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Tax holiday sought for cold chain facilities
October, 20th 2007
The countrys booming retail sector has demanded a 10-year tax holiday to boost development of cold-chain infrastructure as the current fiscal incentive of five-year tax is inadequate to attract private sector investments.

Currently, an undertaking operating cold-chain facility is eligible for a 100% deduction of its profit for five years and 25% for the next five years in a manner that the total period of deductions does not exceed 10 consecutive assessment years.

The tax incentives granted for cold chain infrastructure under Section 80 IB of the Income Tax Act are not sufficient to encourage entrepreneurs to invest in cold chain facilities, Assocham secretary general DS Rawat said in a letter to the National Manufacturing Competitiveness Council (NMCC).

The industry has been demanding that the government should accord infrastructure status to the cold-chain facilities and grant fiscal incentive under Section 80 IA. In a letter to the agriculture ministry, Ficci secretary general Amit Mitra demanded a 10-year tax holiday out of 15 years for cold chain infrastructure.

According to Ficci, agricultural produce worth Rs 58,000 crore gets wasted due to lack of adequate cold storage facilities and cold-chain facilities. Investments worth Rs 15,700 crore is estimated to meet the current infrastructural requirement, it said.

According to industry chambers, an efficient country-wide cold-chain infrastructure is required not only to help farmers but it also help the emerging retail industry.

Better cold chain infrastructure would reduce wastage that would enable good returns to farmers. The retail giants would get maximum produce for value addition that would enhance cost efficiency gains and thus enable the industry to keep the retail price low for end consumers, a Ficci official said.

The requirement of cold chain across the country far outstrips the handling capacity of cold chain players. It results in wastage of 30-35% of agri produce. At present, there are 4,762 cold storages in the country with a storage capacity of about 196 lakh MT. However, most lack in facilities to store a wide range of products, he added.

The government has announced a national policy to involve private players in creating infrastructure. The policy proposes a special purpose vehicle to involve farmers associations and co-operatives by allowing them to pick up equity in cold-chain infrastructure in rural areas.
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