‘Fat tax’ is making restaurants and companies worried sick

A recent proposal by India's food regulator to apply fat tax, i.e., tax on all packaged foods that contain high fat, sugar and salt content has upset companies and restaurants.

The Food Safety and Standards Authority of India (FSSAI) proposed this at a yet-to-be-decided rate. If implemented, the tax would be covering almost all processed food items, thus making companies worried about the extra charges they would have to pay.

Also read: You may have to pay an extra tax for eating pizza and burgers after budget, if PM Modi says a yes

"Like cigarettes, consumers who want to consume such products will continue doing it in one form or another," said BK Rao, deputy marketing manager of Parle Products. "If implemented, prices will shoot up and manufacturers will pass it on to consumers. This might lead to some consumers refraining from the brand. However, when the mandate comes, we will fine tune it (reformulate the product) according to the law," he told ET.

The products that would attract such tax include deep fried Indian and western snacks; sweet, fatty and salty desserts and confectioneries; fast food like burgers, noodles; beverages like coffee and juices, and baby products.

With this tax, FSSAI aims to reduce the rising number of diabetes, hypertension and cardiovascular patients, especially children.

"We have shared the proposal with the ministry. Specific recommendations will require different ways of implementation, for example, on ban of advertising, consideration from the Ministry of Information & Broadcasting," said Pawan Agarwal, CEO of FSSAI. "On some matters, we will ourselves take action."

European countries like Denmark and Hungary already have fat tax on junk food, and was first implemented in India when the Kerala government proposed a 14.5% tax on burgers, pizzas and other junk food.

However, the tax has also found some support.

"We fully support FSSAI's work on promoting safe and nutritious food for Indian consumers," said an official spokesperson of Hindustan Unilever. "We have the responsibility to contribute to this cause both through our product formulation and product labelling to help consumers make informed choices."