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All India Radio – Tax on Junk Food

  • July 22, 2016
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All India Radio
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Tax on Junk Food

 

Kerala has announced 14.5% ‘fat tax’ on food like burgers, pizza, pasta, sandwich, donuts sold in fast food chain. This is analysed as a two-pronged strategy for

  1. Increasing revenue
  2. Move to promote healthy food habits and hence preventing obesity and health related issues

 

Effect of ‘fat tax’ on various stakeholders

The children and new generation are more addicted to fast food. Typically, fast food are luxury products which display conspicuous consumption pattern and seen as style statement or glamorous for youth.

Short term effects

  • A disincentive for youth, so there might be decline in consumption
  • Increase in revenue for government
  • Impact on employment in fast food chain sector and also on volume of business
  • Local vendors can grab the opportunity to sell healthy food products

Long term effects

  • The impact on the consumption might not be significant
  • Reason: even these food companies may try to reduce their prices. They will work on their cost of production.
  • Encourage research and development for nutritional food products and less suagary saturated food. The challenge will be to maintain the taste the moment companies start playing with ingredients
  • Rise in Start-ups in healthy food/ organic food business.

However, if there is not much decline in consumption, there might be rise in inflation.

Context of decision

To increase revenue and encourage healthy food habits. It is an innovative initiative of the government to encourage MNCs and fast food chains to work upon the nutritional content of the food products and come up with better nutritionist food. This will provide them bargaining power to ask for tax incentives in future.

Five fronts

  1. Significant increase in government revenue.
  2. India has traditionally been a nutritional food lifestyle country. It has potential to increase production and access to healthy organic food.
  3. New startups can venture into healthy lifestyle products to provide better service to people. It will help economy in big way.
  4. Fattening food companies to come with good products
  5. Local vendors benefiting

 

Other examples

Demark and Hungary have also tried for similar kind of taxation. Bihar in January had ‘samosa tax’. The other states may follow the footsteps. The decision has to be taken as ultimately it is a good decision that any product not good for health be attached to higher taxes.

Potential for value added products

It is not going to have negative impact on food processing industry with heathy products. However, the fattening food products industry will have to incur more expenditure on increased taxes as well as research.

India’s food processing industries are at a very nascent stage. The product offering should be such that can be sold in domestic or export market. It is not a disincentive to the FDI as India has a large market and their products can be catered to large population. Thus, there are lot of lucrative options for them to innovate in healthy food option.

Standardisation of nutritional content and food

It is a broader objective in the broader parlance of WHO. All this is done in sync with advocacy of WHO. Healthy food is necessity of the present and generations to come. This is the rationale behind such decision. The only challenge facing is that how to bring change in the eating habits of the young people. It is a win-win situation for various stakeholders in the value chain:- government, consumers, MNCs.

Conclusion

Taxes on products like alcohol or cigarette is to dissuade the consumption of such products. If young generation has to be encouraged with healthy options, such decisions can be helpful in short run. In long run, comprehensive and holistic approach is needed.

Time management is big issue at present. Not only young generation but children and adults chose food that is quick, tasty and easily available. Hence, it is now highly crucial to launch a mission in form of ‘Healthy India’. Talking to new generation, creating the environment and making them understand the importance of healthy body and healthy mind for a healthy life. It is especially important to sensitise the young generation.

Healthy food must become part of the curriculum. Negative impacts of such fast foods have to be known and spread. No country is allowed to mess with health and education. If such is the case, the country has unsustainable future.

Connecting the dots:

‘Taxing is not a permanent solution, behavioural change is the way ahead’. Consider the statement’s validity wrt to ‘fast food taxes’ levied.

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