacturing industry‘s annual production figures are given below:

5. ANNEXURE 1 (In Lakh Metric Tonnes) 2003-04 - 11.00 2004-05 - 12.54 2005-06 - 14.29 2006-07 - 16.14 2007-08 - 17.44

6. ANNEXURE 1 Segments : The organized and unorganized sectors of the biscuit industry is in the proportion Of 60%:40% ratio.

7. ANNEXURE 1 EXPORTS of Biscuit is estimated to be around 15% of the annual production during the year 2007-08. IMPORTS of biscuits into India has not shown any significant growth during the last two years and has not affected production/sales by the Indian Biscuit industry

8. ANNEXURE 1 Rural-urban penetration of Biscuit: Urban Market : 75% to 85% Rural Market : 50% to 65%

9. ANNEXURE 1 Marketing : Wholesale and Retail marketing in the Biscuit industry is carried out with a network of C & F Agencies (for States and specific Districts), Dealers / Wholesalers and Retail shops.

10. ANNEXURE 1 HIKE IN COST OF PRDUCTION Biscuit Industry especially the Small & Medium Sector, consisting of around 150 units are facing erosion in their profitability and competitive capability, due to :- a) Steep hike in cost of production on account of increase in prices of major raw materials, i.e. Wheat Flour, 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.

11. ANNEXURE 1 The above rates are excluding VAT & other Taxes as well as Cost escalation due to increase prices of Laminate, hike in prices of Petrol/ Diesel, Revision of wages

12. ANNEXURE 1 IMPACT OF ABOVE IN FINISHED PRODUCTS S.NoCost per KGJan 08May 08Difference in Rs In %age 1Glucose 85 gm31.0831.730.652.09 2Crunchy bite 150 gm 30.1832.402.227.36 3Golmol 150 gm34.0634.260.200.59 4Butter 250 gm41.5943.822.235.36 52 in 1 75 gm39.0141.062.055.26 6Milk Cream 75 gm46.3847.280.901.94 7Marie 17 gm40.3741.210.842.08

13. ANNEXURE 1 Value Added Tax Imposition of Value Added Tax (VAT) by the State Governments @ 12.5% compared to VAT at 4%/0% levied on other similar food products has also adversely affected biscuit industry.

14. ANNEXURE 1 VALUE ADDED TAX On behalf of the industry, IBMA has been pursing the issue with the Chief Ministers/Finance Ministers of all States and also with the Chairman of the Empowered Committee on VAT, seeking reduction in the rate of VAT on biscuit to 4%. IBMA delegations have already met Shri Asim Dasgupta, Chairman, Empowered Committee on VAT, as well as Deputy Chief Ministers & Finance Ministers of Bihar, Orissa, Jharkhand, Punjab, Haryana,Delhi, Andhra Pradesh, and oficials of Uttar Pradesh etc.While most of the State Ministers have expressed their support of IBMA’s representation, however the issue has not so far received favourable consideration by the Empowered Committee on VAT.

15. ANNEXURE 1 IBMA estimates annual growth in the range of 25% and above in the event of reduction in the rate of VAT on Biscuits to 4%.

16. ANNEXURE 1 PER CAPITA CONSUMPTION of Biscuits in the country is only 1.8 kg, as compared to 2.5 kg to 5.5 kg in South East Asian countries and European countries, and 7.5 kg USA

17. ANNEXURE 1 Pattern of Biscuit Consumption(On Zonal basis) in the country are as below: Northern Zone - 25% Western Zone - 23% Southern Zone - 24% East and North East Zone - 28% (Including N.East )

18. ANNEXURE 1 The per capita consumption as well as pattern of consumption in the four regions, as shown above, will also increase considerably, in case the industry’s plea for reduction in the rate of Value Added Tax (VAT) from 12.5% to 4% is acceded to.

19. ANNEXURE 1 Main Categories of Biscuits are broadly as under: Glucose, Marie. Sweet, Cream, & Milk Popular Brands of 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.