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Delhi Wine Club
Wines to Cost More in Haryana

Posted: Monday, 09 April 2012 13:28

Wines to Cost More in Haryana

Apr 09 : While Haryana, the neighbouring state of Delhi continues to streamline its excise policy, trying to balance between the declared long term objectives of breaking the cartels and unethical dominance of liquor mafia and broad basing the trade by facilitating the entry of new players of modest means, there has been an increase in taxes that will push up the wine prices and keep smaller distributors out of the market, opines Subhash Arora.

With an increase in the cost of wholesaler license (L-1BF) from Rs.500,000 to Rs.1.5 million, introduction of registration fee of Rs.10,000 for each wine label and that too by every wholesaler selling the label, an astronomical increase in cost of the Retail license L-2 and making the use of holograms compulsory, are expected to result in higher costs for the consumer, although it will make the leakage into the Delhi market more difficult.

The buzz in the wine industry has been that the Delhi Excise Department applied extreme pressure on the Haryana government to take some of these steps to avoid leakage of the stocks meant for Haryana into the Delhi market. Thus the sale in cities like Gurgaon is expected to come down substantially, resulting in double whammy for smaller importers in particular.

Increased wholesaler License Fee

Section 9.5.1 of the Haryana Excise Policy declared last month and effective from April 1 states that ‘the consumption of liquor imported from outside the country is growing particularly in NCR region. To facilitate greater consumer choice for quality liquor and to regulate distribution of foreign liquor imported from outside the country, a wholesale license in the form of L-1BF for such liquor is prescribed.’ 

For sale volumes below 10,000 cases in the financial year 2012-13, the license fee has been increased to Rs 1.5 million per annum. For Every subsequent slab of 10,000 cases in the financial year it will be Rs 1 million per annum. This was set at Rs.500,000 for up to 5000 cases last year while the additional 5000 cases required a further deposit of Rs.500,000 for another 5000 cases.

This means that for 1-10,000 cases, the increase is from 50-150% in the license fee. If you import (distributor/out of state wholesaler) 10,000 cases into the state, the increase is minimum at 50%. But for 5,000 cases, it means in increase from 500,000 to 1.5 million, a 150% increase. Permit Fee: The permit fee on imported wine is at Rs. 20 per Bulk Liter. Permit fee shall be paid by L-1BF

Brand-Label Fee: Under section a Brand label fee has been introduced at Rs.10,000  a label to be taken by each L-1BF. Since there may be multi-holders of L1-BF licensee selling the same label-some selling in retail while others to clubs, hotels or restaurants, each wholesaler will need to register the same label individually. For example, earlier an importer might have had 3 distributors who were wholesalers with individual L1- BF license, now he would have to spend Rs.30,000 as registration fee for one label. For the volumes sold, the costs will have to be apportioned to each bottle, making it much more expensive-though the level of increased is being worked out mutually. An increase of 10-20% is likely, bringing the prices more in line with Delhi.

Holograms: Taking a leaf out of the book of the neighbouring Delhi state, Haryana has made it mandatory to affix Holograms on each and every bottle of foreign liquor including wine, being supplied in the State of Haryana. The Hologram will be supplied by the department on cost to be decided by the excise department. Holograms are to be affixed only in the presence of Departmental Excise Official in- charge of the L-IBF. This step is part of the government’s right strategy to contain leakages but it means additional costs for the wholesaler and eventually to be passed on to the customer through the retailer with an L-2 license the cost of which has also reached astronomical proportion during the recent years-reportedly a group of 3 such licenses went for Rs. 130 million!

L-10B License: In order to sell imported wine to the departmental stores located in shopping malls having minimum carpet area of 500 sq feet (like Spencer’s, Reliance in Gurgaon), the license shall be granted on an annual license fee of Rs. 500,000. The L-10B licensee is allowed to sell wine and spirits as well. The licensees are required to buy from the two nearest L-2 vends. Theoretically, it means that the retail margin would have to be padded in the sales price to the department stores. However, in practice, this is not so as all the L1-BFs have also L-2s, directly or indirectly.

The Haryana government needs to be lauded for its progressive policies since 2006-7. But it has faltered in a big way this time, especially in the case of wine marketing and should look at it once again. Revenues are important but so is just and fair playing field. It is the consumer who is going to get the brunt of the unfair policy.

Winery License

Interestingly, under section 9.7 of the excise policy, the winery license S-1 to produce wine has been brought down from Rs.100,000 last year to Rs. 10,000 only making it a very attractive proposition for making wine in the state. Since growing grapes may not be a feasible option in the state in the  near future, it makes an interesting proposition to set up a wine making factory from imported juice- in a state that imposed complete prohibition between 1996 and 1998 for 19 months. 

L-50 License for storage: Incidentally, for the information of those storing wines for personal consumption, The license in form L-50 is granted to a bonafide consumer of IMFL (India Made Foreign Liquor) for the purchase, possession and transportation for a life time on payment of Rs. 2000 and for an annual payment of Rs. 200 as license fee. L-50 licensee shall be authorized to keep a stock of liquor as under:

IMFL IFL- 12 bottles, IMFS- 24 bottles Beer-24 bottles (650 ml), Rum-12 bottles, Wine-24 bottles, Vodka/Gin/CIDER- 12 bottles. The policy does not clarify whether the number is interchangeable, i.e., if a license-holder can keep the total of 108 bottles of wine alone. It would be a welcome clarification from the department. It is time the government authorities recognize that fine wines age with time and need to be stored-hence need to cellar them for a period lasting at least a few years.

Without this license, a total of 54 bottles (half in each category are allowed)

Despite the prices expected to go up by around 10-20%, the introduction of holograms will ensure less leakage to the Delhi market where the high excise duties will continue to make them more expensive. Incidentally, there has been no change in the excise duty in Delhi or Mumbai although there has been a net reduction of around 4% Karnataka due to streamlining of duties coupled with lowering of the profit margins brought down for the monopoly state distributor, Karnataka State Beverages Corporation.

Subhash Arora



David Carr Taylor Says:

Dear Subhash,thank you so much for this detailed article on the licencing and Excise tax system in Haryana State.Our company in Mumbai imports wines from the UK at RI 227 per bottle cif. by the time it is for sale it increases to RI 1950. There are some 14 levels of Excise tax and licences added in these costs.The end user price is eye wateringly prohibitive and so the total sales of wine for all India is less than 1 million cases. As India is the second largest attraction for worldly visitors who know the price world wide for a bottle of wine they take one look at the price and choose a small beer or Coke. To put this volume into perspective the total wine consumption in India is the equivalant of say three UK supermarkets around London. The purpose of this comment is to say that if the Excise tax system was simplified,harmonised and reduced to comprable world levels then India would benefit to several tens of Billions increase in revenue to benefit many of the social services and a happier tourist Cafe culture. By example China is the third largest importer of wines in the world after only six years of opening up the market Is there any reason why India cannot do the same ? My kind regards David

Posted @ April 12, 2012 14:18


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