|
Under pressure from US and EU, which have
dragged India to the WTO over high duties on wines and
spirits, India has decided to scrap Additional Customs
Duty of up to 150 per cent on these products to make
the tax structure compatible with its commitments.
"We are planning to scrap ACD by
July and allow states to impose taxes equivalent to
the levy on domestic wine and spirit makers," a
senior Commerce Ministry official said.
He said this would be done through an executive order
and there was no need to bring a central legislation
for allowing states to levy additional taxes.
So we are seeing the end of the tunnel,
so far as the import duty reduction is concerned. This
should be music to the ears to the foreign producers
and the Indian consumers.
But The possible reduction of import duties
has not even happened yet and the Indian wine industry
has started reacting negatively to it. They feel that
the lowering of duties will make India a dumping ground
for the cheap imported wine that will hurt the Indian
wine industry.
Earlier the government had announced that
it will pass a legislation which will authorise the
states to charge a maximum of the same excise duty on
imported wines as the domestic products. Since the excise
on the Indian made wine is generally much lower, it
iwas assumed that in most states the prices would come
down.
Recently, however, the government sources
had announced that the agreement had been reached by
states wherein they had consented to this government
initiative and only an executive order would do.. Any
which way one looked at it, the reduction was imminent.
This will naturally put pressure on the
Indian industry who has been cheering and Sante-ing
all the way to the bank with growth of over 60% being
the norm among the top producers. With the shortage
of good quality grapes and the unprecedented increased
demand, the top three producers had increased price
on the majority of their wines during the last two months.
Champagne Indage, the number one company
withdrew its well-known offer of buy-one-get-one free
offer to the dealers across the board offer on its table
wine Riviera which has been the national brand till
recent years, thus hardening its price by as much as
50% in Chandigarh and Mumbai where sales prices are
flexible.
Sula entered a decade ago and spoilt the
party. Even Sula has increased the price on its Dindori
Reserve Shiraz by over 15% (from Rs,550-600 to Rs. 700;
€13, ostensibly to allow it to age the wine in
barriques longer, thus increasing the cost. In fact,
the wine has turned out to be of fine quality and is
amenable to ageing but is always in short supply due
to the limited supply and increasing demand, created
by better product and slick marketing.
Sula has been business savvy by getting the 'Dindori'
brand registered after the name of the village in which
majority of its vineyards are located. This amounts
to a brand name like Sancerre, Pouilly Fuisse or Marlborough
and will pay them richer dividend in future.
Sula had also increased prices on its
other labels, though by lesser margins.
Grover, the third brand belonging to
the Grover family, which makes French style wines in
consultation with Michel Rolland, and was ranked as
the fifth most influential family of India by the French
magazine, Le Monde for its efforts, had hiked the price
on its Shiraz based La Reserve, the wine that was selected
by Steven Spurrier as the World's Best red wine from
the New World, in 2005, from Rs.440 to Rs. 540 (€
9), a whopping increase of over 20%.
Out of the two giants that are just entering
the market by buying grapes from the farmers, Seagram's
is already pricing its one-vintage-old Nine Hills at
Rs. 480. Beer king Vijay Mallya's new entry into the
market has not taken place though the infrastructure
is in place with its Business Head (wines), the ex-Grover
VP, Abhay Kewadkar quoted as saying, ' This would lead
to the heavy reduction in the prices of imported wine
and make India a dumping ground for cheap and sub-standard
liquor imported from European countries.
The opinions will be divided as can be
expected. India makes some very good wine and plenty
of cheap wine, like the rest of the world. There is
no doubt that it has benefited the most by various efforts
to promote the wine culture., taking a lion's share
of the increased market, due to high duties. Perhaps,
it will be a more level playing field now
But the recent trends exemplify how Indian
businessmen are shrewd and comparable to the best in
the world in converting opportunities into maximizing
their profits. It will be interesting to see how they
react to the changes when they take place. Will they
roll back the prices?
Hapless consumer has been the lonely loser
in the whole ball game till now. One hopes the lower
prices will induce more people to drink wine and the
consumer will have a wider choice with the prices on
imported wines falling by a third.
It is interesting to note that if the
CVD (ACD) is scrapped in full, the customs duty element
will fall to 100% (plus, the excise duties imposed by
the states). WTO agreement allows for a higher duty
of 150%.
Subhash Arora
June 2, 2007
|
