Posted: Wednesday, 23 March 2011 12:07

Feature: Exorcising Dilli-Dailying Excise

As far back as one remembers, the central government presents the annual budget every year on February 28th, barring one or two years with some exceptions. The average consumer listens with baited breath its effect on the excise and customs duties among other taxes like the income tax. But never is there a change in the time of announcement even by a minute.

There was no change in the customs duty on wines this year-none was expected. A small factor went generally unnoticed. The interest on customs duty for releasing the goods from the bond after 90 days was increased to 18%. With the importers already burdened with slow moving labels and many unsold even during the one year allowed for the tax-free bond facility, this increase in interest will make the imports somewhat expensive, dissuading them from importing wines unless they are reasonably sure of liquidating them faster.

Dilli Excise a state subject

Excise on wine, on the other hand is a state subject and the annual policy announced by each state independently-for instance Haryana announced its practically unchanged policy about a month back. As far back as one remembers, Delhi has never announced it on a fixed date like the union budget. Since early this month, ‘it would be announced this week, or next week, or the next’ has been the refrain from the trade interacting with the department. The fiscal year gets over in March but generally the excise department extends the existing policy for a few weeks into the coming year, keeping the stakeholders confused and the rumour mill busy.

It is seldom (actually never so far, one believes) that the central government’s annual budget is leaked to anyone before announcement -scams like the 2G scam notwithstanding (there is a saying that the Finance Minister does not even discuss it with his wife). But for Delhi excise, everyone seems to have a direct connection with the ‘big boss’ who may in turn be overruled by the ‘bigger bosses’ in the Delhi cabinet or the chief minister. Therefore the dilly-dallying in the policy announcement does no good to anyone. But nobody dares to raise a finger for obvious reasons.

Speculation was rife earlier that 25% of the irrationally high existing excise duty would be reduced in the coming year-delWine even reported media news to the effect. This was followed by the pet perception that the excise duty would henceforth be charged on the wholesale price without customs duty (instead of the existing MRP)-the percentage on this ‘wholesale price’ varied from 25% to 35%, depending upon who the contact in the government was for the individual. Suddenly the percentage shot up to 65% and a new factor piped in- the customs duty would be added to the basic costs to constitute the wholesale price.  There are more permutation and combinations possible than the number of days left to speculate further before this fiscal year ending on March 31.

The importers claim that the excise ‘mess’ is due to the domestic wine industry not willing to see any fall in the excise on imported wines. Another theory points out to the millions being fed to the government in the neighbouring state of Haryana where the traders have a windfall because of zero excise duty. There are three levels of excise licenses which require annual charges but the trader cartels are smart and powerful enough to ‘influence’ the top brasses in the state capital Chandigarh, to keep the excise status quo, they claim. Some even feel that it is the strong liquor lobby that is causing them anguish as they are able to influence the Delhi excise department-reportedly a delegation had visited the department very recently.

But the importers are the most fragmented lot-not willing to unite or trust each other, looking over each other’s shoulders and not able to form a viable association to present the genuine problems; the one formed a couple of years ago is in tatters. Delhi had been one of the top two markets of India but has been a slowly dying market- certainly stifled after the excise duties were raised up to ten-fold and more. 

The top bureaucrats are otherwise extremely intelligent people and capable of taking correct and rational decisions when independent of pressures. Finance Minister Walia is not anymore handling the excise department with the cabinet reshuffle. Chief Minister Sheila Dixit is now holding the portfolio and being new at the job would delay matters and perhaps justify the delay in announcing the excise policy this year.

In all likelihood, the current policy will continue for a few weeks into April- the excise duty money is rolling into the coffers of the Delhi government. But till date no one has heard of any delegation of wine importers meeting the CM who is otherwise very approachable and is a good listener-all of them seem to be trying to influence the department in their individual capacity and winning a few brownie points for themselves.

One important meeting that did take place on March 15 was that of the new Union Minister in the Ministry of Food Processing Industries, Mr Sharad Pawar and the   Commissioner of Excise Mr. R.M. Pillai. Pitching on behalf of the Indian producers under the aegis of the Indian Grape Processing Board, he is believed to have impressed upon the Commissioner to go easy on the annual license fee of Rs.500,000 and reduce the minimum registration fee of Rs.50,000 a label to help the smaller producers to enter the Delhi market and help bigger producers add more labels in the market, giving a platform for the domestic producers to help survive. This when there is yet another unfounded rumour that the annual license fee is being increased to Rs.600,000, when it ought to be reduced to Rs.100,000-200,000 for ‘wine and beer-only’ sales excise license for both Indian and imported wines.

So what if the rumour mill is working overtime? Plenty, if you think from the viewpoint of the buyers. The sales are not moving at this time of the year as much as expected based after the recent buoyancy in the market after the recession, especially for imported wines. Most people believe that the excise duty will come down and it would be cheaper to buy after the new policy sets in and they should wait a while. The excise department seems to be in no mood to oblige consumers or the sellers.

The wine trade and consumer can do precious little except wait. The logic would make the department look at all the extraneous factors like no-duty Haryana, the stifled Delhi market, the need to help Indian producers and at the end help itself by higher revenues due to excise duty with sales increasing to much higher levels. But when all logic fails, prayers through some tantrics may give hopes to those who believe in the paranormal.

Subhash Arora