Wine Industry stunted by government policies?


In his latest column for Business Standard, Sommelier India contributor Alok Chandra discusses the need for policy changes in the Indian wine industry. Quite simply speaking Indian and foreign wines are far too expensive in India largely because of State and Central government taxes. As a result, individuals are reluctant to invest in the wine industry.

Policy Changes
Alok Chandra, Business Standard
When one thinks of it, there’s a huge contradiction between wine prices and quality in India. Prices of halfway decent wines start at about Rs 300 per bottle — which puts most wines out of reach of all but the ‘very rich’ (let’s say about 3 per cent of the population, i.e. the 30 million Indians who could afford to buy a car in 2005).
Compare this with wine prices in the US — where ‘Two Buck Chuck’ (actually the Charles Shaw brand of wines retailed exclusively through the Trader Joe’s chain) sold over two million cases in 2005 for between $1.99-3.39 per bottle. That’s between Rs 90 and Rs 150, for wine that is reportedly quite drinkable.
Now, land is much cheaper in India than in the States, and so is labour — so how on earth can the Yanks (and the Chileans, Argentineans and South Africans) bring out decent wines at prices low enough to enable people to do a bit of daily quaffing? As far as I know, farm subsidies in these countries do not extend to wine (unlike in Europe), so what’s their mantra to achieve reasonable quality at low prices?
You’ve probably guessed it: state and central government policies that actually encourage (rather than restrict) efficiencies and productivity in this industry. Their domestic markets are large enough to allow economies of scale in production — which in turn allows companies to minimise costs of production while making decent quality wine, spread overheads over larger volumes, sell 90 per cent of the wines at below $5 per bottle, and still make decent returns.
Mind you, most state-level officials in India probably know that reducing taxes and simplifying rules would stimulate the sales of wines (as for any industry). However, the system is weighted against the bureaucracy doing something that benefits an industry unless it is catalysed by either political clout or money.
The farmer’s lobby in Maharashtra was strong enough to have the rules for making and selling wine rationalised as far back as 2001 — the result has been 35 new wineries (with many more on the way), a huge increase in production capacity, falling prices and better wine quality.
Karnataka has been fooling around with a similar policy since 2002 — the file goes up and down and round and round, but nothing gets done because the grape and wine industry has no mai-baap here, and given the present political situation in the state, it is unlikely anything will be done this year either.
Andhra Pradesh killed off the fledgling wine industry in that state when it imposed prohibition in the ’90s; local rules and taxes still make wines unaffordable, and nobody is in a hurry to even revive the old wineries in that state.
At the other end of the scale (from low price and reasonable quality) is the boutique winery, where an individual makes a small quantity of high-quality wine. Italy has 250,000 wine makers because anyone with even a couple of acres of land plants a few vines and makes a few bottles of wine. He can then drink it himself, sell it locally in bulk or bottle, do this with or without labels.
In India, everything alcoholic must be taxed and regulated, so there’s no scope for either the ‘gentleman farmer’ or the son-of-the-soil to follow suit. What a pity. I know of quite a few chaps who would just love to invest a few crores in a small vineyard (shades of Napa Valley), provided they could make (and sell) wine without the attendant hassles.
However, the times ‘they are a-changing’: with a simpatico Agriculture Minister and world-wide interest in this industry, one hopes this will happen sooner rather than later. Cheers to that.

1 Comment

  1. Well, it’s a pity that there are very few people who think like the way you do. You are bang on about the entire wine scenario. Sincerely, everyone is missing out. Wine lovers like me have to shell out more money. Business opportunities are lost and also the humble farmer misses out on some extra bucks.
    I believe the taxes and duties on alcohol based drinks is calculated on the net volume. so a 750 ml bottle of wine with 42% alcohol and wine or beer with 4% have more or less, the same duties. I believe these should be calculated on the alcohol content.
    Also wine and beer should not be confused with regular drinks like whisky or rum. It should be understood that these should be liberalised. Also delicensing these would open fresh markets

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