 Prime Minister Modi hails from Gujarat, one of the two Indian states where prohibition is enforced, out of a total of 29 states (for the information of our non-Indian subscribers there were 28 States till June I, 2014 but the new State of Telangana has been now carved out of Andhra Pradesh. According to the Constitution of the Indian Republic, it will also have its independent wine pricing and tax structure. For now, it will continue to have the VAT of 120% as applicable in the erstwhile Andhra Pradesh).
A section of people are pessimistic about the future of wine and alcoholic beverages. They feel that since he comes from a State that introduced prohibition in 1961, he might wish to impose it throughout the country. But this is a far-fetched assumption especially as he is pro-business and would like foreign investments as soon as possible to rev up the economy. It is a known fact that expats are not comfortable with prohibition or such restrictions that may force the locals to indulge in drinking bootlegged liquor. There are often jokes about Gujarat having the highest unofficial per capita consumption of alcohol and Prime Minister Modi undoubtedly understands this as much as the fact that taxes on alcohol are the big earners for States, some of which may find it impossible to run if this support is withdrawn due to prohibition.
Let us not forget that Mr. Modi did not introduce prohibition and the primary reason was sheer respect for the Late Mahatma Gandhi who was born in Gujarat and was a prohibitionist who wanted the whole country to be dry. No government has had the guts or inclination to change the law in Gujarat and Mr. Modi is not likely to change it either although he might consider having it made less strict and simpler for expats with his nominee being the new Chief Minister of Gujarat.
Then there is the question of excise policies of various states. Although his political party BJP may have the majority of States under its control, it is not easy to dictate the excise policy to States that are guaranteed independence through Constitution. Whether they had the will or not, the Congress government at the Center was not able to persuade even the Delhi government ruled by the party itself, to bring down the excise duties which had been increased in 2007, a day after the Additional Customs Duty was removed. Maharashtra, on the other hand, had escalated the same even more but came to realize the logic and rolled it back almost to the previous level a few months later.
A positive scenario could be the implementation finally of the GST- Goods and Services Tax - which makes the taxes uniform in all States, with the distribution of funds so received distributed in a rational and pre-agreed model. If that happens, this could be a major historical contribution of the government and the fact might not be hidden from the visionary Modi. The Congress party had promised it for years and even tried to implement it but did not succeed.
Another important issue that was pushed to the backburner during the last one year, as predicted by delWine much earlier, was the signing of the Foreign Trade Agreement with EU. This includes reduction of customs duties to a mutually agreed level that could be very low for high-ended wines imported from the EU member countries. Many people claim that the Treaty negotiations are as good as dead for he won’t like to take on the wrath of the anti alcohol lobby. Many feel that the government will stress on keeping the imports of wine and spirits out of the purview of the FTA. This, per se, may not be true since he is a visionary and very calculating in his strategy. He would realize with his sharp brain that India has a lot to gain from the treaty and wines in any case can be high revenue earners through exports in a big way and by promoting the production, it will significantly help the cause of the farmers as well. It is in the national interest to see a growth of this industry and imports form an important segment.
Any policy decision of the Maharashtra government- and many times even the central government- was often attributed to Mr. Sharad Pawar who was the minister of agriculture, with interests in winegrowing in Maharashtra and was quite influential in the previous government. He may not be as effective now and Mr. Modi can perhaps ensure more objective policies vis-à- vis new wine laws that ought to have been framed by now; the government and the parties involved have been quite slow and hopefully, a positive action would be forthcoming now.
Any other changes might not be substantive. But the producers and even importers are in a very upbeat mood. A majority of them feel that he is a man of swift decisions and the policy paralysis of the previous government may be a thing of the past so far as the procedures is concerned. ‘Even if the decision is uniformly negative, it is better than no decision at all as was the case in the previous government where due to non-action, the bureaucrats were either not willing to take any decision or each one interpreted the laid out policies individually and often differently with the result that the industry is in a state of doldrums and confusion today,’ says an importer unwilling to be named.
One hopes that the good governance as promised by Mr. Modi would also mean simplification of procedures and as the dust settles down, the officials would use kid gloves to encourage the industry to sustain so that we may be able to compete with China one day in the global markets and there is a positive switch from spirits to lower alcohol and healthier wine drinking at home.
In the meantime, let us be optimistic about changes for the better. Already, there has been a positive signal from the FSSAI which has come forward to do a bit of hand-holding. Hopefully, with a deeper understanding of the problems created by bureaucracy and the right direction that seems to have been set with billions of rupees of stuck-up projects cleared within a few days of taking over by the new government, the Modi factor should work in favour of the wine industry and there is no reason to be panicky or pessimistic.
Cheers.
Subhash Arora
Tags: Narendra Modi |