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This document was sent at a time when the brazen hotels had not satisfactorily reduced their prices when the Duty Free wines and spirits were allowed to be imported a few years earlier. Many hoteliers cite the extra licensing costs and increased overheads for failing to follow the directive while others simply brush it aside as an April Fools’ Day joke. The Directive was seemingly written on April 1, 2008!
According to a very bold and excellently worded undated letter sent by Mrs. Asha Juneja, Assistant Secretary General (Admin) of the FHRAI to the members, she did not mince any words when she chided them and wrote, ‘The Hon’ble Minister for Commerce & Industry had received complaints that the benefits derived by Hotels/Restaurants on import of duty free wines and liquor under the Served from India Scheme (SFIS) were not being passed on to the consumers.’
It is a fact that the run to the previous budget in 2008 a month earlier had seen wide speculation in the industry that the license might be cancelled due to the their stubborn attitude not to adhere to the promise. Their premise was that the license was given for some consideration and consumers were not a part of the negotiation process. During the hot discussions with several hotels, delWine was told in private that the cancellation of the benefits was imminent because of the continued exhorbitant prices. Others knew that a few of the top hoteliers had a long reach to the politicians and would ‘manage’. The grapevine was that the Commerce Minister had gone to a couple of restaurants in 5-star hotels and was shocked and visibly upset by the ridiculously high levels despite the facility extended and had threatened to get the facility of no customs duty withdrawn.
While it was the victory of the hotel lobby, the effort to appease him was clear in the directive. In the same directive she said, ‘It was also pointed out that the Hotels/Restaurants mark up was to the tune of 1000% of the landed cost hence SFIS (served from India Scheme) should be discontinued.’
In fact, a meeting had been held and the Minister did pressurize the FHRAI under veiled threat to reduce prices. As the letter communicated, ‘a meeting was held among senior hoteliers and a joint proposal was submitted by FHRAI and HAI on 13.3.2008 to the Ministry of Commerce, Government of India. In this it was committed that the revised selling prices of imported spirits and wines in the hotels would be applicable with effect from 01.04.2008.’
‘As per the above commitment the revised selling prices are to be restrained in Bars and Restaurants with a mark up upto 400% for imported spirits and 250% for imported wines on landed costs plus taxes including excise duties and gratis items as detailed in the statement of costs submitted to the Ministry of Commerce. These costs included sundries like peanuts and savouries etc., not normally incurred for wine.
The letter did have the desired effect. delWine went to check up the revised price list of the hotels and noticed a substantial mark-down in the prices-but only in the short-tem. Gradually, the prices started moving up again. With the government focusing only on the higher excise revenue collections, things have come to such a pass that no hotel or restaurant follows the Directive that is gathering dust.
When delWine contacted FHRAI, Mrs. Juneja was sympathetic to the consumers but she was a lot more worried about the hoteliers whose very existence she felt was under threat in today’s scenario. She was so convincing that my sense of sympathy for my hotelier friends even deepened. Knowing a significant number of them personally at various levels, I know that they are the finest people in terms of offering service. Our hotels compete well and their creativity is matched by few in the world. One knows that our government has been myopic and almost anti-hotel industry as if they are beds-of –luxury. We have thus missed out in a big way the benefits of tourism. The hotels are perpetually under the vagaries of some catastrophe to calamity besides the cycles of world economy and when they do somewhat stabilize, the government pulls the rug from under their feet and squeezes them with higher taxes in some form or the other.
One hopes that the new government will be more sympathetic to the hotels. If the visuals of Amitabh Bacchan showcasing the beauty have evoked emotions towards Gujarat and the son-of-the-soil, one can assume he realizes that the hotel industry needs to sustain and flourish to make our tourism get the focus it deserves. But the fact remains that the duty free imports were not allowed for them to pocket the extra profits due to the 150% duty waiver but to pass them to the customers who according to their lobbying were supposed to benefit in the first place with price reduction.
What has been the main reason for the hotels sticking to this seemingly illegal policy? How far has it benefitted the hotel industry or hurt the consumption of wines? What is the plight of the Indian wine industry which claims it has suffered because of this policy? Should the government scrap the policy altogether? delWine will discuss the issue in its usual bold, neutral and objective fashion in a future edition soon - provided the issue of prohibition on the national level does not raise its ugly head.
You may like to read an earlier article published by delWine on April 17,2008 soon after the Directive was sent by FHRAI.
For the April Fools’ Day Directive letter click DIRECTIVE
Subhash Arora
If any of our hotel friends feel their pricing is well within the policy of 250% on each wine, they are welcome to send us their comments. We would be glad not only to publish them but also the calculations. We hope our consumer readers will send us their valued comments on this issue too at delWine@delwine.com -editor
Tags: Federation of Hotel and Restaurant Association of India, FHRAI |