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Delhi Wine Club

Posted: Wednesday, January 06 2010. 13:43

Feature: Delhi May Don Karnataka Style

Grapevine has it that the Delhi government is seriously considering following the Karnataka model of marketing wine, beer and spirits through the government owned Karnataka State Beverages Corporation Ltd., apparently to streamline and plug the pleasant marketing loopholes, opines Subhash Arora.

DelWine has learnt from reliable sources that senior officials of excise department were sent to Bangalore about a month ago to study the Karnataka model of marketing of alcoholic beverages through the Karnataka State Beverages Corporation Limited (KSBCL) which is a monopoly distributor for all alcoholic beverages for off-trade as well as on-premise requirements at a handling charge of 7.5% on the selling price.

The apparent reason to consider the system is to plug loopholes that currently result in leakage of revenues. The one-stop distribution point is expected to make it easy to monitor the system through a high level of computerization that would make any nexus or hoodwinking the system almost impossible.

At present Delhi has a system similar to the one in Mumbai. Anyone can register and get a license for an annual fee of Rs. 0.5 million that allows one to distribute wine and other spirits by paying exi\cise duty. The brands have to be registered individually for an annual fee of Rs.5000. In Karnataka, there is no hassle of registering for this license. All one needs to do is to pay the customs duty, deposit the excise fee which is around Rs.326 a bottle get the TP and ship the products.

As is evident, ‘the system is expected to help the smaller importer who can’t afford to pay for the annual license fee of Rs. 5 lacs and have to work through importers who have got the license, paying them an annual charge for the license and parting with a commission for the logistics,’ says Debjit Dasgupta, Director of Ace Beveragez, who ‘handles’ three importers. He adds, ‘in Karnataka there are 24 importers dealing with KSBCL whereas in a big market like Delhi there are only 18 licensees in all.’

In the short term at least, the move may be beneficial to all importers from the point of view of payments. Currently, they have to extend credit to the retailers (who are considered to be the poor paymasters by most distributors) and the hotels and restaurants which keep on extending the payment period even for the duties that are being born by the importers. KSBCL gives delivery only when the payment is made by the buyer online (a small one time fee of Rs.10,000 reportedly gets the user a password enabling him to complete the transaction online with no fuss).

As a corollary, the hotels and the retail would not be happy since they will have to make the payment immediately. The change in cash flow may cause an initial slowdown in purchase levels too. But there are smaller restaurants like Flavors which have a problem of another nature. Says Tarsillo Nataloni, the owner of Flavors Restaurant in Defence Colony, ‘we won’t be affected much by the change so long as our costs remain the same. I make my payments on time, so we wont be affected by the mechanism. But we are facing another peculiar problem which may be an obstacle to get our duty free license we have been getting. The government wants us to join some export promotion council with a payment of Rs.75000 (Rs.25000 joining g fees and Rs.50,000 annual charges.) We don’t need any export assistance so it is unfair for the government to expect us to bear this un-necessary burden.’

The costs may not change much for buyers like Flavors. Explains Dasgupta, ‘The distribution costs, as of now are 10% or more. So if the newly formed corporation charges 7.5% as in the case of Karnataka, there might in fact be savings for the consumer. I think the system will be welcome by the trade.’

‘In short term, the system does have an apparent advantage,’ opines Alok Chandra, the Bangalore based wine consultant. KSBCL does seem to be working very efficiently so far with very few reasons to complain. In future, who knows?’

Power corrupts and absolute power corrupts absolutely. There is no denying that many would dread the bribes and greasing of palms expected by the baboos. Andhra Pradesh, Kerala  and Tamil Naidu are known for their autocracy and whatever comes with the intoxication of power. On the other hand, Rajasthan which also chose the Karnataka model seems to be doing better with the new system.

‘We are very happy with the payment system in Bangalore,’ beams Debjit. 'Every Tuesday, we are credited the sales proceeds to our account online automatically. True, we have to follow the technical procedures including collecting the orders, payment of duties etc., but the system is well streamlined.'

One reason KSBCL seems to be doing so well is that the experience of around 8 years since the system was put in place has really helped them streamline it properly. Another reason –and that may have been well reported back by the Excise officers who visited  Karnataka is that the average age of the staff there is around 30-32 years. The employees are very computer savvy and sitting in the swanky and modern offices as well equipped as any MNC, the staff is well motivated. It may be a while-a long while before the staff in Delhi can be trained to such a level.

With all the positives the Karnataka systme may offer, there would still be the proverbial Sword of Damocles on their heads- the Commonwealth Games in October this year. Studies and Objectives are fine but the Delhi government may not want to rock the boat, just yet.

But be it known by the importers, retailers and on- premise buyers that the first step has been taken-it is a matter of time that the change becomes a reality.

Subhash Arora


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