Apropos the commitment made by the hotel industry in India to the government to roll down prices within specified limits, a meeting has been called by the DGFT to decide whether to withdraw the duty-free benefits, with Subhash Arora suggesting they must continue, the government insuring that every hotel falls in line immediately.
Reportedly,
a meeting has been called by the Director General of Foreign Trade (DGFT),
today wherein the hotels would present the rolled down price –lists.
If the Commerce ministry is satisfied that its intent has been followed
in spirit, the benefits will continue.
Prices Slashed up to 50%
If one goes by the roll-down of prices of the Taj and The ITC Welcomgroup, there is no cause of worry. Wine prices have been brought down between 25-35% as predicted by delWine. In case of whiskies and liquor, the drop has been up to 50%.
It could not be ascertained whether the Commerce Minister, Mr. Kamal Nath would be present at the meeting. But the seriousness with which these and possibly other hotels are revising their lists downwards, it is clear that the government is finally getting control of the situation, it let go out of hands due to inaction.
One reason the government is very keen to pressurise the hotels to reduce prices than withdraw the benefits is the commonwealth games to be held in 2010 and it needs no rocket science to surmise that this action would have a negative impact on tourism.
Delay due to Excise Policy
The government would keep the pressure till all hotels and restaurants fall in line. Many like Hyatt and Park have been slow in their response, presumably because they were not clear about whether the excise duties would be revised upwards as had been approved by the Delhi government. In fact, there has been a few days' delay in bringing out the new price list as the hotels were awaiting the new policy.
No change has been made in the Delhi excise so far as the government seems to have taken the wise decision of maintaining status quo. One hopes there would not be any changes during the year. Excise policies by states are announced before March 31. But importers are jittery as Mumbai changed the duties twice during the course of last year.
Excise duty in Maharashtra had been increased to 150% in July and further to 200% in November when the importers had pleaded a lenient view. Ironically, the premium whiskies and liquor saw the duties reduced to 75% in November.
What is causing anxiety is also the excise department reportedly asking the licensees to declare MRP on the wines. DelWine had already reported that imposing of excise at 25% of the MRP (Maximum Retail Price) was on the cards for wines; liquor was to suffer 30%. Several importers sell only to hotels and do not have MRP on their labels.
Happy Hours 24*7 at the Delhi Taj
I did a spot check on the latest prices at the Taj and The Maurya. The drop in prices beats the recent free-fall crash of the stock market. At both hotels, the management confirmed that the instruction were specific - prices on each item in the wine and liquor list must be brought down within limits, individually.
Here are some of prices per bottle in Rupees (picked at random) at the Taj Hotels which deserves kudos for the swift action and sizeable reduction:
Pinot Grigio Danzante 2004 |
800 |
Santa Cristina Marchesi Antinori xxxx |
900 |
Soave xxxx |
900 |
Orvieto xxxx |
900 |
Tarapaca Chardonnay 2005 |
1000 |
Cab Shiraz Oxford Landing |
1200 |
Chianti Classico Peppoli 2001 |
2000 |
Chardonnay Alto Tarazzas |
1200 |
Beaujolais Villages Albert Bichot 2004 |
1250 |
Pinot Noir Sonoma 2003 Mushal |
1500 |
St. Emilion Philippe Rothschild'03 |
2500 |
Cab. Sauv Napa. Trefethen 2001 |
2900 |
Brunello di Montalcino Castello Banfi 2001 |
3900 |
Such low prices suggest that a few of their wines may be past their prime-in which case it is good to know the benefits are being passed to consumer rather than the shareholder. I am not even mentioning Montepulciano Terre Palladiane 2000, listed at; hold your breath, Rs.650 ($16) without actually tasting it and making sure it is still drinkable!
The Maurya
Despite the reduction, prices at The Maurya are not as exciting. There is hardly any bottle costing less than Rs. 2000 even after reduction. Significantly higher prices of the comparable Pinot Grigio Danzante (Rs.1600), Sauvignon Blanc Oxford Landing (Rs.1950), Santa Cristina (Rs.1950) and Peppoli (Rs.3250), suggest differences in cost calculation or possibly better costing for the Taj, although there are some excellent wines like the South African Life from Stone Sauvignon Blanc 2003 at Rs. 1900.
Confirming that the wine prices had been brought down by 25-35% on each label, Mr. Ashutosh Chhibba, EAM for Food and Beverages for the Maurya also revealed that the situation was happier for the Scotch drinkers. The Johnny Walker Black Label has been slashed from Rs.1320 a shot to Rs.650, though the drop in the Red Label has been from Rs.840 to only Rs.550.
Interestingly, Indian wines consistently cost 50% higher at the Maurya.
High License Fees
The excise department might have been pragmatic in not increasing the taxes, but they have been extracting their pound of flesh from the importers and hoteliers alike by continuously increasing the annual License Fees. The cost of license for distributors was increased from Rs. 200,000 to Rs.500,000 for importers last month, applicable from this month. The Maurya paid Rs.81, 24,750, for its 10 outlets last financial year which is rather steep. It is also not clear whether Maurya has apportioned these fees to the individual bottles on a pro-rata basis while arriving at the costs.
The difference in prices and full compliance from other hotels will keep the DGFT busy for a while. But surely the message from the Honourable Minister, Kamal Nath has been heard loud and clear by the industry. Though belated it augurs well for the consumer and the government deserves kudos for taking a tough stand, though belatedly.
Expect Higher Sales
The hotels are generally putting up a brave front on this forced measure and 'believe' that the fall in prices will not impact the sales. Some of them perhaps still believe that the earth is square.
Once the customers come to believe the improbable and realise the prices have come down (paradoxically, unlike the mobile companies who go to town announcing the price decreases forced on them by TRAI, the hotels cannot advertise this windfall for the tipplers) , the demand is sure to pick up.
The History in future years will rate this as a defining moment for the quantum jump in wine consumption and record appreciation for the belated step taken by the government . So go ahead, order a bottle of wine and raise a toast to the minister, hotel or your own health.
But please do drink wine in moderation, to stay healthier.
Subhash Arora
April 22, 2008