No repack: FMCG watches its wasteline

Mumbai: Consumer goods companies have requested the government to let them sell their current stock with the existing packaging material but at a lower price than the printed MRP, once the new GST rates become effective on September 22. They want to utilise the already printed packaging material as well, to avoid discarding material worth more than Rs 2,000 crore.

The firms have offered to inform consumers about the new sale price that factors in tax benefits through advertisements, website updates and distributor notices. In letters written to the ministry of finance and the department of consumer affairs through industry bodies, the companies pointed out they have two to three months’ of inventory, running into millions of items spread across the supply chain from factories to retailers.

The letters said re-stickering these manually would be impractical. These items will become unusable if they are not allowed to sell with the existing packaging, they said.

“Majority of the packaging materials are pre-printed with the prevailing MRP. In order to avoid colossal waste of pre-printed packaging material worth thousands of crores in value, we submit that until new packaging materials with revised MRP are procured, manufacturers should be allowed to exhaust pre-printed material with existing MRP,” said one of the letters written on Friday.

ET has seen a copy of the letter. Industry executives said they have yet to receive a response from the government.

A steep cut in GST was announced last week on most consumer goods. While tax on butter, cheese and confectionery has been cut to 5% from 12%, that on chocolates, biscuits, cornflakes, coffee, ice-cream, bottled water, hair oil, soaps and toothpaste has been slashed to 5% from 18%. "While we intend to pass on the full tax cut benefits through lower pricing, we are working on how to implement it cost efficiently without wastage," said Mayank Shah, vice-president at India's biggest food company, Parle Products. Dairy products maker Amul said the majority of its 30 lakh-strong retail distribution network operates under the composite GST scheme, without availing input tax credits.

“As these retailers and channel partners will continue to carry the pipeline inventory of existing MRP stock for almost up to a month, immediate reflection of benefits at consumer level will be challenging,” said Jayen Mehta, managing director of the Gujarat Cooperative Milk Marketing Federation, that markets under the brand. Amul plans to advertise the reduced prices through mass media and social media. It “will also offer discounts to ensure consumers start receiving the benefit of GST reduction (even on) the older, higher-MRP stock (that is still) available in the market,” Mehta said.

EASE OF TRANSITION
To support transparent pricing and simplify billing, companies are also calling for the reintroduction of rounding off MRPs to the nearest rupee or 50 paise. They have also proposed that promotional offers such as ‘buy one-get one’ and increased grammage be recognised as valid methods of passing on tax benefits. Packaging typically accounts for 10-15% of the total cost of a consumer goods product, depending on the size, category and brand positioning.