Local businesses were being undermined by red tape, cheap imports and confusion over flow-on costs from the Gillard government's carbon tax, a senior industry executive said.

The executive, a managing director whose name has been withheld by the inquiry on request, claims ''abuse of market powers'' by Australia's supermarket duopoly is ''the leading cause'' of the demise of local food manufacturing.

''The price we are able to achieve for our products is stagnant at best, and in many cases deflationary due to the promotional requirements being forced on us by the two major chains to keep our [products] on their shelves,'' the executive told a Senate select committee inquiry into Australia's food processing sector.

Two of Australia's biggest food industry players, Campbell Arnott's and the Australian Dairy Industry Council, have also voiced concerns over the potential cost impacts of a carbon tax. The council's chairman, Chris Griffin, told a recent public hearing the dairy industry would be ''severely impacted'' by increased electricity prices.

''Even though agriculture is exempted, so-called, the flow-on cost for an average dairy farm is between $5000 and $10,000 … the problem is that we cannot pass it on to the consumer [because] our price is set by the world export price,'' he said.

''We cannot go to a customer in Japan or Europe or Asia and say, 'Well, Australia has put a carbon tax on. We want an extra $50 a tonne for our product', because they will go down the road and get it from Brazil or Argentina.''

Mr Griffin said dairy farmers in NSW had already lost $18,500 in income ''for every dairy farming family'' as a result of a decision by the Coles supermarket chain to cut milk prices to $1 a litre.

Campbell Arnott's Asia Pacific vice-president Craig Funnell told the inquiry the company was still ''determining the exact impact of the carbon tax''.

This appears to contradict earlier claims by Prime Minister Julia Gillard that the price of a packet of Tim Tams - one of Campbell Arnott's best-selling biscuit lines - would increase by less than 2c under a carbon tax.

''We do not emit carbon dioxide at levels that require us to pay the carbon tax.

However, we will pay increased energy prices as a result of the tax, and other input costs are also likely to increase,'' Mr Funnell told the inquiry. ''We will be working with our suppliers to seek to minimise these cost increases.

''Once we have determined the size of these cost increases we will assess whether they can be passed on. Given current market conditions in Australia, and the continued pressure from imports that are not subject to any carbon tax, we believe it will be difficult to pass the costs of the carbon tax on to our customers.''