Army Canteen’s profit zooms as companies fall in line

Indian Military Veterans

The Canteen Stores Department (CSD), which runs retail stores for the armed forces, said it has posted record profit during FY17-18, after it collected tax refunds from a few states and imposed penalties on companies that flouted fair pricing norms, which included matching and promotional offers given to other retailers.

CSD, or Army Canteen, which, incidentally, is a not-for-profit organisation, earned Rs 1,253 crore during the year to March, significantly higher than other retailers in the country. A year ago, it had earned a net profit of Rs 280 crore on sales of Rs 17,000 crore.

“This is the biggest profit ever for CSD. Debit note was issued for all companies that deviated and didn’t pass promotional scheme which alone was in excess of Rs 500 crore,” said M Baladitya, chairman of the board of administration at CSD, that clocked sales of Rs 18,000 crore during the year to March 2018. He declined to share the names of companies that violated pricing norms.

CSD’s retail outlets sell 5,300 products ranging from biscuits and beer to shampoos and cars to 12 million consumers — personnel of the army, navy and air force, exservicemen and their families.

Started in 1948, it is managed by the Ministry of Defence and comprises 3,901 unitrun canteens and 34 depots. Interestingly, CSD’s number is higher than the combined profit of Future Retail, D’ Mart, Shoppers Stop and Tata Trent.
In April this year, ET had reported that CSD has booked Rs 1,100 crore in profit over the past two years through long-delayed value added tax (VAT) refunds from several state governments and penalties from companies that breached fair-pricing agreements. CSD said profit was higher due to exceptional income and doesn’t necessarily reflect on operational profit.

“Every year, we had to make provisions in the balance sheet for VAT refunds as NPA. Over the past two years, we have pursued these cases in six states and booked these as a one-time gain,” said Baladitya. More than Rs 700 crore refund from states — Gujarat, Karnataka, Andhra Pradesh, Maharashtra, Telangana and Madhya Pradesh — were booked last fiscal.

Army canteens have more than 600 suppliers competing to provide a range of products including toiletries and cosmetics, household goods, footwear and accessories and food items, stationery, electronics and consumer durables, liquor and a variety of vehicles.

For most consumer product and liquor companies, CSD accounts for 5-7% of their total volume sales. Typically, the price differential between retail stores and CSD ranges from 10-40%.

Army canteens get a refund of 50% of the goods and services tax (GST) paid from the states and the Centre. “It is just not possible to sell products at prices lower than us since the government waives a substantial amount of taxes and we negotiate with companies for discounts as well,” said Baladitya

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