 I was shocked to look at the wine list of a prominent 5-start hotel recently. (I have generally stopped looking at them since it raises my blood pressure). A bottle of the plebeian Baron Philippe de Rothschild Cadet d’Oc Chardonnay 2013 retails abroad for an average price of Rs. 557+ tax (my estimate for the ex-cellar price would be Rs. 150-200). This wine has nothing to do with the aristocratic Mouton or the middle-class Mouton Cadet except that it is produced by the same famous Bordeaux Top Growth producer Baron Philippe de Rothschild. I was told recently by an unsuspecting subscriber of delWine that she went to buy a Mouton Cadet but the retailer in Gurgaon convinced her that it was the same wine, and palmed it off at around Rs. 800. That same wine is priced at Rs. 5000 at the hotel! Is the producer cashing in on the popular Mouton/Cadet brand? Is the importer? Is it the hotel? I don’t know as I don’t have the details of the prices at various levels though I can make a good guess.
Thinking it could be a case of taking advantage of a popular brand (or rather misrepresenting the image created by the brand), I checked up the price of a few other labels. The Viña Edmara Chardonnay from Chile has an average suggested retail price overseas of Rs. 650+ (source-wine-searcher.com). The hotel prices it at Rs. 7000! Such astronomical prices do not surprise me any more simply because there is no check on the prices as was envisaged by the tourism or commerce ministry when the policy was framed. A vast majority are following the established norm of keeping the beverage costs at 15% (meaning if it costs Rs. 15 they sell it for Rs. 100) - if they buy a wine at Rs, 450 they would sell it for Rs. 3000.
The 5-star hotels are so used to trying to recover their increasing overheads by keeping exorbitant prices of imported wines (and liquor I believe) that they seem to have long forgotten that the duty free licenses were introduced in around 2002 so that the benefit of the lower prices would be passed on to the consumer (tourist-according to the lobby). It would be naïve to compare the policy to the infamous coal-gate scam that has rocked the country but obviously the concession was extracted from the then minister because of strong lobbying by the hotel industry. The Association sent out a perfunctory mail in 2004 after there were rumours that the minister was threatening to cancel the facility of duty free wines due to the misuse after he was shocked to see the Wine List at a restaurant.
The Federation of Hotel and Restaurant Associations of India (FHRAI) reminded the members that according to the assurances given to the government the profit margins chargeable on wine were to be under 250% and liquor at 400% (the costs inclusive of free munchies). According to the Directive of the Ministry of Commerce and Industry communicated to the members in April 2004, the hotels were requested to bring the prices of wine and liquor in the hotels in line with this directive. Most hotels have since chosen to ignore the directive as the two examples above suggest. (I apologise to few who have made conscious efforts to reduce the prices and presume their sales have gone up since)
Recently, a few hotels have started claiming that they have totally or partially exhausted the duty-free license by importing products other than wine and liquor and say that they follow a uniform pricing policy based on the assumption that they don’t have the license. Many smaller, privately held hotels have allegedly started using the licenses for products for non-hotel use-a practice that needs to be looked into by the concerned ministry.
Beware the budget
This will be the first full one year budget of the BJP government. It’s high time the Finance Minister Mr. Arun Jaitley pokes his nose at the scheme and takes a fresh look at whether the norms prescribed are being adhered to and whether such licenses should be renewed. Although there is a school of thought that would like the abolition of this privilege, that decision would ‘kill’ the wine industry which is still in infancy. Besides, there are a few hotels which are making genuine efforts to promote the consumption by rationalising the prices. The ministry must have a transparent system of keeping a tab on the prices and should cancel the license or not renew it when it comes up for renewal the following year if the licensees are found not following the norm.
We generally blame the government for tardy development of wine culture because of its archaic and often abrupt and irrational procedures. And rightly so! But this is one procedure, if the government follows it diligently, will help the consumer and the tourism in the cause célèbre.
My strong personal view is that the duty-free license policy should continue but the government must put pressure on the hotel industry and ensure the benefits of the zero customs duty (250% mark ups on the cost of wine) are strictly passed on to the customers and not to the shareholders. The hotels would profit from the sales increase and tourists would truly be the beneficiaries. Of course the hotels have the right to price their wines and liquor-if they choose not to avail of these benefits. The government also needs to verify that non wine and liquor products are strictly according to the norms prescribed in the license.
For one of the several earlier articles detailing the problem, visit Blog: Rolling Back the Customs Duty Benefits to Hotels
Indian Wine Academy would be glad to offer a free audit of any hotel if requested directly by them or by the concerned ministries-Tourism or Finance- and the results could be published in delWine for its readers.
Subhash Arora |