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The massacre did not single out any caste, colour or
creed. It was directed only to one class- of decent quality imported wine
drinkers. It was the state government's dictum to switch to Indian or
cheap imported wines, or better still drink Scotch whisky and keep the
English tradition alive. If you can afford the luxury of drinking better
quality wines, better lighten your wallets, seems to be the refrain.
The market is limping back to life, but like a bullet
that barely missed piercing the heart, recovery is painfully slow and
life may never be the same again. Says Sumedh Mandla, partner of FineWinesNMore,
a Mumbai based importer, the market is slowly picking up but the premium
wines are pretty much dead in Maharashtra. With such high excise duties
hotels are afraid of stocking premium wines; they are sticking with cheaper
wines.
Maharashtra's biggest importer, Sanjay Menon's moustache
seems to be flying at low mast. He is quite reticent.' What can a few
importers do? We tried our best in reasoning with the department. Despite
all assurances that the increase will be rationalised to Rs.300 a liter,
the government has decided to change direction, we have to live with the
policy'
Like Mandla and other importers, Menon is also focussing
on cheaper imported wines.
Sula's Rajeev Samant, part of the 'Bombay Club' (others
being presumably, Sanjay Menon of Sonarys, Ashwin Deo of Moet Hennessey
and Amrit Kiran Singh, Area Director, South Asia, Brown and Foreman of
Jack Daniels fame) concedes the government has been harsh. 'Local industry
certainly needs protection against cheap wines costing less than a Euro;
else they'd be flooding the market and would threaten the very existence
of our nascent wine industry. 'We were ok with excise duty of 150% for
cheaper imported wines. The higher end wines don't compete with us so
we would be ok even with the excise duty of Rs. 300 a bottle that one
had presumed would be the final decision by the department.'
Ranjit Dhuru, CEO of Dindori based Chateau d'Ori is an
importer as well as a producer. He is simmering because of the excise
duty increase. The plea taken by the government of protectionism for the
local wineries is unfortunate for the industry in the long run, he feels.
Chairman of Aftek Ltd., a listed IT company with a Rs.400 crore ($100m)
revenues, says,' We are not only exporting our products and competing
with the rest of the world, but are also successfully running a German
company we bought in 2003. Similarly, unless we have more imported wines,
how can we Indian producers compete with them and take our quality to
higher levels?' he retorts.
Dhuru also imports wines from Bordeaux. He had the wines
crafted specially for the Indian market for as low as Rs.600 when 'I would
love to sell them for Rs.400 but I can't, because of high duties.' Since
the price increase, he has been obliged to increase the price to Rs.850
on the basic wines.
I
had written on July 31 about DIAGEO, the world's largest spirits
business, with a presence in the imported wine segment had hired KPMG
consultants to fight the Indian government in the continuing row over
its unfair and punitive tax regime,
Obviously Diageo must be happy now because their liquor
sales will get a tremendous boost. The effect on the sales of imported
wines like Blossom Hills etc. is a small price to pay to get the honey
pot.
Genrally speaking, even EU are the net gainers because
it is the export of Scotch whiskies etc that were being affected a lot
more than the wines, at least in the short run.
I often cite the example of the auto industry in India
barely over 20 years ago when we were happily chugging along with Ambassador
and Padmini cars, strongly opposing any foreign hand, until the arrival
of Maruti which touched the life of every Indian and helped make some
of the finest cars not only for our own use but for exports. Imports of
quality wines will help the industry develop rather than be strnagulated
Maharashtra, which has the biggest market for wine and
spirits, had imposed an additional excise duty of 200% on whisky and 150%
on wines since July 9, 2007 after the central government had reduced the
customs duty on wine and spirits to 150% and beer was left untouched at
100%.
In a shocking turn of events after the 'Bombay Club'
met the excise officials, the excise duty on wines was further jacked
up to 200% while for premium whiskies it was actually brought down from
200% to 75%! Drop Wine-Drink Whisky seems to be the slogan pushed implicitly
by an otherwise pro-active Maharashtra.
During a chat with Amrit Kiran Singh, I asked him whether
things could get more absurd than this, he said,' You don't know how hard
we had to work to get it reduced. We had to convince them that otherwise
bootlegging would be rampant. We requested them to give a 6-month trial
and watch the duty collection shoot up. The records show that the duty
collection has already gone up by 100%,' he says with a smirk.
We all know about the various lobbies and incentives
that work in the Indian system. Apparently, the lobbying and the financial
power of whisky producers was rather strong and they made an offer 'the
government could not refuse.'
At the end of the day, who suffers? The whisky sellers
like Diageo, Brown Forman and even the wild card White Mackay have plenty
to gain, though outwardly they might mourn the death of fine wines of
their portfolios.
Wine importers are only in the business to make money.
They are already diversifying into beer, liquor imports, olive oil or
other products that would make them stay afloat.
It is the middle class mumbaikers and other maharashtrians
who had started enjoying the taste of decent wines, who would be deprived
of the access to decent wine. And if other states imbibe the Maharashtra
style of excise duties, we would revert back to a nation of whisky drinkers
as we already are identified in the outside world or consigned to drinking
cheap imported wines or the expensive cheap Indian wine, a few glaring
exceptions notwithstanding.
There is also a string possibility that bootlegging and
smuggling will become more rampant in Maharashtra. One often hears of
Dubai being an indirect supplier of many high-duty, luxury products. Dubai
does differentiate between caste, colour or creed but concentrates only
on cash. Knowledgeable people assure me that I should not be pessimistic
for the Maharashtrans as its denizens will not be deprived for long and
soon will have access to fine wines thanks to these resources.
Subhash Arora
January 23, 2008
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