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A report in The Hindu this morning says that the excise duty on ENA is being increased by 177% from Rs. 17 to Rs. 47 a bulk liter. (Our sources say it is proposed to be increased from Rs. 29 to Rs. 79 a bulk liter.) The Excise Department’s draft notification of June 22, will be effective on July 1.
Even though this sounds incredible, it becomes equally incredulous when Mr. P.L. Venkata Rama Reddy, president of the Karnataka State Wine Producers’ Association and owner of Heritage Wines-one of the biggest producers of fortified wines in Karnataka , claims, “We are producing 60,000 cases of wine a month, which we expect now to come down to 15,000 cases.”
By no means does this logic hold. The real culprit has been the abnormal increase in grape prices which went as high as Rs. 25 / Kg in the recent past, according to our source, making production of this type of wine unviable. Although United Spirits Ltd. used to make the Golconda fortified wine, it has reported stopped production totally, though the reasons have not been clear-it could be a policy decision to move away from this product category or it could be for economic or a policy decision.
The claimed production of 60,000 cases of this fortified wine presumable refers to the whole of Karnataka where as high as 700,000-800,000 cases of fortified wine (16% alc.) was being produced earlier. The category is extremely popular in the lower to lower middle class category where it is used as an additive to make concoctions with Gin or vodka more easily drinkable to have the kick faster.
There has been a substantial drop in the total production which has already come down to around 30,000 a month (Heritage, Goana and Golconda and a few other smaller producers). The prices of grapes have since crashed to Rs. 9/ Kg. But this major fluctuating factor has not been referred to in the report.
Mr. S.R. Umashankar, Excise Commissioner, has rightly said the excise duty had been hiked only for Extra Neutral spirit (ENA) made from molasses. “The hike in excise duty for fortified wine is done as a policy intervention to encourage fruit wine,” he says. The fortified wine is allowed 4% of demineralised water and the formulation is such that it can be brought to 16% alcohol level. This can be achieved by using ENA or grape spirit the duty on which remains the same.
Message is clear in the report: ‘A spokesperson for the Karnataka Grape Growers Association, told The Hindu that the bulk of Bangalore Blue grapes used in the base wine, was now being bought by the Maharashtra wine producers and the hike in excise duty would not affect the growers much’. Grape buying and selling is a matter of supply and demand.
While the logic of Mr. Reddy that ‘We presently sell a litre of fortified wine for Rs. 100. With the new excise duty, it may even go up to Rs. 263 for certain categories,’ is confounding and defies any logic, Mr. Umashankar says that the objections by both wine producers and grape growers to the draft notification would be looked into before taking a final call.
It appears that the Report and the Article is a ploy to get the proposed excise duty reduced. The excise department surely knows that Sula, Fratelli and other ‘Port’ producers do not use fortification of wine by law and yet produce around 500,000 cases of this wine in Maharashtra with alcohol at 15%. The government is on the right track when it claims that they are watching the interesting of the farmer.
At the end of the day, the expansion of Indian wine industry depends on the prosperity of the farmer and vice versa-of course keeping the interest of the consumer in mind. Mindless promotion of a product that gives further impetus to the spirits and liquor does not merit any softness on the part of the government. We must move up the quality latter at each step of the way. |