Boom or Doom, it Spells Maha (rashtra) Gloom for Imported Wines

The Maharashtra government has spelt doom for the imported wine industry by making a sudden volte-face and increasing the excise duty on imported wines from150% to 200%, bringing a boom for the state producers and casting a gloom for fine wine lovers

Despite assurances and unofficial statements that it was considering decreasing the duties from 150% to Rs. 300 a liter, the ministry has increased it to '200% of the assessable value or Rs.200 per bulk liter whichever is higher, for wine either in bottle or bulk, through a gazette notification, signed on November 12 th , but released today.

The order also spells death knell for many importers of Maharashtra and a gloomy future for all importers. 'Maharashtra hotels which consume 85% of the premium wines of the country will be the worst hit,' says Aman Dhall, owner of Brindco, the biggest wine importer.' It will be a big set back for the imported wine industry. It is totally arbitrary and the government does not appear to have applied its mind properly,' he told delWine.

Sanjay Menon is the biggest importer in Mumbai, who is a market leader in Mumbai. Talking to delWine from Paris, too dumbstruck for words,' the imported wine industry is finished,' he said. 'We were hoping that the government will see reason and reduce the excise duty , at least on the fine wines which are not even competing with the Indian wines,' he rued.

Says the Delhi based Naresh Uttamchandani, partner of Sovereign Impex,'Of course it will affect our Mumbai business but the bigger fear is that Maharashtra's example might be replicated in other states which would mean the imported wines will just not be affordable.'

Rajeev Samant who has been a supporter of a fixed duty per bottle as in UK and Singapore is in Italy and could not be available for comments. Sula and the other producers of Maharashtra will have now free run as there will be practically no competition from the foreign imports.

Even more surprising is the announcement of a reduction of excise duty to 100% and even 75% for better quality spirits, costing upwards of Rs.5000 (€ 88 a case of 9 liters). This means the excise duty on Scotch whisky and other premium liquors will actually come down.

The hotel industry will be adversely affected, bringing in a huge drop in sales and an unprecedented price increase for the consumers.

Fortunately, the other states have not taken any regressive steps as they do not have any local farmers to protect. But.

With the stroke of a pen the fine imported wine industry enters the dark ages today.                              ...........................................................................................

Subhash Arora

November 20, 2007

Policy

Dear Subhash,

Where wine is involved, governments can be counted on to be stupid, around the globe.  I am very sorry to hear this. Gloom is the word.

Gerry Dawes
17 Charnwood Drive - Suite A
Suffern, NY 10901

Dear Subhash,

What is happening in Maharashtra re taxation on imported wines is just unbelievable - a massively retrograde step that requires immediate correction. However, I am perplexed: how would Vijay Mallya gain by this? Since Mumbai was the second-largest market for imported wines (after Delhi ), surely it would have been in his interest to have a low-tax regime so that Bouvet-Ladubay could be sold? It would be interesting to know who is 'pushing the buttons' that prompts the state authorities to do this - which is quite a piece of work

Regards,

Alok

Dear Alok,

Don't forget that White Mackay has a much bigger canvas in the India market context. Of course, UB would lose on Ladubay- but on balance , the long term gains could be substantial. And don't forget W & M has huge inventory that would need to be liquidated for cash flows. This will help him popularise the brand as well- Radico had not done much with it earlier.

Obviously a strong liquor lobby is working. Otherwise, tell me when the whole world is convinced about the health benefits of wine and shifting towards wine drinking, where was the need to reduce excise to 75% for liquor and increase to 200% for wine?! It should have been other way around.

Less said about the domestic wine lobby, the better.

This also reminds me of an old story about a motorist in Bombay who was fined Rs.20 for a road offence. He pleaded with the magistrate to reduce it some. The magistrate made it Rs.40. When he protested, the magistrate increased it to Rs. 50 for the defendant's belligerence.

Whether there is a truth to the story or not, the wine importers have been branded defendants and termed belligerent for asking for the redressal. It is the hapless consumer who got the shaft!

Obviously, there are strong lobbies working out there. Do let us know if you find out something. I am clueless here, busy preaching about the anti-oxidant and ageing properties and other health benefits of wine!

Cheers (though there is little to cheer for, right now! Our heart goes out to the Maharashtra wine lovers)

Subhash Arora