Wisdom seems to have prevailed in the capital with the Delhi government maintaining status quo and deciding not to implement the proposed increase in excise duty for the time being.

The new policy for 2007-08 comes into effect and no change has been announced and it is business as usual-for the time being.

Last month, the cabinet had approved a levy of 25% excise duty on the MRP (Maximum Retail Price) of imported wines. There was a strong lobby against it and many importers and restaurateurs, most notable being Ritu Dalmia, chef partner of well known Italian cuisine restaurant, Diva, had even met the Chief Minister, Mrs. Sheila Dixit on more than one occasion. She had given a patient hearing with positive vibrations, according to Ritu.

The decision to postpone any increase has been a pleasant surprise for importers and wine lovers alike. Hoteliers, already under pressure from the government to reduce prices and pass on the benefits of duty free imports to the customer get a reprieve too.

Whisky and other hard liquors which would have been affected too, have also been spared. Citing the local elections later this year as a major factor, David Williamson, public affairs manager of the Scotch Whisky Association, said: "The Delhi government has decided to defer any change to its tax treatment of imported spirit drinks, pending further discussions with the industry and state elections later this year."

One significant reason for the postponement is also the availability and accessibility of cheaper wine in the neighbouring Gurgaon in Haryana and Noida in UP. Haryana has practically no excise duty and with Delhi netizens having daily access to the city, has already shown a marked increase in wine sales last year. The proposed action would have been a big blow to the tax revenues of Delhi.

With the Commonwealth games at its doorstep, in 2010, the government has rightly realised the significance of not increasing duties.

The Indian Wine Academy had been strongly against any duty increase and had been quite vocal about it. In an analysis done by delwine and published Et Tu Delhi? , it had calculated that the increase in the proposed excise duty would have been more than 140% on the imported CIF price. Getting close to the 200% excise duty prevalent in Mumbai, it would have been quite unreasonably high and punitive to the average wine lover. With lower alcohol and the known health benefits of moderate wine drinking, this would surely have been a regressive step.

Delhi had already announced an increase in the license fee from Rs.200,000 ($5,000) to Rs.500,000 making it very difficult for the smaller, newer importers to survive. It is extremely important for the government to delink wine from hard liquor and keep the license fee for wine to a low amount , like Rs.50,000. The hotels, retail and the consumer would benefit and it would also help tourism, not to mention the increase in excise and VAT revenues .

Goa and Karnataka have already announced increases which are significant but not palate-breaking. Mumbai continues to follow the dogmatic policy of 200% excise duty on the assessable import price; the rationale being known only to the policy makers.

Delhi's retreat marks the only victory for the imported wine industry and would be a step to stop the move initiated by Maharashtra.

Now if only the Delhi government would take out the file announcing the selling of wines freely in the supermarkets , gathering dust in some steel cupboard!!!!

Subhash Arora
Verona, Italy
April 6, 2008