Take as an example Delhi- the Indian Capital that aspires to become a world class city before the Commonwealth Games in October. Before making the first sale, the wine importer has to procure an excise license costing Rs.0.5 million (US $11,000) annually-which normally translates into a sales period of around 11 months anyway. For example, most importers have still not got the excise license for this year (2010-11)-mercifully; the department had extended the same for 15 days into April this year.
After getting the license, there are numerous bureaucratic formalities to be completed before a bottle can be sold. This includes a label registration charge which for Delhi is Rs.5,000 a label. If you have your cousin’s neighbour in Australia willing to ship you a pallet of wine to market, and he invoices you on payable- when -able basis, you have to shell out Rs.50, 000 for 10 labels- a number considered ‘below the poverty level’ so far as a wine portfolio is concerned-and there are at least 3-10 markets like Delhi where one would need to sell to make it a viable project, each state demanding its own pound of flesh through the licensing and registration and registration charges.
So, the small guy really feels the heat from the excise department of every state..
Small wine producers
If you think importers have got the wrong end of the stick, welcome to the world of Indian wine producers ambitious to sell in Delhi. The small importer can tie up with a distributor who has the excise license, at mutually acceptable terms which usually imply a fixed charge per bottle or a percentage of the sales amount.
But the Indian wine producer must take the annual excise license in the winery’s name at an annual fee of half a million rupees. Additionally, there is a registration fee of Rs.50,000 a label. This is only the minimum amount payable- in fact, the producer is required to pay 1% of the wholesale price. For a bottle selling for an MRP of Rs. 450-480, the wholesale price is around Rs.250, or Rs.3, 000 a case. At Rs.30 a case, the registration charge paid in the beginning of the fiscal year would allow the sale of only1667 cases, after which a further Rs.30 a case has to be deposited.
Let us take the case of Sula, the biggest Indian producer at the moment. If they register 16 of their Indian brands, they have to shell out Rs.800,000 (for label registration) and Rs.500,000 for the license fee. Including the smaller, sneaking additional taxes, it means an outgo of Rs.1.35 million before they can start selling in the new fiscal year (Apr-Mar).
It may be safely assumed that producers in the category of Sula, Grover, UB and earlier Indage ( which cannot get the license unless they get an NOC from the sales tax department to whom they reportedly owed over Rs.5 million in back taxes last year) would be able to arrange these funds. But a small producer-and there are quite a few who are now making decent wines and want to enter a market like Delhi, may not be in a position to set aside the funds required to register their wines.
If a small producer wants to sell even 4 labels, he has to shell out Rs.700,000+ before he can start selling just in Delhi. alone. Not many can afford to do it. It should be no surprise that in the national capital only 6-7 Indian brands are available- including Sula, Grover, UB, Nine Hills, Vinsura (off and on), Zampa
It is ironic that a country that, for decades looked after the interest of the small guys by reserving over hundred industries for the small scale sector, penalizes small entrepreneurs who may have potential to be good wine producers but are restrained due to the fiscal and non fiscal barriers.
The government must consider reducing the annual license fee for selling wine-to a much small amount, initially to Rs.200,000 and then to Rs.100,000. Similarly the registration charges on imported wines should be reduced to Rs.1000-to 2,000 and more importantly, the label registration charges must be brought down to reasonable level of Rs.5,000-10,000 a label for the domestic producers to enable the smaller ones get a share of the pie. At the additional 1% excise duty on the wholesale prices, there won’t be any revenue loss to the government- Sulas and Grovers would continue to pay the same amount of registration charges due to higher volumes but several smaller guys will be able to bring in several labels.
But rationalization has not always been the forte of the government in the wine sector. The least we can do is to shed a few tears for the small guy who is an important link in the marketing chain but feels restrained and frustrated. Meanwhile, the consumer is deprived of several good quality wines being produced by the upcoming boutique wineries- the ones that could raise the bar of the wine quality and take us closer to being an important industry during the next a couple of decades.
PS- We do not have any financial interest or stake in any winery- in India or overseas or with any importer.