June 24: The Government of Delhi NCR which implemented a new excise policy in Delhi in November 2021 and withdrew from liquor business the state government corporations that earlier ran over half of all the liquor vends in the city and were responsible for nearly 50% of liquor sales in Delhi and thus pushing the liquor trade into the hands of private players, has come into criticism from retailers who claim that the policy has been made in favour of large wholesalers with deep pockets and connections, badly affecting the survival of small retailers
Among private players, the policy is said to be tilted in favour of wholesalers, giving them power to treat retailers differently. The new policy has given a handful of wholesalers offering brands of Pernod Ricard India Pvt Ltd and Diageo India a significant control over the supply to retail vends and the quantum of discount to offered, according to the Report in Indian Express which claims that Pernod Ricard India Ltd and Diageo India account for over two-thirds of the India liquor brands sold in Delhi.
BJP has reportedly filed a complaint with CBI, saying, “the policy has been drafted and notified with the sole intent to facilitate creating of monopoly in the liquor market It has been tailor-made for a few wholesalers only since one of the eligibility conditions to bid for a wholesaler’s license (L-1) to have a minimum annual sale of Rs 150 crore during the previous 3 years eliminated small players, who used to hold the L-1 Licenses, from the bidding process.
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Delhi’s deputy chief minister Manish Sisodia, who headed the committee for finalizing the new excise policy, reportedly did not respond to the question on this rationale and whether this high entry barrier helped bigger companies take a monopolistic control of the liquor trade. The new excise policy allows a fixed profit margin of 12% for the wholesalers-irrespective of the sales and actual profits of retailers. The high fixed profit protected the wholesalers’ interest but squeezed out the retailers who have started surrendering their licenses.
There has been a spate of cases where retailers have been known to have offered wines at a mind-boggling, unprecedented 50% discount while 33-40% discounts were even advertised for imported wines- that apparently looked like a ‘going out of business sale’.
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The new policy had issued retail licenses for which it had divided Delhi into 32 zones with 27 shops in each zone. With an average reserve price of approximately Rs 225 crore per zone, it added up to nearly Rs 7,000 crore for all the zones. Surprisingly, the Delhi government earned over Rs 9,000 crore through competitive bidding without a single bottle sold.
As many as 10 out of a total of 32 zonal retailers have reportedly surrendered their licenses already because of lower-than-expected revenues and unfair competition. These retailers blame the discriminatory policy for the non-viability of their business. The Report says that big liquor manufacturers were offering discounts through wholesalers to select retailers while denying the same to others, thereby tilting the playing field in favour of a select few.
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The earlier excise policy expressly prohibited producers to offer any discounts, rebates or incentives to retailers (which was a joke and used to be a common practice) or consumers. If at all a gift scheme was to be given, it had to be offered equitably to all retailers. The new policy, however, removed this condition including discounts to consumers.
Wholesalers are complaining that retailers are at the mercy of manufacturers and wholesalers who pick their favourite retailing zones for offering incentives and discounts. Retailers who have surrendered their licenses say that the discounts being offered by some manufacturers and wholesalers to select retailers are so heavy that these retailers are able to offer buy-one-get-one-free schemes. This predatory pricing by retailers favoured by some manufacturers and wholesalers has killed other retailers who were left with no option but to surrender their license. Of course, the wine producers with whom delWine talked, have vehemently denied giving any heavy discounts and are surprised at how the retailers could offer them.
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A large number of petitions have been filed in the Delhi High Court, including one by the Delhi Liquor Traders’ Association with a membership of around 150 members.
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