Additional Custom Duties Scrapped. Who will benefit?
The Indian Government has cut duties on liquor. The Finance Ministry has finally withdrawn all additional customs duties on imported spirit, wine and beer, following ongoing complaints from the EU and US on the high duties levied by India.
A European Commission study had reported that the combination of duties and taxes in some states in India was as high as 550% on imported spirits and 264% on wines. Abhay Kewadkar, Sanjay Menon and Alok Chandra share their opinions.
While the Centre has acted on the additional customs duties, which fall within its domain, the government is expected to empower states to levy duties and allow them to recoup revenue losses.
The big question is, will you and I benefit?
Abhay Kewadkar chief wine maker of United Spirits and director of Four Seasons Wines from United Brewries told us that the less expensive foreign wines that were highly taxed will cost less and this will, prima facie, make a big difference. The cost of the more expensive wines will remain the same. “My reaction at this point,” he said “is very guarded.” “How far the states go and duties change remains to be seen.”
From wine importer Sanjay Menon’s perspective in Mumbai, the outlook does not appear rosy. There are too many variables.
“They have taken away additional duty but have increased basic duty on wine to 150%. Also it’s very likely that the states will bring in additional taxation… ,” he said. “Yes, in some states we may be better off than we are currently, but in the biggest market, Bombay, if additional taxation, in line with what is being charged to domestic 'imports' from other states, is introduced, even the duty-free advantage of hotels will be negated.”
In Sanjay’s view, the only way to increase the market for wine, and that includes domestic players, is to completely open up the market.
Meanwhile, Alok Chandra, who has been reporting on taxes for Sommelier India, said, it was difficult to say which way the wind will blow.
“I think that in Maharashtra the local wine lobby will ensure that prices for the cheaper wines do not drop, whereas in places like Delhi and Bangalore this will happen, whereas prices of the most expensive wines should actually increase a bit.”
Comments
Sent to Sommelier India on email for the blog -
“The withdrawing of additional customs is good, but I think the Indian wine industry needs protection from cheap wine imports. Wine producers in the EU, because of the common agriculture programme, are heavily subsidised. We are not. We still need some protection from the cheaper wine imports. However, on the other hand, we should not put the duty that we do on expensive wines. There is no point putting a 150 per cent duty on a wine that costs $50 in the first place. What we would like to see happen is the entire ad valorem system that we currently have now be replaced with a flat duty of say Rs 250. The cheaper wines become more expensive while the expensive wines became much cheaper. That is what we would support.” - Rajeev Samant, CEO & MD, Sula Vineyards.
Posted by: Rajeev Samant | July 6, 2007 07:22 AM
I agree entirely with Rajeev Samant's suggestion that the domestic wine industry ought to be protected against cheap imports from Europe, which I visualise flooding the country. We know that Europe, even Bordeaux, is facing a huge problem of over-production and that there's pressure building up from the non-wine producing members of the EU against the excessive subsidies being provided to keep the industry alive. In India, new wine importers (and seasoned bootleggers, of course) are dangerously flirting with European plonk. For them, wines priced at 50 cents or less make economic sense. And these are the undrinkable wines you'll find on the lists of many independent restaurants that can't afford quality stuff, precisely because of the duty structure that Rajeev argues against.
Posted by: Sourish Bhattacharyya | July 6, 2007 04:49 PM
In this fight of imported wine duties, the most common suffering group is going to be consumer, majority of whom are still deprived of the real essence of wine. It is not the matter of cheaper and expensive imported wines, it is the case of what they are offering to the Indian palate. Definately it is the point that majority of the world wine producers are eyeing on the developing Indian wine market and nobody can stop them entering with fool flash in the market. So with this concerned the most basic step local producers should aim for is the building up the strong local market, this is more related to the easy availability of their wine around the country ex: uniformity of the state laws in terms of local wines. And the most important factor is setting up the special wine laws or wine governing body which can keep an equal eye on the imported and exported wines in the country. Definately, we should also think about our wines that might have produce through cheaper method and bare expensive tag? The point is about survival of the fittest! Don't forget foreign producers sepcially those from Europe they sale their emotions (cheaper/expensive)in form of wine and we sale just bottle with wine as a product!
Posted by: M.Desai | July 7, 2007 09:02 PM
Dear Mr Rajeev Samant,
what you have said is 100% perfect and thats what should be done sooner or later.
i was planning to start a small winery, what do u think ; Is it the right time to set up the unit ?
will we be able to sell our wine ?
Can we be associated with your company in any respect in business.
Regards,
naveenbali@yahoo.com
Posted by: Naveen Bali | July 13, 2007 04:45 PM
(Disclaimer: This MIGHT be slightly off topic.)
I dont know why in India we are scared of a little bit of competition? It will make the market more competitive leading to lower costs and maybe better offers/quality/freebies;
Instead of resisting an open economy shouldn't we be advocating:
*uniform excise laws instead of 28 different excise policies and entry points.
*single point entry instead of 28 different entry points.
* Better treatment of the wine industry in general...sops; loans etc
* Wine as a food product...do away with Excise duty on wines (I don't think these babus understand wines anyway)
*Wine lobby in the Parliament
There are serious issues like these which need urgent attention. On the other hand, we seriously need protection from the likes of Blue Nun.
*Franzia (US) produce decent quality in bulk and cater to the everyday consumer.
*Mocavero (Italy) produces excellent reds which suit your pocket both when your are consuming yourself or casual gifting.
*Even Sainsbury's in-house brands are good for everyday consumption (dont trust Tesco's in-house brand's quality though...some are like engine oil!!)
So, I think we must not debate "domestic v. imported wines" (remember divide and rule...the Govt. doesn't want people to focus on the real issues) instead "A better wine environment across the country" sounds like a nice topic.
Cheers!
Posted by: Abhishek | August 10, 2007 04:03 PM
The wine market is flourishing in India, as the economical boom came. But keeping away the taste out from the overseas market will never grow the taste for the Wine loving people in India. At this moment the World market has change in last 5 years, and France is not any more the biggest exporter of USA. Australia wines took over that and surpass the expectation, so it is changing very fast.New Zealand /South Africa/Chile are newer contenders.
The Indian Govt. has to understand that very few region in India would able to produce the high quality grapes compared to the USA, France and Australia, so opening the market , not only will help the local people but also make the Indian producer more competitive to understand the process.
Looking forward to see this luxurious taste would be more affordable, once open by Govt. At least beneficial for Heart,the Style Icon Wine will grow some more variation of taste to people in India in next 4-5 years.
Posted by: Sanjeev Yadav | August 16, 2007 04:59 AM
hi, it was nice going through the various comments posted by everyone.
can anyone please help me with the current scenario on the duty structure of importing wines into india, and feasibility and profitability of the same.
also it will be great if someone can let me know the excise policies in diffrent states in India.
shall be obliged.
waiting for a reply at : arjunbabbar@gmail.com
+91-9815122223
Posted by: Arjun Babbar | October 20, 2007 12:57 AM