The Hindu Business Line : Milk derivatives exempted from cost audit rules

COMPANIES manufacturing milk derivatives such as chocolates, desi ghee, butter, and ice cream, can now heave a sigh of relief. The Ministry of Company Affairs has exempted these items from the definition of milk products in the cost accounting rules, putting them at a competitive advantage.

What this means is that companies such as Nestle, Cadbury's, Gujarat Cooperative Milk Marketing Federation (GCMMF or Amul) and Mother Dairy will no longer have to disclose the cost component of their major products in their annual reports. The only products that would continue to be subjected to cost accounting records would be `milk foods' and `infant milk foods,' which basically cover malt-based milk beverages — the likes of Horlicks or Boost produced by companies such as SmithKline Beecham.

The Government's latest move comes, despite non-governmental organisations and cost auditing professionals urging the Government against exempting products like desi ghee, butter, chocolates and ice-cream on grounds that companies were promoting these explicitly as milk-based products.

Official sources told Business Line, "The amended rule recently notified by the Government is to clarify on the definition part of the milk products, which had become a contentious issue." Based on representations from industry associations, the Ministry recently revised the applicability of Cost Accounting Record Rules forcompanies engaged in the production, processing or manufacturing of milk food, except those falling under the small-scale industrial units classification.

It has now defined `infant milk food' as that which includes all types of milk food intended for the routine, complementary or supplementary food of infants and children up to five years and other types of modified milk foods for infants, which are intended for the feeding themduring the treatment of gastro-intestinal disorders.

Further, `milk food' means any food produced by mixing whole milk, partly skimmed milk or milk powder with ground barley malt or any other malted cereal grain, wheat flour or any other cereal flour or malt extract, with or without addition of flavouring agents and spices, edible common salt, sodium or potassium bicarbonate minerals and vitamins, cocoa powder, sugar or sweetening agents or other edible materials.

Opposing the revision, a cost accounting professional said , "The major beneficiary of this will be the multinational companies. The purpose of a cost auditing is to reduce cost and ensure that the benefit is passed on to the consumer. Agreed that milk has different qualities and different products require varied quantities of milk, but this does not mean that such product categories need not attract applicability of cost accounting rules."

The Government had earlier received representations on Cost Accounting Records (Milk Food) Rules, 2001, which had substantially increased the coverage of products by modifying the definition of milk products and even products such as chocolates have been treated as milk.

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